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ICAEW, ICAS and PRAG publish joint COVID-19 guidance on pension scheme financial reports and audit

04 Jun 2020

The Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants of Scotland (ICAS) and the Pensions Research Accountants Group (PRAG) have jointly published guidance on the implications of COVID-19 on pension scheme financial reports and audit.

The guide has been prepared primarily to support pension scheme auditors navigate the additional challenges they are likely to experience as a consequence of COVID-19 in meeting their responsibilities towards the scheme’s annual report, including the audited financial statements. Trustees and accounts preparers may also find the guide useful.

The Guide is relevant to private sector occupational defined benefit (DB) and defined contribution (DC) trust-based pension schemes in the UK, including hybrid schemes and DC master trusts, applying Financial reports of pension schemes: A statement of recommended practice (the Pensions SORP), published by PRAG.

The guide covers a wide range of topics including:

  • responsibilities for reporting to The Pensions Regulator
  • the impact of COVID-19 on the control environment of pension schemes
  • the trustees' report and the chair's statement
  • going concern and the trustees' assessment of going concern
  • accounting for scheme investments
  • events after the end of the reporting period
  • audit issues
  • the auditor's statement about contributions.

It should be read alongside the latest available COVID-19 guidance from The Pensions Regulator, the Financial Reporting Council (FRC) and other key third parties.

A press release and the full guide is available on the ICAEW website.

Membership for European Lab project task force on reporting of non-financial risks and opportunities

04 Jun 2020

The European Financial Reporting Advisory Group (EFRAG) has announced that the European Lab Steering Group has appointed the members of the project task force for its second project on reporting of non-financial risks and opportunities and linkage to the business model​.

The group’s membership includes:

  • Charles Mario Abela, not-for-profit organisation (Malta)
  • Maria Alexiou, preparer (Greece)
  • Estelle Aymard-Young, financial institution (France)
  • Emilie Beral, user (France)
  • Donato Calace, digital tools (Italy)
  • Daniela Cholakova, preparer (Bulgaria)
  • Jean-Philippe Desmartin, user (France)
  • Laura Girella, not-for-profit organisation/ academia (Italy)
  • Michael Goebbels, preparer (Germany)
  • Ulrika Hasselgren, user (Denmark)
  • Christian Hell, accountancy profession (Germany)
  • Marcus Looijenga, accountancy profession (Netherlands)
  • Gloria Mazzocco, preparer (Italy)
  • Giuseppe Milici, accountancy profession (Italy)
  • Tegwen Le Berthe, user (France)
  • Isabel Gavín Pérez, financial institution (Spain)
  • Eckhard Plinke, user (Germany)
  • Gunnar Rimmel, academia (Sweden)
  • Dawn Slevin, other stakeholder (Ireland)
  • Mirjam Wolfrum, not-for-profit organisation (Germany)

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

We comment on the IASB's proposal to defer the amendments to IAS 1

03 Jun 2020

We have responded to the IASB’s exposure draft ED/2020/3 'Classification of Liabilities as Current or Non-Current – Deferral of Effective Date'.

We support the deferral of the effective date for recent amendments to IAS 1 and believe that it is important that entities have sufficient time to analyse the potential effect of the amendments on the classification of their liabilities and, if necessary, renegotiate their debt covenants. In addition, we have observed some diversity in views on how to apply the recent amendments and suggest the Board consider additional guidance on how the recent amendments should be applied.

Please download the full comment letter here.

IASB issues 'Investor Update' newsletter

03 Jun 2020

The IASB has issued the latest edition of its newsletter 'Investor Update', which profiles recently introduced IFRS Standards and other changes to the pipeline as well as how those changes may affect companies and performance.

This issue features:

  • IFRS Foundation response to COVID-19
  • New project timelines
  • We need your views—open consultations
  • Stay up to date
  • Resources for investors

The Investor Update newslet­ter is available on the IASB’s website.

Government introduces Corporate Insolvency and Governance Bill

03 Jun 2020

The Government has introduced the Corporate Insolvency and Governance Bill in Parliament.

The overarching objective of the Bill is to provide businesses with the flexibility and breathing space they need to continue trading in a COVID-19 environment. The measures are designed to help UK companies and other similar entities by easing the burden on businesses and helping them avoid insolvency during this period of economic uncertainty.

The Bill has three main sets of measures to achieve its purpose:

  • to introduce greater flexibility into the insolvency regime, allowing companies breathing space to explore options for rescue whilst supplies are protected, so they can have the maximum chance of survival;
  • to temporarily suspend parts of insolvency law to support directors to continue trading in a COVID-19 environment without the threat of personal liability and to protect companies from aggressive creditor action; and
  • to provide companies and other bodies with temporary easements on company filing requirements and requirements relating to meetings including annual general meetings (AGMs).

