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2018

EFRAG TEG meeting December 2018

18 Dec 2018

The European Financial Reporting Advisory Group (EFRAG) will hold a TEG meeting on 20 December 2018 in Brussels.

An agenda and details on how to register for the meeting can be found on the EFRAG website.

EFRAG publishes November 2018 issue of 'EFRAG Update'

18 Dec 2018

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during November 2018.

The Update Reports on the EFRAG Board meeting held on 22 November, the EFRAG TEG meting on 29 November and the EFRAG CFSS and EFRAG TEG meeting on 28 November.  The Update also lists EFRAG publications issued in November which included:

Please click to download the November EFRAG Update from the EFRAG website.

CCAB publishes revised SORP for Limited Liability Partnerships

18 Dec 2018

The Consultative Committee of Accountancy Bodies (CCAB) has published a revised Statement of Recommended Practice (SORP) which sets out a framework for accounting by Limited Liability Partnerships (LLPs) (“LLP SORP”).

The Financial Reporting Council (FRC) has approved the CCAB bodies for the purpose of issuing a recognised SORP for Limited Liability Partnerships incorporated in Great Britain under the Limited Liability Partnerships Act 2000. The members of CCAB are; The Institute of Chartered Accountants in England and Wales (ICAEW), The Institute of Chartered Accountants of Scotland (ICAS), The Institute of Chartered Accountants in Ireland (ICAI), The Association of Chartered Certified Accountants (ACCA) and The Chartered Institute of Public Finance and Accountancy (CIPFA).

SORPS issued by CCAB apply to LLPs preparing accounts under UK GAAP to present a ‘true and fair view’. CCAB has stated that “the underlying purpose of the SORP is to deal with issues that are specific to LLPs and ensure that, as far as possible, LLPs present financial statements that are comparable with those of other entities”.

Updates have been made to the LLP SORP as a result of amendments to FRS 102 resulting from the first Triennial Review of the Standard in December 2017.

Updates are made to:

  • the guidance on cash flow statement presentation to reflect the new requirement to disclose the changes in net debt between the beginning and end of the financial period;
  • the guidance on accounting by small LLPs to reflect the simpler recognition and measurement requirements available to small entities when accounting for certain loans;
  • provide additional guidance on the revised recognition rules for intangibles assets acquired in a business combination; and,
  • the guidance on merger accounting to reflect the extended definition of a group reconstruction.

In addition other minor clarifications have been made to ensure consistency with FRS 102.

The updated SORP is effective for accounting periods beginning on or after 1 January 2019 with earlier adoption permitted subject to certain exceptions.

Click for (all links to CCAB website):

We comment on the IASB's discussion paper on financial instruments with characteristics of equity

17 Dec 2018

We have responded to the IASB's discussion paper 'Financial Instruments with Characteristics of Equity' that was published in June 2018.

We do not support the preferred classification approach in the discussion paper and believe financial performance should be attributed to those holders of equity instruments that currently own a residual interest in the entity, not to those that hold instruments which may result in them being owners in the future. In addition, we disagree that amounts due at liquidation are financial liabilities prior to liquidation and do not support the carry over of requirements in IAS 32 that future acquisitions of equity should be recognised as a gross financial liability with a debit in equity.

Please click to access the full comment letter.

EFRAG issues draft endorsement advice on ‘Definition of material (Amendments to IAS 1 and IAS 8)

17 Dec 2018

The European Financial Reporting Advisory Group (EFRAG) has issued a draft endorsement advice letter and a separate invitation to comment relating to the use in the European Union (EU) of Definition of material (Amendments to IAS 1 and IAS 8) (“the Amendments”).

The Amendments, published in October 2018, clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards themselves.

EFRAG recommends the endorsement of the Amendments. EFRAG’s initial assessment is that the Amendments meet the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.

Comments are requested by 1 February 2019.

For more information, see the press release, draft endorsement advice letter and the invitation to comment on the EFRAG’s website. EFRAG has also updated its endorsement status report that is available here.

Updated IASB work plan — Analysis

17 Dec 2018

Following the IASB's December 2018 meeting, we have analysed the IASB work plan to see what changes have resulted from the meeting and other developments since the work plan was last revised in November. Changes are numerous and quite a few projects have been delayed.

Below is an analysis of all changes that were made to the work plan since our last analysis on 17 November 2018.

Standard-setting projects

  • no changes

Maintenance projects

  • Accounting Policies and Accounting Estimates — a decision on the project direction has been postponed to the second quarter of 2019 (was: December 2018)
  • Accounting Policy Changes — after discussing the feedback to the exposure draft, the next project step is now given a decision on the project direction (no date given)
  • Amendments to IFRS 17 'Insurance Contracts' — the IASB now acknowledges its decisions in November and December and has added a new project to its work plan; an exposure draft is expected in the first half of 2019
  • Fees in the ‘10 per cent’ test for Derecognition — an exposure draft is now expected in the first half of 2019 (no date given before)
  • Improvements to IFRS 8 'Operating Segments' — a feedback statement is now expected in February 2019 (was: December 2018)
  • Lease Incentives — an exposure draft is now expected in the first half of 2019 (no date given before)
  • Onerous Contracts — Cost of Fulfilling a Contract — after publication of ED/2018/2 earlier this month, the next project step is now discussing feedback on the exposure draft in the first half of 2019
  • Subsidiary as a First-time Adopter — an exposure draft is now expected in the first half of 2019 (no date given before)
  • Taxation in Fair Value Measurements — an exposure draft is now expected in the first half of 2019 (no date given before)
  • Updating a Reference to the Conceptual Framework — an exposure draft (tbc) is now expected in the first half of 2019 (no date given before)

Research projects

  • Business Combinations under Common Control — a discussion paper is now expected in 2020 (was: second half of 2019)
  • Discount Rates — a project summary in now expected in February 2019 (was: December 2018)
  • Dynamic Risk Management — the core model is now exected in the second half of 2019 (was: first half of 2019)
  • Goodwill and Impairment — a discussion paper or exposure draft is now expected in the second half of 2019 (no date given before)
  • IBOR Reform and the Effects on Financial Reporting — an exposure draft is now expected in the first half of 2019 (was: December 2018)
  • Post-implementation Review of IFRS 13 'Fair Value Measurement' — removed from the work plan as a summary report was published on 14 December 2018

Other projects

  • IFRS Taxonomy Update — 2018 General Improvements — a proposed update was published on 6 December; the next project step is now discussing feedback on the proposed update (no date given)
  • IFRS Taxonomy Update — Common Practice (IFRS 13) — an analysis of the feedback received is now expected in the first quarter of 2019 (was: January 2019)

The above is a faithful comparison of the IASB work plan at 17 November 2018 and at 17 December 2018. For access to the current IASB work plan at any time, please click here.

FRC publishes a suite of factsheets on FRS 102

14 Dec 2018

The Financial Reporting Council (FRC) has issued a suite of staff factsheets on aspects of FRS 102, including the 2017 triennial review.

FRC issues revised auditing standard and consults on guidance for quality bank audits

14 Dec 2018

The Financial Reporting Council (FRC) has issued an International Standard on Auditing Accounting Estimates and Related Disclosures (ISA UK 540), covering the audit of expected credit losses in banks. It is effective for audits of financial statements for periods beginning on or after 15 December 2019.

The FRC is also consulting on updates to its Practice Note on The Audit of Banks and Building Societies in the United Kingdom.  The consultation reflects findings from the FRC’s audit inspection work covering bank audits, which were covered extensively in public reports in June 2018The comment period closes on 8 March 2019.

The press release, revised ISA UK 540, the feedback statement and impact assessment of the revised ISA UK 540, the exposure draft of the practice note and the consultation paper and impact assessment of the revised practice note are all available on the FRC website.

