The Amendments, published in March 2018, update some of the references and quotations in IFRS Standards and Interpretations so that they refer to the revised Conceptual Framework or specify the version of the Conceptual Framework to which they refer.

EFRAG recommends the endorsement of the Amendments. EFRAG’s 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.  EFRAG also assesses that endorsing the Amendments is conducive to the European Public good.

A press release and the endorsement advice letter to the European Commission are available on the EFRAG website. EFRAG has also updated its endorsement status report.

The annual report outlines the FRC’s financial position, highlights achievements and challenges in 2017/18 and also identifies areas that it will focus on in 2018/19. The annual report also outlines the progress made in the FRC’s strategy for 2018-21.

In 2018/19 the FRC’s priorities will include:

• Driving further improvements in the quality of audit, including through implementing a new audit approach to the monitoring and supervision of the six largest audit firms, reviews of firm-wide audit quality processes, thematic reviews, and reviews of audit engagements, focusing on areas of high risk.
• Consulting on a revised Stewardship Code.
• Continuous improvement in corporate reporting through monitoring of annual reports and accounts. There will be a specific focus on how companies are implementing IFRS 15 Revenue from Contracts with Customers, IFRS 9 Financial Instruments and IFRS 16 Leases.
• Ensuring that its enforcement action continues to be robust, proportionate and timely.

The press release and the full annual report are available on the FRC website.

The letter stresses the support of the industry for IFRS 17 as a "high-quality standard for insurance contracts which improves insurers’ financial reporting" but notes that preparatory work has confirmed that "a number of important issues need to be resolved in order to ensure the quality and operational practicability of the new standard". In addition, the insurers mention operational constraints ontheir ability to successfully implement IFRS 17 on the current timelines. The letter argues:

As a result, we strongly believe a 2-year delay in the effective date of the standard is required. This lead time is essential both to allow for the necessary improvements to the standard and to allow adequate time for the wide range of companies required to apply the standard and meet its significant implementation challenges.

The letter promises that a delay would not result in insurers stopping or slowing their implementation projects.

Please click to access the letter on the website of Insurance Europe, one of the signatories of the letter.

The study is focussing on three sets of issues:

• choice and switching
• the long-term resilience of the sector
• the incentives between audited companies, audit firms and investors

The CMA has issued an invitation to comment with a deadline for responses of 30 October 2018. The webpage for the study, on the CMA website, contains more details.

In addition to the review, the Secretary of State has written to Sir John Kingman, who is undertaking a review of the Financial Reporting Council. In his letter to Sir John, the Secretary of State asks him to also provide his thoughts on:

• whether there is any case for change in the way in which audits are currently procured, and audit fees and scope are set, particularly for major companies of public interest; and
• whether any change could better promote the interests of users of accounts – and ensure quality, rigour, independence and scepticism on auditors’ part – whilst at the same time, of course, needing to be feasible and workable in practice.

The Secretary of State has asked the CMA and Sir John to liaise with each other.  The letter is available here.

Accounting and corporate reporting

Many aspects of the UK framework will be unchanged. However:

• Certain exemptions for UK companies which are reliant on having a parent in the EEA (primarily the exemption from the requirement for a UK dormant company to prepare and file accounts if it is guaranteed by its parent company) will be restricted to companies with a UK incorporated parent.
• UK businesses operating in the EEA may need to register branches or places of business in the relevant EEA state and comply with that state’s overseas companies reporting regime.
• EEA businesses with a branch or place of business in the UK will need to comply with the UK overseas companies registration and reporting regime. Details can be found in Companies House guidance.
• UK companies admitted to trading on a regulated market in one of the remaining EEA member states may need to formally demonstrate compliance with International Financial Reporting Standards (IFRS Standards) as issued by the International Accounting Standards Board (IASB).

Auditing 

Individuals qualified as an auditor in an EEA member state will have until December 2020 if they wish to obtain a UK audit qualification by taking an aptitude test (as opposed to requalifying in the UK). This does not apply to Irish individuals as Irish professional qualifications are recognised by UK law. During this same period, individuals with an EEA audit qualification will count towards the control rules for audit firms; after December 2020 only non-UK or Irish qualified individuals already in place at that date will count.

Auditors of EEA incorporated companies admitted to trading on a UK regulated market will need to register with the UK Financial Reporting Council (FRC) and may be subject to inspection by the UK FRC unless the UK authorities determine that the relevant EEA state’s audit regulatory regime is equivalent to that in the UK. Likewise UK auditors of UK companies admitted to trading in an EEA member state are likely to need to register in that state.

A copy of the technical notice is available on the Department for Business, Energy and Industrial Strategy (BEIS) website.

The Wednesday sessions start with the Primary Financial Statements project. The focus is on the labels the Board will use to describe subtotals. The staff are recommending that the labels be operating profit or loss; operating profit or loss and share of profit or loss of integral associates and joint ventures; and profit or loss before financing and income tax (with entities being prohibited from using the term ‘EBIT’ for this subtotal).

On Implementation, the IASB will consider a recommendation by the IFRS Interpretations Committee that the IASB amend IAS 12 Income Taxes in relation to the initial recognition of a lease, by a lessee, and decommissioning obligations. 

