June

EFRAG, NASB, the NFF, and IASB to host joint outreach event on general presentation and disclosures in financial statements

08 Jun, 2020

The European Financial Reporting Advisory Group (EFRAG), the Norwegian Accounting Standards Board (NASB), the Norwegian Society of Financial Analysts (NFF), and the IASB will host a joint webinar on 17 June 2020 on the IASB’s Exposure Draft ‘General Presentation and Disclosures’.

On 17 December 2019, the IASB published the exposure draft of a new standard General Pre­sen­ta­tion and Dis­clo­sures that is intended to replace IAS 1 Pre­sen­ta­tion of Financial State­ments.

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

Example of an annual financial report in ESEF format

18 Jun, 2020

The European Securities and Markets Authority (ESMA) has published on its website an example of an annual financial report which is prepared in the new European Single Electronic Format (ESEF).

The report aims to provide issuers with an example of an annual report in the ESEF format for their submissions to the national Officially Appointed Mechanisms.

Please click for access to the report and more information on the ESMA website.

FRAB minutes for March and April 2020 published

15 Jul, 2020

The minutes of the Financial Reporting Advisory Board’s (FRAB’s) meetings of 19 March 2020 and 8 April 2020 have been made available on the HM Treasury website.

The role of the FRAB is “to ensure that government financial reporting meets the best possible standards of financial reporting by following Generally Accepted Accounting Practice (GAAP) as far as possible”. The FRAB includes representatives from the accountancy profession in the private and public sectors, academia and government bodies. The board meets regularly to consider proposed changes to policy and practice.

Key topics discussed during the March meeting included:

  • an update on the Financial Reporting Manual (FReM);
  • an update on the implementation plan for the adoption of IFRS 17 Insurance Contracts and a proposed IFRS 17 application guidance exposure draft expected in winter 2020/21; and
  • an update on the CIPFA/LASAAC Code of Practice on Local Authority Acounting in the United Kingdom.

Key topics discussed during the April meeting included the challenges from Covid-19 that are emerging including various options for reducing the reporting burden.  It was agreed that the 2019/20 FReM would remain unchanged but that further guidance would be issued to set minimum reporting requirements for the performance and accountability reports.

The minutes and other supporting documents for the March and April meetings are available on the HM Treasury website.

FRC Lab reports on current questions investors seek answers on

15 Jun, 2020

Two new reports from the Financial Reporting Lab of the Financial Reporting Council (FRC) provide practical guidance to companies in areas of reporting that investors have highlighted as being most critical in these times of unparalleled economic uncertainty.

The reports found that investors recognise COVID-19 may create a wide range of issues for companies, but that the provision of transparent and timely information helps investors in their decision-making and drives the allocation of capital when companies are looking to the markets for support.

Specific elements of uncertainty relevant to the next 12 months might include (but are not limited to):

  • Timing of resumption of operations.
  • Further restrictions that limit the return to normal operations.
  • Restrictions placed on government (or other) capital.
  • Timing and continuation of government schemes and support packages.
  • The outcome of capital raising actions, discussions with banks, and landlords.
  • Short-term impacts of pricing changes to revenue and expenses.
  • Impacts on human capital, the supply chain and customers.

Please click for the following additional information on the FRC website:

  • Press release
  • Report with practical advice to companies and infographic setting out the disclosures investors expect to see from companies during this time of uncertainty
  • Report with specific guidance on going concern, risk and viability disclosures

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.

The Financial Reporting Council (FRC) has also published updated questions and answers (Q&As) including guidance on best practice for AGMs. 

The Corporate Insolvency and Governance Bill received Royal Assent on 25 June and is now law.

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IAAER grants for research informing the IASB's work

30 Jun, 2020

The 'Research Informing the IASB Decision Process programme' of the International Association for Accounting Education and Research (IAAER) has awarded grants to academics from Canada, Sweden, the UK, and the USA to conduct research that will be relevant to the IASB's work.

The successful research projects relate to projects and standards of the IASB:

  • Extractive activities: Financial Statement Comparability in Extractive Industries: International Evidence 
  • IFRS 9 Financial Instruments: The Impact of Hedging and Hedge Reporting on Managers’ and Investors’ Decisions
  • IFRS 15 Revenue from Contracts with Customers: An Assessment of Corporate Disclosures of IFRS 15: Revenue from Contracts with Customers
  • Primary Financial Statements: Are Non-GAAP Measures Running Amok? Evidence on the Proliferation of Non-GAAP Adjustments and the Quality of the Related Disclosures 
  • Primary Financial Statements: Income Statement Presentation and Forecasting Quality

The researchers will present their findings to the Program Advisory Committee, the Board and its technical staff in three deliverables. The first round of presentations will take place in December 2020.

Please click for more information on the IASB website.

 

IAASB guidance on accounting estimates

29 Jun, 2020

The International Auditing and Assurance Standards Board (IAASB) has released COVID-19 pandemic-related guidance on auditing accounting estimates and related disclosures.

Auditing Accounting Estimates in the Current Evolving Environment Due to COVID-19 notes that management is responsible for the recognition and measurement of accounting estimates and related disclosures in accordance with the applicable financial reporting framework. As financial reporting frameworks often require forward-looking information and yet the COVID-19 pandemic comes with a lot of uncertainties, it will likely be more difficult for management to develop accounting estimates, in particular future cash flows. The COVID-19 pandemic could also result in triggers for impairment testing. Therefore, the IAASB notes, auditors will need to focus on the potential impacts of volatility and uncertainty when auditing accounting estimates.

Please click to access the guidance on the IAASB website.

IASB finalises narrow-scope amendments to IFRS 17 and IFRS 4

25 Jun, 2020

The International Accounting Standards Board (IASB) has issued 'Amendments to IFRS 17' to address concerns and implementation challenges that were identified after IFRS 17 'Insurance Contracts' was published in 2017. The amendments are effective for annual periods beginning on or after 1 January 2023 with earlier application permitted. The IASB has also published 'Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)' to defer the fixed expiry date of the amendment also to annual periods beginning on or after 1 January 2023.

 

Background

Since IFRS 17 Insurance Contracts was issued in May 2017, the Board has been monitoring the implementation and has learned about concerns and implementation challenges. The Board had previously indicated that it would consider whether additional action is needed to address matters arising during implementation. At the October 2018 meeting of the Board a list of 25 potential amendments to the standard was identified and the criteria against which any possible amendment would be considered were agreed. An exposure draft of proposed amendments was published on 26 June 2019 with comments requested by 25 September 2019.

In the redeliberations in the project on possible amendments to IFRS 17 following the end of the comment period, the IASB refined its proposals and took additional feedback by constituents on board resulting in the final amendments issued today.

 

Changes

The main changes resulting from Amendments to IFRS 17 and Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4) are:

  • Deferral of the date of initial application of IFRS 17 by two years to annual periods beginning on or after 1 January 2023 and change the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after 1 January 2023.
  • