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2018

Reporting of non-financial information by SMEs

27 Nov 2018

The European Federation of Accountants and Auditors for SMEs (EFAA) has published the results of a survey on non-financial information reporting by small and medium-sized entities (SMEs) across 14 European countries.

While the EU Directive on Non-Financial Information (NFI) Disclosure only applies to larger companies, preliminary results from the EFAA survey suggest that NFI reporting is quite common for SMEs due to national requirements. Furthermore, there is also growing interest in the benefits of integrated thinking and reporting by SMEs.

EFAA suggests that the following policy considerations should be taken into account for further discussion:

  • SMEs should be encouraged to consider voluntarily providing NFI as this may yield benefits to them, their stakeholders and the wider public;
  • Some elements of the Non-Financial Reporting Directive (NFRD) might be suitable for voluntary adoption by SMEs; and
  • National regulators should be encouraged to refer to the NFRD if formulating NFI requirements for their SMEs as this will help enhance international comparability of NFI reporting by SMEs.

Please click to access the full survey results on the EFAA website.

ESMA begins series of video tutorials on ESEF

26 Nov 2018

The European Securities and Markets Authority (ESMA) has released the first in a series of tutorial videos designed to guide market participants through the new requirements of European Single Electronic Format (ESEF), which will become effective in 2020.

From 2020 on, all annual financial reports in the European Union must be prepared in xHTML, within which financial data is tagged using inline XBRL. The video gives an introduction to the tagging process and requirements for ESEF.

Please click to access the ten minute video on YouTube.

Financial Reporting Lab publishes quarterly newsletter

23 Nov 2018

The Financial Reporting Lab ("the Lab") has published its Q3 newsletter providing highlights of its activities in the third quarter of 2018.

The newsletter highlights the Lab's reports issued since the Q2 newsletter:

It also indicates that the Lab will soon be releasing a report on its Digital Future series looking at artificial intelligence and has also launched a project on climate change and workforce disclosure.

The full newsletter is available on the FRC website here .

Summary of the October 2018 ITCG meeting

23 Nov 2018

The IASB has published the summary to the IFRS Taxonomy Consultative Group (ITCG) meeting held via conference call on 11 October 2018.

The ITCG discussed the following:

  • general improvements to the IFRS Taxonomy 2018; and
  • update on other IFRS Taxonomy activities.

For more information, see the summary on the IASB’s website.

Councils granted statutory override of the requirements of IFRS 9 relating to fair value movements on pooled investment funds for 5 years

23 Nov 2018

The Ministry of Housing, Communities and Local Government (MHCLG) has issued its summary of consultation responses and the Government response to a consultation which sought views on ways to mitigate the effects of IFRS 9 'Financial Instruments' on local authority accounting.

Local authorities who will be required to apply IFRS 9 for the 2018 to 2019 financial year had expressed concern to the Government claiming that some of the provisions of IFRS 9 would have negative impacts.

The consultation, published in July 2018, indicated that local authorities would be principally affected by the introduction of IFRS 9 in the following ways:

  • More income statement volatility. IFRS 9 raises the likelihood that more assets will have to be measured at fair value, with changes in fair value recognised through profit and loss. This is most likely to impact local authorities with investments in pooled investment funds.
  • Earlier recognition of impairment losses on receivables and loans, including trade receivables. Entities will be required to consider providing for possible future credit losses from the first reporting period in which a loan or receivable is recognised in the accounts. Local authorities will need to consider whether they have any trade receivables or loans, for example loans made to local SMEs that fall within scope of the standard.
  • Significant new disclosure requirements. Those entities that are more significantly impacted by these new disclosure requirements may need new systems and processes to collect the necessary data.

The consultation sought potential mitigations to the above, specifically on mitigating the impact of fair value movements on pooled investment funds.

Following feedback to the July consultation, the Government has indicated that it intends to:

  • Require local authorities to account for fair value movements on financial instruments in accordance with proper practices as set out in the Code on Local Authority Accounting published by The Chartered Institute of Public Finance and Accountancy (CIPFA).
  • Introduce a mandatory statutory override requiring local authorities to reverse out all unrealised fair value movements resulting from pooled investment funds from profit/loss to an unusable reserve. This is intended to mitigate the impact of fair value movements on the balanced budget requirement. It will be mandatory and will apply to both the losses and the gains that would otherwise impact on the revenue account under IFRS 9. This will be effective from financial year commencing 1 April 2018.
  • Extend the proposed period for which the statutory override applies to five years. The Government will keep use of the override under review.
  • Require Local Authorities to disclose the net impact of the unrealised fair value movements in a separate unusable reserve throughout the duration of the override.

