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September

EFRAG webinar on FICE Discussion Paper

20 Sep 2018

In August 2018, the European Financial Reporting Advisory Group (EFRAG) issued a draft comment letter on the IASB discussion paper DP/2018/1 'Financial Instruments with Characteristics of Equity' (FICE DP). This is now followed by a webinar will delving more deeply into the more challenging and contentious areas of FICE.

The webinar, which builds on the draft comment letter, will take place on 12 October 2018 from 12:00 to 13:00 (Brussels time). Please click for more information and registration on the EFRAG website.

Financial Reporting Lab calls for new participants for a new project on climate and workforce reporting

19 Sep 2018

The Financial Reporting Lab (“the Lab”) is calling for participants for its next project on the disclosure of climate change and workforce information. The project will look at how the Lab’s recommendations in previous reports on business model reporting, risk and viability and performance metrics apply to companies’ reporting on client change and their workforce. It will look at how climate and workforce disclosures can be reported most effectively.

The Financial Reporting Council indicate that the scope of the project will develop from the contributions of the participants but it is most likely to cover the following areas:

  • how companies understand, measure and report on climate change and workforce issues, especially in the context of new reporting requirements;
  • how investors use this information in their decision-making process and consider whether the emerging reporting meets investor needs;
  • identification of where best practice reporting of material information overlaps with relevant frameworks under which companies may develop their reporting, for example, the Task Force on Climate-related Financial Disclosures’ recommendations;
  • discussion of which areas of reporting are most challenging for companies;
  • consideration of the extent to which lessons can be learnt from emerging international reporting practice; and
  • highlighting best practice in company reporting.

It is expected that the Financial Reporting lab will likely publish the final report in autumn 2019.

Further information including the press release is available on the FRC website.

Charity Commission publishes reviews into the quality of charity annual reports and accounts

19 Sep 2018

The Charity Commission has published the findings of three reviews which looked at whether charity annual reports and accounts meet user needs for both smaller (under £25,000) and over £25,000 (larger) income brackets; and at how well charities are meeting their public benefit reporting requirements.

Larger Charities

The first report, Do charity annual reports and accounts meet the reader’s needs? focuses on whether the set of accounts reviewed “met the basic requirements of the users of those accounts rather on strict technical compliance with the Statement of Recommended Practice (SORP) and other reporting requirements”. The following criteria were assessed:

  • Have the trustees filed all of the required documents that make up a set of accounts (the annual report, independent scrutiny report and the accounts) and do they provide a consistent picture of the charity’s activities?
  • Does the annual report explain what activities the charity had carried out during the year to achieve its purposes?
  • Have the accounts been prepared on the correct basis depending on the charity’s income and type, either receipts and payments or accruals accounts (also known as SORP accounts)? Also, do the accounts contain both a statement of financial activities (SOFA), which analyses the charity’s expenditure, and a balance sheet that are consistent with each other (or the equivalent if receipts and payments accounts were prepared)?
  • Have the accounts been subject to the required level of independent scrutiny depending on the charity’s income and gross assets, either an audit or an independent examination?

Samples of charity accounts, with incomes over £25,000, were taken from the register of charities in April 2017. 106 charities were reviewed for accounting years ending during the 12 months to 31 December 2015.

It was found that 74% of charity accounts in 2015 were of “acceptable quality”. This shows a continued pattern seen from the last two surveys  where it was found that approximately three quarters of the submissions were of acceptable quality. However, 28 charities within the sample were assessed to have not met the basic standard. Key reasons included:

  • Inadequate annual reports due to including little or no information on charitable activities.
  • Inadequate independent scrutiny reports.
  • The accounts did not balance or were incomplete.

The Charity Commission highlights that “it is a statutory requirement to prepare an annual report and accounts and arrange for them to be subject to independent scrutiny, if required”. It reminds Charities that there are a number of resources to assist trustees and independent examiners on the preparation and scrutiny of the annual report and accounts including pro-formas of both the annual reports and accounts. Guidance can be downloaded at GOV.UK here.

