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2019

ESMA continues series of video tutorials on ESEF

11 Sep 2019

The European Securities and Markets Authority (ESMA) has released the third 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.

The new video answers ten questions which are frequently asked by market participants to ESMA and National Competent Authorities on the ESEF Regulation.

Please click to access the seven minute video on YouTube.

IASB publishes project update on goodwill and impairment related to business combinations

10 Sep 2019

The IASB has published an article by IASB member Tom Scott on the status of the Board's goodwill and impairment project following its post-implementation review of IFRS 3, 'Business Combinations'.

Within its goodwill and impairment project, the Board is investigating how companies can provide users of financial statements with better information about mergers and acquisitions (business combinations) at a reasonable cost. This investigation includes the challenging question of how companies should account for goodwill after the business combination.

The six-page article discusses the Board's preliminary views that:

  • "we should enhance disclosure objectives and requirements to improve the information provided to users about an acquired business and its subsequent performance, even if that information must be on a combined basis where the acquired business has been integrated into an existing business;
  • it is not feasible to make the impairment test significantly more effective at recognising impairment losses of goodwill;
  • reintroducing amortisation of goodwill would not provide significantly better information to users;
  • we should reduce the cost and complexity of the impairment test by providing relief from the mandatory annual quantitative impairment test for goodwill;
  • we should also reduce the cost and complexity of the impairment test by simplifying some of the requirements for estimating value in use;
  • we should not allow more intangible assets to be included in goodwill; and
  • we should enhance transparency by requiring companies to present total equity before goodwill in their balance sheets."

The article notes that the Board plans to issue a discussion paper on these issues at the end of 2019.

EFRAG appoints new TEG member

10 Sep 2019

The Board of the European Financial Reporting Advisory Group (EFRAG) has announced the appointment of Olivier Schérer​ to its Technical Experts Group (TEG), effective from 16 September.

Mr Schérer will replace Isabelle Grauer-Gaynor, who is stepping down from EFRAG TEG as of 13 September.

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

Responses to the ESMA consultation on short-termism in financial markets

09 Sep 2019

In July 2019, the European Securities and Markets Authority (ESMA) launched a consultation that aimed to gather evidence on potential short-term pressures on corporations stemming from the financial sector. The individual responses to the consultation are now available.

Part of the consultation was a questionnaire intended to support ESMA’s analysis of potential sources of undue short-termism with an aim to identifying areas in which existing rules may contribute to mitigating undue short-termism and areas where the rules may exacerbate short-term pressures.

Section IV of the questionnaire "The role of fair value in better investment decision-making" contained questions on whether and how fair value may impact the capacity of financial reporting to provide relevant and reliable information on equity instruments held for long-term investment purposes. With these questions ESMA wanted to assess how the measurement and disclosure of fair value may impact the selection of a short-or long-term horizon.

Please click to access the press release, which offers access to the responses to the questionnaire, on the ESMA website.

FRC publishes annual report 2018/19

06 Sep 2019

The Financial Reporting Council (FRC) has published its 2018/19 annual report (“the annual report”).

The annual report outlines the FRC’s financial position, highlights achievements and challenges in 2018/19, looks forward to 2019/20 and also sets out progress made to date on its transition to the new Audit, Reporting and Governance Authority (ARGA), following the independent review carried out by Sir John Kingman

In 2019/20 the priorities of the FRC will include:

  • working with the government to ensure that an effective regulatory framework exists following the UK's exit from the EU;
  • driving continued improvements in audit quality by focusing, alongside audit inspections, on the audit improvement programmes put in place by firms and continuing development of auditing and ethical standards;
  • promoting corporate governance and investor stewardship including extending the monitoring of practice and reporting on corporate governance and updating the UK Stewardship Code;
  • monitoring and taking action to promote audit quality and usefulness of corporate reporting including increasing the planned number of corporate reporting reviews;
  • expanding the Enforcement team to provide timely and effective enforcement action to encourage improvements in the quality of audit and financial reporting; and
  • supporting transition to the ARGA, including investing in staff, IT and other relevant systems.

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

Agenda for the September 2019 IFRS Advisory Council meeting

06 Sep 2019

An agenda has been released for the upcoming meeting of the IFRS Advisory Council, which is being held in London on 18–19 September 2019.

A summary of the agenda is set out below:

Wednesday 18 September 2019 (09:00-17:45)

  • Welcome and Chair's preview
  • Effect of technology on the investment process (introduction and breakout sessions)
  • Consistent adoption and application of IFRSs
  • Effect of technology on the investment process (feedback)
  • Effective risk management (introduction and breakout sessions)
  • Update on Trustees and Foundation activities
  • Update on the Board’s activities

Thursday 19 September 2019 (9:15-14:45)

  • Digital experience for customers and stakeholders (introduction and breakout sessions)
  • 2020 Agenda Consultation — Proposed approach
  • Effective risk management (feedback)
  • Digital experience for customers and stakeholders (feedback)
  • Summing up of the meeting

Agenda papers for the meeting are available on the IASB website.

Agenda and pre-meeting summaries for the September 2019 IFRS Interpretations Committee meeting

05 Sep 2019

The IFRS Interpretations Committee will meet on Tuesday 17 September 2019 to discuss nine issues, including three new interpretation requests.