There will be no override for the expected loss model or for the extra disclosures that IFRS 9 will require.

The consultation summary document and draft regulations are available on the MHCLG website.

December 2018 meeting of the ICAEW FRDG

23 Nov 2018

The next meeting of the Institute of Chartered Accountants in England and Wales (ICAEW) Financial Reporting Discussion Group (FRDG) will be held on 10 December 2018 in London.

The meeting will cover a roundup of the Financial Reporting Council's (FRC's) corporate reporting activities.  It will cover an overview of key FRC findings for the year, summarising current themes and future areas of focus for the next reporting season.

Click for more information, including registration details on the ICAEW website.

Agenda and pre-meeting summaries available for the November 2018 IFRS Interpretations Committee meeting

23 Nov 2018

The IFRS Interpretations Committee will meet in London on 27 November 2018 to discuss seven issues, including five new interpretation requests.

Continuing discussions

The Committee will continue the discussions it had in September on whether, some, cloud computing arrangements create an intangible asset. The staff recommend that the Committee not 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 is being asked for its 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. How should a joint operator account for output arising from a joint operation when the output it receives in a reporting period is different from the output to which it is entitled?

IFRS 9 Financial Instruments—Physical settlement of contracts to buy or sell a non-financial item. When an entity contracts to buy or sell a non-financial item in the future at a fixed price, is it 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. Should borrowing costs 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. Can the cash flows expected from a financial guarantee contract or any other credit enhancement that is integral to the contractual terms of a loan be included in the measurement of ECL if the credit enhancement would otherwise be required to be separately recognised (for example the lender obtained a guarantee from a guarantor)?

IFRS 9 Financial Instruments—Presentation of contractual interest. How should unrecognised interest be presented when a credit-impaired (stage 3) financial asset is subsequently paid in full or is no longer credit-impaired?

The staff recommend that the Committee not take any of these issues onto its agenda and have drafted tentative Agenda Decisions to that effect.

Other work in progress

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

The full agenda for the meeting and our pre-meeting summaries can be found here. We will update this page for any changes to the agenda and our Deloitte observer notes from the meeting as they become available.

EFRAG TEG-CFSS meeting November 2018

22 Nov 2018

The European Financial Reporting Advisory Group (EFRAG) will hold its EFRAG TEG-CFSS meeting on 28 November 2018 in Brussels.

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

We comment on six IFRS Interpretations Committee tentative agenda decisions

22 Nov 2018

We have published our comment letters on IFRS Interpretations Committee tentative agenda decisions related to IAS 27, IAS 37, IFRS 9, IFRS 11, and IFRS 15, as published in the September 2018 IFRIC Update.

More information about the issues is set out below:

Issue

Agenda decision supported?

More information

IAS 27 — Investment in a subsidiary accounted for at cost — partial disposal

Yes; although we do not find the analogies to IAS 28 Investments in Associates and Joint Ventures and to the investment entity requirements of IAS 27 persuasive in terms of the recognition of any difference between cost and fair value when IFRS 9 Financial Instruments is first applied

IAS 27 — Investment in a subsidiary accounted for at cost — step acquisition

Yes

IAS 37 — Payments relating to taxes other than income tax

Yes

IFRS 9 — Application of the highly probable requirement in a cash flow hedge relationship

Yes

IFRS 11 — Liabilities in relation to a joint operator’s interest in a joint operation

Yes; however, we believe additional clarity could be added by specifying that (a) in the circumstances described in the tentative agenda decision, the lead operator has primary responsibility for the lease liability; and (b) the Committee did not opine on the accounting for any contractual arrangements which may exist between joint operators in respect of a leased asset.

IFRS 15 — Assessment of promised goods or services

Yes 

Click to access all our comment letters to the IASB, IFRS Foundation, and IFRS Interpretations Committee.

IASB issues podcast on latest Board developments

21 Nov 2018

The IASB has released a podcast featuring Vice-Chair Sue Lloyd, Board member Darrel Scott, and education director Matt Tilling to discuss the deliberations at the November 2018 IASB meeting.

The podcast features discussions of the following topics in more detail (length of the podcast: 15 minutes):

  • IFRS 17 Insurance contracts
  • Primary financial statements
  • Management commentary
  • Classification of liabilities as current or non -current
  • Rate-regulated activities
  • Implementation issues the IFRS Interpretations Committee is considering
  • Cryptocurrencies

The podcast can be accessed through the press release on the IASB website. More information on the topics discussed is available through our comprehensive notes taken by Deloitte observers at the November IASB meeting.

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.