Smaller charities

The second report, Do small charity annual reports and accounts meet the reader’s needs? focuses on whether each set of accounts reviewed “met the basic requirements of the users of those accounts rather than on strict technical compliance with the reporting requirements”. The following criteria were assessed:

  • Have the trustees provided both an annual report and accounts?
  • Does the annual report explain what activities the charity had carried out during the year to achieve its purposes?
  • Do the accounts contain both an analysis of receipts and payments and a statement of assets and liabilities and are these consistent with each other (or the equivalent if the accounts were prepared on an accrual basis)?  

Samples of charity accounts, with incomes less than £25,000 reported in their annual returns were selected. 110 charities were reviewed for accounting years ending during the 12 months to 31 December 2015.

It was found that 64% of charity accounts in 2015 were of “acceptable quality”. This shows an improvement in comparison to last year’s review  where only 47% were of “acceptable quality”. Key reasons why the basic standard was not reached included:

  • Both the annual report and accounts were provided, but key information was missing.
  • Either the annual report or the accounts were not provided.
  • Neither the annual report nor the accounts were provided.

The Charity Commission reminds trustees that all registered charities must prepare an annual report and accounts and make them publicly available.

As with the larger charities, the Charity Commission reminds charities that there are a number of resources to assist trustees on the preparation of the annual report and accounts.

Public benefit reporting

The third report, Public benefit reporting by charities, looked at the quality of public benefit reporting.   All registered charities are required to publish a trustees’ annual report which sets out the activities that the charity has undertaken for the public benefit. Charities are also required to include a statement as to whether they have had due regard to the Charity Commission’s guidance on public benefit.

The report reviews public benefit reporting of 106 charities for financial years ending in the 12 months to 31 December 2015.

Findings indicate that the percentage of charities’ annual reports that demonstrated a clear understanding of the public benefit reporting requirement was slightly higher than the prior year  (46%) at 51%.

The Charity Commission reminds trustees that the preparation of annual report, of which public benefits from an integral part of, is a statutory requirement and a good annual report can help a charity “tell their story well.”

Click for (all links to Charity Commission website):

Final programme for the World Standard-setters meeting in October available

19 Sep 2018

The final programme has been released for the upcoming World Standard-setters meeting, which is being held in London on 1-2 October 2018.

A summary of the programme is set out below:

Monday, 1 October 2018 (09:00 - 18:15)

  • Opening remarks
  • Welcome address
  • IASB technical programme update
  • The need for a Conceptual Framework
  • Overview of the Conceptual Framework
  • Conceptual Framework – small-group discussions
  • Breakout sessions
    • Business combinations under common control
    • Better communications — focus on primary financial statements and disclosures
    • Financial instruments with characteristics of equity — discussion paper
    • Goodwill and impairment
    • IFRS Interpretations Committee update and implementation of new standards strategy

Tuesday, 2 October 2018 (09:00 - 13:00)

  • Panel Discussion — Management Commentary
  • Breakout sessions (repeated from previous day)
  • Conceptual Framework – feedback session

Papers for the meeting are available on the IASB's website. The WSS meeting will be immediately followed by a meeting of the International Forum of Accounting Standard Setters (IFASS).

We comment on the proposed IFRS Foundation Constitution amendments

17 Sep 2018

We have responded to the IFRS Foundation's exposure draft 'Amending the Terms of Appointment of the IFRS Foundation Trustee Chair and Vice-Chairs' that was published in June 2018.

Our comment letter notes our reservations about the exposure draft:

  • We do not support the proposals; they would over-engineer the Constitution and probably limit rather than help the Trustees and Monitoring Board when making appointments.
  • We do not support making a distinction between internal and external appointments.
  • We would not wish to prevent the direct appointment of a Vice-Chair concurrently with that person's appointment as a Trustee.
  • We continue to support the practice that a Trustee may serve two three-year terms, but can see that a third term of up to three years may be necessary for continuity. We do not support subsequent re-appointments to the IFRS Foundation.

Download the full comment letter here.