The staff will give an oral update on the Management Commentary project.

The staff will present a proposal to revise the Preface to International Financial Reporting Standards, removing redundant material on the structure of the IASB and its due process requirements.

For the Disclosure Initiative, the focus is on accounting policies. The staff recommend that the Board clarify that not all accounting policies relating to material transactions, other events or conditions are material. They also recommend that the Board develop guidance and examples for inclusion in the Materiality Practice Statement to help entities apply effective judgement when deciding whether accounting policies are material.

The Board will discuss IFRS 17 Insurance Contracts, to help it determine how it should respond to concerns that have been brought to its attention regarding this Standard (the papers include a description of 25 identified concerns). The staff have developed criteria for the Board to apply in assessing whether, in each case, it should propose an amendment to IFRS 17. We do not expect the Board to make any decisions about specific issues at this meeting.

On Thursday the staff will give an update on the Rate-regulated Activities project.

The meeting concludes with a session on Goodwill and Impairment. The staff present their proposed outline for a Discussion Paper. The main sections would focus on improving disclosures, simplifying the impairment test, and simplifying the accounting for goodwill. The staff are asking the Board to reconsider its earlier decisions not to pursue some ideas around improvements to the impairment test. The Board has not indicated when it expects to publish the DP.

More in­for­ma­tion

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

Since IFRS 17 was issued in May 2017, the Board has been monitoring the implementation and has learned about concerns and implementation challenges, among them the issues identified in the EFRAG letter sent to the IASB last month. The Board had previously indicated that it would consider whether additional action is needed to address matters arising during implementation. The upcoming meeting on 24 October will be a first step in this assessment process.

Agenda paper 2C for the meeting reveals the criteria the staff of the IASB has developed for the Board to apply in assessing whether a concern warrants considering an amendment:

1. the amendment would not result in significant loss of useful information relative to that which would be provided by IFRS 17 for users of financial statements and
2. the amendment would not unduly disrupt implementation processes that are already under way or risk undue delays in the effective date of a standard that is needed to address many inadequacies in the existing wide range of insurance accounting practices.

The staff also notes that even if the Board agrees that any potential amendment to IFRS 17 meets the criteria, it does not mean that all amendments meeting these criteria are justified.

Agenda paper 2D for the meeting includes some background information and provides for each identified concern or implementation challenge:

• an overview of the IFRS 17 requirements;
• a summary of the Board’s rationale for setting those requirements;
• an overview of the concern or implementation challenge expressed; and
• staff preliminary thoughts.

The paper notes 25 identified concerns that are listed in paragraph 12 in a table offering an overview and referencing the subsequent paragraphs where the concern is dicussed in detail.

The Board will be asked to consider at a future meeting whether any of the concerns and implementation challenges indicate a need for standard-setting to amend the requirements of IFRS 17. There are no decisions expected at this meeting.

The papers for this session (currently scheduled for 15:15-17:45 on 24 October) are available on the IASB website (please scroll down). In addition to the two papers pointed out above, they also include a cover note, a summary of the TRG meeting held in September, and the TRG submission log.

The Board will discuss the following:

• Primary financial statements
  • Descriptions of subtotals
• Implementation
  • Deferred tax — tax base of assets and liabilities: possible narrow-scope standard-setting
• Management commentary
• Preface to IFRS Standards
• Disclosure initiative
  • Accounting policies
• IFRS 17 Insurance contracts
  • Summary of TRG for IFRS 17 meeting
  • TRG submissions log
  • Criteria for evaluating possible amendments to IFRS 17
  • Concerns and implementation challenges
• Rate-regulated activities
• Goodwill and Impairment
  • Additional work to be performed
  • Identifying better disclosures for business combinations, goodwill and impairment
  • Discussion paper outline

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.

The consultation sets out options and asks questions on what ethnicity pay information should be reported by employers, who should be expected to report and next steps.

The consultation responses will inform future government policy on ethnicity pay reporting. The consultation closes on 11 January 2019.

A press release and the full consultation is available on the BEIS website.

As the new UK GAAP regime has now been in place for a number of years, preparation of either parent company or subsidiary accounts under either FRS 101 or FRS 102 should now have become a more routine exercise. The FRC has made several changes to FRS 102 as part of its first triennial review of the Standard to deal with issues highlighted in its implementation. The amendments were published in December 2017.

The table below reflects new and revised new UK GAAP financial reporting requirements that need to be considered for financial reporting periods ending on 30 September 2018. For those reporters who want to understand new UK GAAP application for earlier periods please select one of the following:

• New UK GAAP application for reporting periods ending 30 June 2018
• New UK GAAP application for reporting periods ending 31 March 2018
• New UK GAAP application for reporting periods ending 31 December 2017
• New UK GAAP application for reporting periods ending 30 September 2017
• New UK GAAP application for reporting periods ending 30 June 2017
• New UK GAAP application for reporting periods ending 31 March 2017
• New UK GAAP application for reporting periods ending 31 December 2016
• New UK GAAP application for reporting periods ending 30 September 2016
• New UK GAAP application for reporting periods ending 30 June 2016
• New UK GAAP application as at 31 March 2016
• New UK GAAP application as at 31 December 2015