Our response to this request for comments can be found by clicking here

New Code launched for corporate governance of large private companies

14 Dec 2018

A new code for the corporate governance of large private companies has been launched.

In June 2018 the Government introduced secondary legislation (The Companies (Miscellaneous Reporting) Regulations 2018) which requires all companies of a significant size that are not currently required to provide a corporate governance statement, to provide a corporate governance statement, to disclose their corporate governance arrangements.  This applies for periods commencing on or after 1 January 2019.

The Coalition Group was asked to prepare principles to help those companies which are subject to the thresholds comply with the new reporting requirement.  By explaining the application of these Principles large private companies will be able to meet their obligations under The Companies (Miscellaneous Reporting) Regulations 2018. 

The six principles are:

  • Purpose and Leadership – An effective board develops and promotes the purpose of a company and ensures that its values, strategy and culture align with that purpose.
  • Board Composition - Effective board composition requires an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the company.
  • Board Responsibilities - The board and individual directors should have a clear understanding of their accountability and responsibilities. The board’s policies and procedures should support effective decision-making and independent challenge.
  • Opportunity and Risk - A board should promote the long-term sustainable success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.
  • Remuneration - A board should promote executive remuneration structures aligned to the long-term sustainable success of a company, taking into account pay and conditions elsewhere in the company.
  • Stakeholder Relationships and Engagement - Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.

A company which chooses to adopt the Wates Principles should follow them using an “apply and explain” approach in a way that is most appropriate for their particular organisation. Boards should be able to explain, in their own words, how they have addressed each of the principles in their governance practices.

By providing broad principles with supporting guidance, the intention of the Wates Principles is to move beyond a tick box approach to describing and explaining how the company’s governance practices achieve the principles and demonstrate the desired outcomes. This approach offers increased transparency for stakeholders and links to the other new reporting requirement on how the directors have discharged their section 172 duty. Cross-referencing is encouraged – there is no need to duplicate information.

There is no obligation on companies to adopt these principles but the intention is that the Wates Principles provide an approach to corporate governance that offers sufficient flexibility for a diverse range of companies without being too prescriptive.

A press release the Wates Corporate Governance Principles can be found on the Financial Reporting Council (FRC) website.  Our related Governance in brief publication is available here.

IASB completes post-implementation review of IFRS 13

14 Dec 2018

The IASB has completed its post-implementation review (PIR) of IFRS 13 'Fair Value Measurement'. The summary report published today shows that the standard works as intended.

During the PIR, the Board focused on the following matters:

  • the usefulness of information disclosed about fair value measurements — to gain a deeper understanding of both users’ and preparers’ perspectives on the usefulness and costs of fair value measurement disclosures;
  • whether to prioritise Level 1 inputs or the unit of account — to further assess the extent and effect of the issue as well as to examine current practice;
  • application of the concept of the highest and best use when measuring the fair value of non-financial assets —  to better understand the challenges of applying this concept and decide whether further support could be helpful; and
  • application of judgement in specific areas — to assess the challenges of making judgements and decide whether further support could be helpful.

The conclusions were that the information required by IFRS 13 Fair Value Measurement is useful to users of financial statements. Some areas of IFRS 13 present implementation challenges, largely in areas requiring judgement, However, evidence suggests that practice is developing to resolve these challenges. No unexpected costs have arisen from application of IFRS 13. Thus, the Board concluded that the standard works as intended.

The findings from the PIR regarding the usefulness of information disclosed will feed into the Board's work on better communication, in particular into the projects on targeted standards-level review of disclosures and on the primary financial statements. The Board will also continue liaising with the valuation profession, monitor new developments in practice and promote knowledge development and sharing. Other than that the Board does not intend to conduct any other follow-up in response to findings from the PIR.

For more information, please see the press release and the PIR report on the IASB’s website. In addition, see our project page on the PIR of IFRS 13.

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