February

EFRAG publishes January 2020 issue of 'EFRAG Update'

04 Feb, 2020

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during January 2020.

The The update reports on the EFRAG conference call on 11 December, the EFRAG Board meeting on 18 December, the EFRAG Technical Expert Group meeting on 4 to 5 December, the meeting of the EFRAG CFSS and EFRAG TEG on 4 December and the meeting of the European Lab Steering Group on 3 December.update reports on the EFRAG Board meeting on 14 January, the EFRAG Technical Expert Group meeting on 29 to 30 January, the EFRAG conference call on 8 January and the Project Task Force on Climated-Related Reporting meeting on 8 January.

The update also lists EFRAG publications issued in December:The update also lists EFRAG publications issued in DecemberThe update also lists EFRAG publications issued in January:

Please click to download the January EFRAG update from the EFRAG website.update reports on the EFRAG conference call on 11 December, the EFRAG Board meeting on 18 December, the EFRAG Technical Expert Group meeting on 4 to 5 December, the meeting of the EFRAG CFSS and EFRAG TEG on 4 December and the meeting of the European Lab Steering Group on 3 December.The update reports on the EFRAG conference call on 11 December, the EFRAG Board meeting on 18 December, the EFRAG Technical Expert Group meeting on 4 to 5 December, the meeting of the EFRAG CFSS and EFRAG TEG on 4 December and the meeting of the European Lab Steering Group on 3 December.THtThe update reports on the EFRAG conference call on 11 December, the EFRAG Board meeting on 18 December, the EFRAG Technical Expert Group meeting on 4 to 5 December, the meeting of the EFRAG CFSS and EFRAG TEG on 4 December and the meeting of the European Lab Steering Group on 3 DecembTfThe update reports on the EFRAG conference call on 11 December, the EFRAG Board meeting on 18 December, the EFRAG Technical Expert Group meeting on 4 to 5 December, the meeting of the EFRAG CFSS and EFRAG TEG on 4 December and the meeting of the European Lab Steering Group on 3 December.fhfgThe update reports on the EFRAG conference call on 11 December, the EFRAG Board meeting on 18 December, the EFRAG Technical Expert Group meeting on 4 to 5 December, the meeting of the EFRAG CFSS and EFRAG TEG on 4 December and the meeting of the European Lab Steering Group on 3 December.

European Reporting Lab issues report on climate-related disclosures

06 Feb, 2020

The European Lab Project Task Force on Climate-related Reporting has issued, ‘How to improve climate-related reporting — A summary of good practices from Europe and beyond’.

The report provides an analysis of the current state of climate-related reporting of approximately 150 European companies and focuses on “identifying good reporting practices and assessing the level of maturity in the implementation of the TCFD recommendations, while also taking into consideration the climate-related reporting elements of the NFRD and the related non-binding Guidelines on non-financial reporting and Guidelines on reporting climate-related information.” In additional, the European Lab Project Task Force has issued two supplement documents which complement the report with detailed findings and in-depth review of scenario analysis reporting.

For more information, see the press release and summary brochure on the EFRAG’s Web site as well as this page offering access to the three documents.

February 2020 IASB meeting agenda updated

17 Feb, 2020

The IASB has updated the agenda for its next meeting, which will now be held at its offices in London on 25–27 February 2020.

The main change is that Amendments to IFRS 17 Insurance Contracts will now be discussed on Tuesday 25 February (pulled forward from 26 February).

The full agenda for the meeting can be found here.

February 2020 IASB meeting agenda posted

14 Feb, 2020

The IASB has posted the agenda for its next meeting, which will be held at its offices in London on 26–27 February 2020. There are six topics on the agenda.

The Board will discuss the following:

  • IBOR reform and the effects on financial reporting
  • Disclosure initiative — Targeted Standards-level review of disclosures
  • Disclosure initiative — Accounting policies
  • Amendments to IFRS 17 Insurance Contracts
  • Consistent application matters
  • Business combinations under common control

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.

FRC and BEIS publish revised Brexit accounting and audit letters

14 Feb, 2020

The Financial Reporting Council (FRC) and the Department for Business, Energy and Industrial Strategy (BEIS) have jointly published revised letters for auditors and accountants with information regarding auditing, accounting and corporate reporting standards during the transition period following the UK’s exit from the EU on 31 January 2020.