Agenda for the first meeting of the Management Commentary Consultative Group

17 Sep 2018

In November 2017 the IASB added to its agenda a project to update the IFRS Practice Statement 'Management Commentary'. To support this project, the Board created the Management Commentary Consultative Group. The agenda for the first meeting of the group on 28 September 2018 is now available.

The agenda for the meeting is as follows:

Friday, 28 September 2018 (09:30-17:00)

  • Introductory remarks
  • Objective of management commentary
  • Applying materiality in management commentary
  • Principles for preparing management commentary
    • Coherence
    • Neutrality
    • Other matters

Agenda papers for this meeting are available on the IASB's website.

IFRS Interpretations Committee holds September 2018 meeting

14 Sep 2018

The IFRS Interpretations Committee met in London on 11 and 12 September 2018 to discuss thirteen issues, including five new interpretation requests. We have posted Deloitte observer notes for the technical issues discussed during this meeting.

New Issues

The Committee received submissions asking whether:

  • IFRS 15 Revenue from Contracts with Customers: whether fees for admitting an entity to a stock exchange and fees for an ongoing listing service are distinct or relate to only one service
  • IFRS 11 Joint Arrangements: how the operators in a joint operation should report a lease liability on a contract signed by the joint operation or signed only by a lead operator
  • IAS 38 Intangible Assets: whether, some, cloud computing arrangements create an intangible asset
  • IAS 27 Separate Financial Statements: when an entity loses control of a subsidiary as a result of disposing some of its interest, can the entity elect to measure the retained interest at FVOCI and can any gain or loss on initial disposal be presented in profit or loss
  • IAS 27 Separate Financial Statements: whether the cost of a subsidiary acquired in stages is the fair value of the tranches (as deemed cost) or the sum of the consideration actually paid

The Committee decided not to take the IFRS 15, IFRS 11 and IAS 27 issues agenda will issue tentative decisions to that effect. The IAS 38 issue will be discussed again at the November meeting.

Agenda Decisions to finalise

The Committee considered the feedback on four tentative Agenda Decisions and decided to finalise them all:

  • IAS 23 Borrowing Costs — Expenditure on a qualifying asset
  • IAS 23 Borrowing Costs — Borrowing costs on land
  • IAS 21 The Effects of Changes in Foreign Currency Exchange Rates — Determination of the exchange rate when there is a long term lack of exchangeability
  • IFRS 9 Financial Instruments — Classification of a particular type of dual currency bond

Items for continuing consideration

Two matters were carried forward from earlier meetings:

  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets — Payments relating to taxes other than income tax. The Committee decided not to take this matter onto its agenda, and to issue a tentative Agenda Decision to that effect.
  • IFRS 9 Financial Instruments — Hedge accounting with load following swaps. A tentative Agenda Decision was issued in March 2018. In light of the comments received the Committee decided not to finalise the Agenda Decision, but to issue a revised tentative Agenda Decision (i.e. to provide an opportunity for additional feedback).

Advice from the Committee for the IASB

The Committee also discussed two topics for which the IASB has asked for feedback: Cryptocurrencies (including holdings of cryptocurrencies and initial coin offerings); and feedback on the proposed amendments to the definitions of accounting policies and estimates in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Other work in progress

Possible revisions to IAS 21 The Effects of Changes in Foreign Exchange Rates to clarify the accounting when the spot rate is not observable is not being discussed at this meeting. Three additional requests have been received, and are being analysed. They relate to IFRS 9 Financial Instruments and the physical settlement of a contract to buy or sell a non-financial item; IFRS 11 Joint Arrangements when there is a difference between a joint operator's entitlement to output and the amount they have actually received; and IAS 23 Borrowing Costs and the capitalisation of borrowing costs on assets being developed for sale for which revenue is recognised over time.

