December

Summary of the November 2018 CMAC meeting

05 Dec, 2018

The IASB has released a summary of the Capital Markets Advisory Committee (CMAC) meeting, which was held in London on 1 November 2018.

The topics discussed at the meeting included:

  • Primary financial statements:
    • Defined subtotals in the statement(s) of financial performance;
    • Management performance measures; and
    • Disaggregation.
  • Financial instruments with characteristics of equity (FICE):
    • Additional disclosures, including priority of issued financial liabilities and equity instruments on liquidation, the maximum potential dilution of ordinary shares, and terms and conditions that affect the timing and amount of cash flows of the financial instruments issued by the entity;
    • Expanded statement of changes in equity, which will show how total comprehensive income of an entity is attributed between different classes of equity instruments; and
    • Presentation in other comprehensive income (OCI) of income and expenses from particular types of financial liabilities i.e. those that have the amount feature that is not independent of the entity’s available economic resources.
  • Management commentary:
    • Objective of management commentary;
    • Applying materiality in preparing management commentary; and
    • Principles for preparing management commentary.
  • Goodwill and impairment:
    • Additional disclosures at acquisition date;
    • Why do users need information on the subsequent performance of the acquired business?; and
    • Additional disclosures about subsequent performance.

The next CMAC meeting will take place on 21 March 2019.

For more information, see the meeting page and the meeting summary on the IASB's website.

IVSC sets up Financial Instruments Valuation Standards Board

05 Dec, 2018

The new Board of the International Valuation Standards Council (IVSC) includes representatives of international banks, prudential regulators, valuation and accounting firms. It will begin work to develop international standards in early 2019.

Please see the press release on the IVSC website for membership of the new Board.

Recent sustainability and integrated reporting developments

04 Dec, 2018

A summary of recent developments at CDSB/CDP, CDP, PRI/ICGN, UNEP FI, GRI, and the University of Oxford.

The Climate Disclosure Standards Board (CDSB) and the Carbon Disclosure Project (CDP) have jointly conducted a review of corporate disclosure of climate change and environmental information across Europe. Their report First Steps: Corporate climate & environmental disclosure under the EU Non-Financial Reporting Directive provides evidence of reporting practices of 80 companies, indicates what information companies are currently disclosing and whether companies are implementing the recommendations of the G20 Task Force on Climate-related Financial Disclosures (TCFD). The press release on the CDSB website offers a short summary and access to the full report.

CDP has published a call by European investors urging EU policymakers to upgrade corporate reporting rules. The signatory investors call on EU policymakers to: (i) align corporate reporting with the recommendations of the TCFD to mitigate financial risk; (ii) create a level playing field across the EU by implementing consistent corporate reporting requirements like those of financial reporting; (iii) standardise sector-specific reporting metrics that increase comparability and consistency and enable tracking progress against public policy targets and clearly defined time horizons; and (iv) address the shortcomings of the European corporate reporting legislative framework by stressing policy coherence between investor duties and corporate reporting. Please click to access the statement here.

Principles for Responsible Investing (PRI) and the International Corporate Governance Network (ICGN) have launched a discussion paper on corporate ESG reporting arguing that despite growing consensus that the integration of relevant ESG factors into company value creation models and corporate reporting is important, listed companies and organisations providing reporting standards have yet to coalesce on an approach to the treatment and inclusion of ESG factors in company disclosure and reporting. The press release on the PRI website offers a short summary and access to the full discussion paper.

The United Nations Environment Programme Finance Initiative (UNEP FI) has announced a partnership with 16 of the world’s largest insurers to develop a new generation of risk assessment tools designed to enable the insurance industry to better understand the impacts of climate change on their business. The pilot group will develop analytical tools that they will use to pioneer insurance industry climate risk disclosures that are in line with the recommendations of the TCFD. Please click for more information on the UNEP FI website.

The Global Reporting Initiative (GRI) announces that its free digital reporting tool has been upgraded to make navigation easier and keeping progress more visual. Please click for more information on the GRI website.

GRI also announces that the GRI Standards are now also available in Arabic. More information can be found here.

The Saïd Business School, University of Oxford, offers a debate on "Should FASB and IASB be responsible for setting standards for nonfinancial information?" at the Oxford Union on 11 December 2018. A Green Paper focussing on the arguments for and against the FASB and the IASB setting standards for nonfinancial information has been released in preparation for the debate and can be downloaded here.

High-level conference on the role of the European Corporate Reporting Lab

03 Dec, 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. ​

EFRAG is now organising a high-level conference on Tuesday 5 March 2019 on corporate reporting and the role of the Lab. Please click for more information on the EFRAG website.

Charity Commission publishes the results of a review into the disclosure of charities’ reserves policies

03 Dec, 2018

The Charity Commission has published the results of a review into the disclosure of charities’ reserves policies. All registered charities must explain their policy on reserves in their trustees’ annual report, stating the level of reserves held and why they are held. More extensive disclosure should be provided for charities with incomes over £500,000.