The letters explain that during the transition period there will be no changes to the UK’s auditing, accounting and corporate reporting frameworks. The letters explain that now the UK has left the European Union with the Withdrawal Agreement, the guidance and correspondence that was previously issued about the effects of a ‘No Deal’ are no longer relevant.

In 2019 the government approved a number of statutory instruments for the audit and accounting sectors; these will come into force at the end of the transition period - 31 December 2020 - with most changes taking effect for periods beginning after that date.

The accounting letter explains how the accounting and corporate reporting regime in the UK will change following the end of the transition period. In particular, UK incorporated companies will be required to use “UK-adopted IAS” for financial years beginning after the end of the transition period, and certain preparation, filing and audit exemptions will also change.   The letter will be particularly relevant for UK and EEA listed companies, AIM companies, large privately-owned entities and Global Depository Receipt (GDR) issuers.

The audit letter sets out key changes to the future of audit regulation following the end of the transition period. It specifically relates to the registration and recognition of UK and EEA auditors and to ongoing UK audits but also covers group audits and firm ownership. The letter will be relevant to auditors and firms.

Both letters include a number of frequently asked questions to assist businesses with their preparations.

Please click to access the letters and supporting materials on the FRC website. Our previous news item on the new legislation is available here.

FRC issues advice to companies and auditors on coronavirus risk disclosures

18 Feb, 2020

The Financial Reporting Council (FRC) has today published guidance for companies on disclosure of risks and other reporting consequences arising from the emergence and spread of Coronavirus (COVID-19).

The guidance will be particularly relevant for companies either operating in, dependent on supply chains in, or having close trading relations with China.  In addition, the overall economic uncertainty in the region could indirectly affect entities that do not have direct exposure to COVID-19 in the region.

The FRC encourages companies to consider what disclosures they might need to include in their year-end accounts relating to these events.  Specifically companies should consider whether to refer to the possible impact of COVID-19 on their business in their reporting of principal risks and uncertainties. Where mitigating actions can be taken, these should be reported alongside the description of the risk itself.   

In addition to reporting the effects of COVID-19 in the principal risks and uncertainties section of the annual report, the FRC also highlights that the carrying value of assets and liabilities might also be affected with a need to perform additional impairment tests and to assess whether leases have become onerous.

With respect to post balance sheet events, for reporters with December 2019 year-ends, the FRC indicates that these events would likely be non-adjusting.  However for companies with later reporting dates, the FRC highlights that year-end balances might be affected. 

The FRC highlights that required disclosures will likely change as more information about COVID-19 emerges. As a result companies will need to continually monitor developments and ensure that they are providing up-to-date and meaningful disclosure when preparing year-end reports.   

A press release and the guidance is available on the FRC website. 

FRC publishes its draft plan and budget for 2020/21

12 Feb, 2020

The Financial Reporting Council (FRC) has published its draft plan and budget for 2020/21. Comments are requested by 28 February 2020.

The strategy has been developed in light of the recommendations made to the government by three independent reviews of the FRC. The FRC indicates that the 2020/2021 strategy sets out its initial response to those recommendations and that the strategy will be replaced in 2021 with a longer-term strategy once the government’s final positions to the recommendations made to it are finalised.

The FRC indicates that moving forward it will reorganise into four divisions consisting of:

  • Regulatory Standards and Codes;
  • Supervision;
  • Enforcement; and
  • Corporate services.

The draft plan and budget sets out the FRC’s strategic priorities in these four areas:

Regulatory Standards and Codes

  • Promote the Stewardship Code, support signatories to the Code and ensure significant take up. Assess early reporting of implementation.
  • Undertake an annual assessment of adherence with the Corporate Governance Code as well as the Wates Code for private companies.
  • Update the Corporate Governance Code and/or related guidance for enhanced requirements on internal controls, risk management, going concern and resilience/viability.
  • Publish a thought leadership paper on the Future of Corporate Reporting.
  • Deliver FRC Lab projects on Technology and Future Horizons in reporting.
  • Update UK GAAP for recent international developments.
  • Launch a post-implementation review of the Technical Actuarial Standards.
  • Support the government’s green finance strategy to embed climate-related issues into corporate reporting and investment decision making.
  • Assist the Government with creating new structures for setting accounting standards after leaving the EU.