More information

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

​Call for members of the European Corporate Reporting Lab Steering Group reveals intended structure and remit

14 Sep 2018

In March 2018, the European Commission published an action plan on sustainable finance that included as one of the action points the creation of a European Corporate Reporting Lab as part of the European Financial Reporting Advisory Group (EFRAG). The idea was expected to result in something similar to the UK FRC Financial Reporting Lab, however, the solution found differs quite considerably as regards structure and remit.

As the call for candidates for the Steering Group of the Lab and an agenda paper for the meeting of the Accounting Regulatory Committee (ARC) in June 2018 reveal, the Lab is to be a separate body under the umbrella of EFRAG, drawing on the EFRAG budget and the EFRAG Secretariat for the day-to-day operation, but the Lab's output "will not be subject to usual EFRAG approval procedures or signed off by the EFRAG Board". (Participants of individual projects of the Lab will have the opportunity to comment on draft project reports before publication, but will also not be asked to approve such reports.)

The European Lab also differs from the UK Lab in that its remit, at least initially, is restricted to non-financial reporting and sustainability reporting although it is noted that the remit of the European Lab should be extended "in the medium term" to include, for example, integrated reporting. Similarly to the UK Lab, however, the "overall aim of the laboratory is to improve corporate reporting [...] and promote good reporting practices". Boundaries of this work are that it is "not the task of the laboratory to develop authoritative recommendations [...] or to develop policy recommendations" and that the Commission may steer the Lab's work by "request[ing] the laboratory to work on particular topics that fall within its scope". 

The unusual structure (the European Commission setting up the Lab under the roof of EFRAG without giving the EFRAG Board a formal say in its work) is also reflected in the composition of the Steering Group. While currently still looking for members, the Chair and the Vice-Chair of the group have already been decided: The Chair will be the President of EFRAG Board (Jean-Paul Gauzès) even though the EFRAG Board will not be involved in any decisions; the Vice-Chair will be the Head of Unit from the European Commission responsible for policy on corporate reporting (Alain Deckers).

More information on the Action plan on sustainable finance, the European Lab, and the Steering Group can be found here:

Pre-meeting summaries for the September IASB meeting

13 Sep 2018

The IASB will meet in London on Wednesday 19 and Thursday 20 September 2018. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. For each topic to be discussed we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

The major sessions will focus on Dynamic Risk Management (Wednesday) and Primary Financial Statements (Thursday).

The Wednesday sessions start with the Dynamic Risk Management project. The Board will consider Imperfect Alignment and Change in Risk Management.

On Implementation, the IASB will formally vote on preparing a proposed amendment to IAS 37 Provisions, Contingent Liabilities and Contingent Assets to clarify the meaning of the term ‘unavoidable costs’ in the definition of an onerous contract.

The staff will provide an update on the steps they have been undertaking in relation to Extractive Activities. The staff are planning to start public education session for the Bard in 2019.

The staff will give an update on activities in the Research Programme.

The Thursday sessions start with the Primary Financial Statements project. The Board will discuss the scope of proposals for subtotals in the statement of profit or loss; unusual or infrequent items; and presentation of the results of integral and non-integral associates and joint ventures in the statement(s) of financial performance. The staff are also recommending that the project be moved to the IASB’s standard-setting programme.

The IASB is returning to its narrow-scope proposal to amend IAS 1 to clarify how an unconditional right to defer settlement of a loan relates to having the discretion to refinance or roll over an obligation affects the classification of a loan as current or non-current.

In the Disclosure Initiative, the Board has been developing an internal guide for setting and drafting disclosure requirements. The staff are asking he Board to approve the guide.

More information

Our pre-meeting summaries are available on our September meeting note page and will be supplemented with our popular meeting notes after the meeting.

IFRS Foundation issues formula linkbase 2018

13 Sep 2018

The IFRS Foundation has issued the 2018 IFRS Taxonomy formula linkbase. It has been updated from the 2017 version and can be used with softare tools supporting the XBRL formula specification 1.0.

The formula linkbase designed to help improve the data quality of IFRS Taxonomy filings and to provide additional guidance for both technical and financial reporting audiences so that they can better understand the IFRS concepts and their meanings.

For more information, see the press release on the IASB's website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.