In January 2018, the Charity Commission selected a random sample of 106 sets of accounts of charities with an income of over £500,000, for period ends in the year ended 31 December 2016. It reviewed each trustees’ annual report and accounts to assess whether:

  • The charity had explained its reserves policy, as required.
  • The charity’s stated level of reserves was correct, based on its guidance.

The review found that nearly 97% of charities sampled had included at least a reference to their reserves policy in their trustees’ annual report.  However, more than a third of the charities’ explanations of their reserves policies did not provide all of the basic information required. The level of reserves held was the most common omission.

The review also found that, based upon the calculations of the Charity Commission, less than a quarter of the charities in its sample had stated the correct figure in their trustees’ annual report. The review indicates that this was in part because a third of the charities in the sample did not include a figure for reserves.

The Charity Commission reminds charities that providing a clear explanation of the reasons why reserves are needed, setting out the basis for working out the level of reserves required and stating the level of reserves held is more than just meeting a reporting requirement. It indicates that the process of developing a reserves policy and then explaining it in the trustees’ annual report gives confidence that the trustees have assessed both the risks that their charity faces and the charity’s ability to manage their financial impact.

To help charities, the Charity Commission highlights that it has published guidance (link to Charity Commission website) which explains what reserves are and sets out the steps that trustees should follow in developing and explaining a reserves policy.

A press release and the full review are available on the Charity Commission website.

December 2018 IASB meeting agenda posted, first potential amendments to IFRS 17 to be discussed

03 Dec, 2018

The IASB has posted the agenda for its next meeting, which will be held at its offices in London on 11-13 December 2018. There are twelve topics on the agenda, most notably the first potential amendments to IFRS 17 'Insurance Contracts'.

Of the list with 25 potential issues around IFRS 17 that were first discussed in October 2018, the staff has grouped 13 into six agenda papers for the meeting. The papers are (all links to the IASB website):

The Staff recommends to amend the requirements in IFRS 17 for the presentation of insurance contracts on the statement of financial position as discussed in AP2A, but not to amend the requirements in IFRS 17 for the other topics discussed in AP2A–2F. 

The full agenda for the meeting can be found here. We will post any updates to the agenda, our comprehensive pre-meeting summaries as well as observer notes from the meeting on this page as they become available.

IFRS Interpretations Committee holds November 2018 meeting

03 Dec, 2018

The IFRS Interpretations Committee met in London on 27 November 2018 to discuss seven issues, including five new interpretation requests. We have posted Deloitte observer notes for the technical issues discussed during this meeting.

Continuing discussions

The Committee continued its discussions from September on whether, some, cloud computing arrangements create an intangible asset. The Committee decided not to take the matter onto its Agenda and issue a tentative Agenda Decision to that effect.

In September, the Committee finalised an Agenda Decision IAS 21 The Effects of Changes in Foreign Exchange Rates—foreign exchange restrictions. At this meeting the Committee provided feedback on a proposal by the staff to amend IAS 21 to provide additional guidance on estimating an exchange rate.

New issues

IFRS 11 Joint Arrangements—Output received by a joint operator. The Committee decided that when the output a joint operator receives in a reporting period is different from the output to which it is entitled, the joint operator recognises revenue that depicts the transfer of output to its customers in each reporting period, ie revenue recognised applying IFRS 15.

IFRS 9 Financial Instruments—Physical settlement of contracts to buy or sell a non-financial item. The Committee decided that when an entity contracts to buy or sell a non-financial item in the future at a fixed price, it is not appropriate at the time of physical settlement for an entity to (a) reverse the accumulated gain or loss previously recognised in profit or loss on the derivative, and (b) recognise a corresponding adjustment to either revenue (in the case of a sale contract) or inventory (in the case of a purchase contract).

IAS 23 Borrowing Costs—Revenue recognised over time. The Committee decided that borrowing costs would not be capitalised when the borrowings relate to the construction of a residential multi-unit real estate development for which revenue is recognised over time.

IFRS 9 Financial Instruments—Credit enhancement in ECL measurement. The Committee decided that if a credit enhancement is required to be recognised separately by IFRS Standards, an entity cannot include the cash flows expected from it in the measurement of ECL.

IFRS 9 Financial Instruments—Presentation of contractual interest. The Committee decided that the reversal of the unwinding of discount is presented as a reversal of credit impairment when the asset is cured.

The Committee decided not to take any of these issues onto its agenda and tentative Agenda Decisions to that effect will be published shortly (each with a 60-day comment period).

Other work in progress

The staff are analysing a request in relation to subsurface rights.

More information

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

Recordings from the fifth IASB Research Forum

03 Dec, 2018

The International Accounting Standards Board (IASB) hosted its fifth Research Forum on 11 and 12 November 2018 in Sydney. The IASB has now released recordings from the presentations given at the forum.

The meeting saw the presentation of six academic papers, responses by academics and standard-setters as well as panel discussions. We have already posted our short summaries of the discussions in November. Please click to access the IASB's audio recordings here (the panel discussions were obviously not recorded).

Correction list for hyphenation

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