The Bill consists of 6 insolvency measures and 2 corporate governance measures. It will support businesses, and where applicable charities and mutual societies, by:

  • introducing a new moratorium to give companies breathing space from their creditors while they seek a rescue
  • prohibiting termination clauses that engage on entering an insolvency procedure, entering the new moratorium or beginning the new restructuring plan procedure. It will also prevent suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process
  • introducing a new restructuring plan for companies in financial distress which include new cross class cram down procedures that allow a class of creditors to be bound by the restructuring plan even if they do not agree to the plan. This provision takes steps to provide safeguards for affected creditors in these situations
  • enabling the insolvency regime to flex to meet the demands of COVID-19
  • temporarily removing the threat of personal liability for wrongful trading from directors who try to keep their companies afloat in a COVID-19 environment
  • temporarily prohibiting creditors from filing statutory demands and winding-up petitions for COVID-19 related debts
  • temporarily giving companies and other bodies greater flexibility to hold Annual General Meetings (AGMs) and other meetings in a safe and practicable manner in response to COVID-19
  • temporarily easing burdens on businesses by extending filing deadlines at Companies House
  • allowing for some of the temporary measures to be retrospective, giving immediate support to businesses during COVID-19

Specifically regarding Annual General Meetings, the measures will allow, for a temporary period, companies and other bodies to suspend shareholders’ and members’ ability to attend meetings in person. Instead they will be able to convene meetings in a flexible way using a range of technologies. Additionally with respect to company filings, the regulations mean that for a temporary period, public and private companies and other entities will have more time to file accounts, confirmation statements and notices of certain relevant events covered by the confirmation statement with Companies House. A relevant event would include the appointment of a new director for instance.

The Department for Business, Energy and Industrial Strategy (BEIS) has published factsheets with an explanation of each of the measures included in the Bill.

Click for:

ICAEW publishes short introduction to the law on dividends

03 Jun 2020

The Institute of Chartered Accountants in England and Wales (ICAEW) has published a document containing a short introduction to the law on dividends.

The document gives a broad explanation of that law and of the role and content of the Guidance on realised and distributable profits (TECH 02/17BL) issued by ICAEW and the Institute of Chartered Accountants of Scotland (ICAS). It aims to inform readers who are not accountants about the subject generally and to make TECH 02/17BL and its principles more widely accessible. The document does not change or supersede TECH 02/17BL which remains in effect as written.

The document covers:

  • Laws relevant to dividends and other forms of distribution. This provides an overview of the various laws that directors should be aware of before making dividend payments. These laws include laws specific to dividends in the Companies Act 2006.
  • General principles on the realisation of profits and losses. This outlines the general principles when applying the laws specific to dividends in the Companies Act 2006, including those derived from TECH 02/17BL.
  • Directory of TECH 02/17BL. This briefly describes the subject matter of each chapter of TECH 02/17BL to help users of that publication to navigate its contents.

A press release and the full publication are available on the ICAEW website.

Accountancy Europe recommends actions for the public sector in the context of COVID-19

03 Jun 2020

Accountancy Europe has analysed short-term and long-term actions that could support the public sector in countering the pandemic's impact, among them many actions with regard to transparency and reporting.

Accountancy Europe notes that the COVID-19 pandemic has resulted in rapid deployment of government financial resources and development of support programmes. As governments should be very transparent about the effects of this, the recommended short-term actions include:

  • Controls over public sector expenditure have been relaxed. It is essential that governments are transparent as to the amount of funds received by beneficiaries and that such payments are retrospectively audited to ensure they have been correctly used.
  • Public sector entity reporting and auditing requirements may need to be temporarily relaxed in certain circumstances. But transparency is important, and they should report what truly matters.
  • Central governments should urgently provide guidance for public sector entities on reporting of going concern, post balance sheet events and management commentary.

Accountancy Europe also notes that it will not be business as usual once the crisis is over and that governments should seize the opportunity to drive forward programmes that support long-term fiscal resilience. The recommended long-term actions, therefore, include:

  • Public sector balance sheets will be more important than ever with public sector assets and liabilities set to balloon.
  • Post coronavirus crisis, the public sector finances will need to be restored and economies will need a kick-start. Robust accruals-based accounts provide the foundation necessary for forward looking estimates and economic models.
  • Governments will need record levels of borrowing, much of it from open markets, and investors will want to see reliable, internationally comparable and timely information. Adopting internationally recognised public sector accounting standards (IPSAS) would provide such foundations.

The actions recommended by Accountancy Europe are available in a summary overview, an in-depth analysis of the short-term actions and an in-depth analysis of the long-term actions.

EFRAG moves quickly on endorsement advice on IFRS 16 amendment

03 Jun 2020

The European Financial Reporting Advisory Group (EFRAG) has issued final endorsement advice for 'Covid-19-Related Rent Concessions (Amendment to IFRS 16)' not even a week after the amendment was issued by the IASB.

EFRAG assesses that the amendment meets the technical endorsement criteria of the IAS Regulation and is conducive to the European public good. It therefore recommends its endorsement.

The European Commission's Accounting Regulatory Committee's (ARC) vote, the next step in the endorsement process, is expected to take place later in June, however, final endorsement is currently expected not before "Q3/Q4 2020".

Please click to access the final endorsement advice letter and a corresponding press release on the EFRAG website.

ICAEW to host an IFRS update webinar

02 Jun 2020

The Institute of Chartered Accountants in England and Wales (ICAEW) will be hosting a webinar on latest developments in IFRS Standards.

The webinar will cover:

Further details are available on the ICAEW website.

IVSC concludes article series on goodwill amortisation

02 Jun 2020

The International Valuation Standards Council (IVSC) has published the third 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 third article Opportunities for Enhancing the Goodwill Impairment Framework can be accessed on the IVSC website.

The second article What is the Information Value of the Current Impairment Framework? was published in December 2019.

The first article Is Goodwill a Wasting Asset? was published in September 2019.

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