New Issues

The Committee will discuss three new issues.

IFRS 15 Revenue from Contracts with Customers—Training costs to fulfil a contract (Agenda Paper 2). Should training costs that are incurred by a supplier, that are necessary to be able to deliver a service to a customer and that are recoverable from the customer, be recognised as a contract asset?

IFRS 16 Leases—Definition of a lease—Shipping contract (Agenda Paper 3). Does a particular type of shipping contract contain a lease? 

IAS 21 The Effects of Changes in Foreign Exchange Rates and IAS 29 Financial Reporting in Hyperinflationary Economies—Translation of a hyperinflationary foreign operation (Agenda Paper 4) How does an entity, with a non-hyperinflationary presentation currency, present the information required by IAS 21 and IAS 29 for its interest in a foreign operation which is hyperinflationary?

The staff are recommending that the Committee not develop any Interpretations or amendments but instead publish tentative agenda decisions. 

Agenda decisions to finalise

The staff are recommending that the Committee finalise six tentative agenda decisions.

IFRS 15 Revenue from Contracts with Customers—Compensation for delays or cancellations (Agenda Paper 5). Should an obligation to compensate customers for delayed or cancelled flights (as set out in legislation) be recognised as part of the transaction price or as an obligation in accordance with IAS 37?

IAS 41 Agriculture—Subsequent expenditure (Agenda Paper 6). Should an entity capitalise or expense the costs related to the biological transformation of biological assets?

IAS 7 Statement of Cash Flows—Changes in liabilities arising from financing activities (Agenda Paper 7). Some investors have expressed concerns about the quality and consistency of disclosures about changes in liabilities arising from financing activities required by IAS 7.

IFRS 16 Leases—Incremental borrowing rate (Agenda Paper 8). Does the incremental borrowing rate need to reflect the interest rate in a loan with both a similar maturity to the lease and a similar payment profile to the lease payments?

IFRS 9 Financial Instruments—Fair value hedge of foreign currency risk on non-financial assets (Agenda Paper 9). Can foreign currency risk be a separately identifiable and reliably measurable risk component of a non-financial asset held for consumption (for example, property, plant and equipment and inventory denominated in a foreign currency) that an entity can designate as the hedged item in a fair value hedge accounting relationship?

IAS 1 Presentation of Financial Statements—Presentation of liabilities or assets related to an uncertain tax position (Agenda Paper 10). Should an entity present a liability related to uncertain tax treatments as a current (or deferred) tax liability or as a provision?

Work in progress (Agenda Paper 11)

There are no new matters that have not yet been presented to the Committee. The staff will present the analysis of comments of the tentative agenda decision 'Lease Term and Useful Life of Leasehold Improvements (IFRS 16 Leases and IAS 16 Property, Plant and Equipment)' at a future meeting.

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

IVSC begins article series on goodwill amortisation

05 Sep 2019

The International Valuation Standards Council (IVSC) has published the first article in a series looking into whether principles underlying business valuations are compatible with the concept of goodwill amortisation. The series aims at encouraging public discussion by exploring certain fundamental questions in this area to inform financial statement preparers, reviewers, and users, and aid the capital market.

The first article Is Goodwill a Wasting Asset? can be accessed through the press release on the IVSC website.

 

Charity Commission publishes study on external scrutiny of charity accounts

04 Sep 2019

The Charity Commission has published a study which looked at the quality of external scrutiny of charity accounts by auditors and independent examiners.

The study assessed the accounts of 296 charities against a new external scrutiny benchmark developed by the Charity Commission to determine whether a minimum standard of scrutiny by auditors and independent examiners had been met. The benchmark is based on the requirements of the Charities Act 2011, the Charities Statement of Recommended Practice (SORP), auditing standards and the Commission’s Directions for independent examiners.

Only three quarters of charities with income over £1 million met the external scrutiny benchmark. This fell to 51% in the case of charities with income of £250,000 - £1 million and just 37% for charities with income below £250,000. Particular issues included incomplete reporting of related party transactions (for which a separate report discussing the findings in more detailed is linked below) and charitable companies failing to provide a separate summary income and expenditure account, or not stating that it was included in the Statement of Financial Activities. The Charity Commission also noted that accounts reviewed by an auditor met the benchmark more frequently than those reviewed by an independent examiner.

As a result of its findings the Charity Commission has issued updated guidance for trustees on independent examination (CC31). It has also made the external scrutiny benchmark available on its website.

Click for (all links to the Charity Commission website):

EFRAG research into crypto assets

04 Sep 2019

The European Financial Reporting Advisory Group (EFRAG) is currently conducting research into accounting challenges that are not addressed within existing IFRSs. In this context, it is looking for input from crypto-assets experts.

EFRAG is seeking to engage with subject matter experts and practitioners to discuss the following:

  • Issuance via initial coin offerings and similar offerings;
  • Holding/investing activities and payment services;
  • Custodial and storage services; and
  • Mining services.

The outreach will be conducted through phone interviews and the questions will be shared before the interview.

Please click for more information on the EFRAG website.

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