Supervision

  • Taking a risk-based approach, increase the scope and number of Audit Quality Reviews (from 130 in 2019/20 to between 145-165 in 2020/21) and Corporate Reporting Reviews (from 215 in 2019/20 to between 240 and 260 in 2020/21) undertaken.
  • Improve transparency by publishing more information about these individual reviews as well as thematic reviews on key cross-market issues e.g. climate reporting.
  • Build and deepen its supervision of the major audit firms, including governance, structure, audit quality management, culture and resilience.
  • Expand oversight of the professional bodies with decision-making about auditor registration moving to the FRC.

Enforcement

  • Deliver robust, fair and transparent regulatory outcomes.
  • Continue to improve the timeliness of its work.
  • Report on regulatory outcomes and progress through the Annual Enforcement Review and public messaging.
  • Conclude its Carillion related factual investigations and decide upon any enforcement action required.

Corporate services

  • Deliver within budget.
  • Improve management information and publish externally on an agreed regular basis.
  • Improve staff morale and wellbeing.
  • Deliver an integrated communications and stakeholder management strategy to ensure it gets the insights it needs to develop policies, maximise the impact of its work and regularly and clearly communicate with its stakeholders.
  • Assess organisational capability gaps and close them.
  • Monitor risks to achieving its objectives and put controls in place to mitigate where possible.

The draft plan and budget also covers the actions the FRC will take in relation to its reform, changes to its governance and also resourcing.

The FRC also sets out its proposed budget for 2020/21for expenditure and funding. Expenditure is being increased in the areas of audit regulation, monitoring the quality of corporate reporting and enforcement.

The press release and Draft Plan and Budget 2020/21 are available from the FRC website.

FRC to review how companies and auditors assess and report on the impact of climate change

21 Feb, 2020

The Financial Reporting Council (FRC) has announced a major review of how companies and auditors assess and report on the impact of climate change.

The FRC will review the extent to which UK companies and auditors are responding to the impact of climate change on their business to ensure reporting requirements are being met.

The review will consider how the quality of information can be improved to support informed decision-making by investors and other stakeholders. The FRC will monitor how companies and their advisers fulfil their responsibilities, and encourage better practice, by:  

  • reviewing a sample of company reports and accounts across industries to assess the quality of their compliance with reporting requirements in relation to climate change;
  • assessing a sample of audits to review how auditors are ensuring the impact of climate risk has been appropriately reflected in company reports and accounts, including the key areas of judgement and related disclosures;
  • assessing the resources available within audit firms to support audit teams in evaluating the impact of climate change on audited entities; 
  • evaluating the quality of disclosures under the new UK Corporate Governance Code regarding risk, emerging risk and long-term factors affecting their viability;
  • evaluating whether the Financial Reporting Lab’s recommendation for companies to report in line with the Task Force on Climate-related Financial Disclosures framework has been adopted, highlighting developing good practice.

Click here for the press release on the FRC website.

GPPC issues implementation considerations for IFRS 17

06 Feb, 2020

The Global Public Policy Committee (GPPC) have issued two papers related to the implementation of IFRS 17, 'Insurance Contracts'.

The first paper, Implementation of IFRS 17 'Insurance Contracts': Considerations for those charged with governance, can help those charged with governance evaluate management's progress towards implementation and assess their external auditors' general readiness to audit the context of IFRS 17.

The second paper, Implementation of IFRS 17 'Insurance Contracts': Companion document on key judgements and accounting policy choices, is a companion document to Implementation of IFRS 17 Insurance Contracts: Considerations for those charged with governance January 2020. This paper focuses on key judgements and accounting policy choices faced by insurers related to the adoption of IFRS 17.

HM Treasury publishes results of the post implementation review of IFRS 9 and IFRS 15 for central government

05 Feb, 2020

HM Treasury has published the results of an early post-implementation review focusing on the way that IFRS 9 and IFRS 15 were implemented in central government.

The thematic review examines the implementation process for lessons applicable to introducing future standards, and considers the quality of disclosures made in relation to IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers in the first year of their implementation.

The report indicates that “disclosure quality is variable” with some companies not sufficiently disclosing the impact of the new standards. In order to improve disclosures, the report contains some better practice examples that companies can refer to. HM Treasury is also revising its guidance to support departments as they improve the quality of their financial reporting.

A press release and the full thematic review are available on the HM Treasury website.

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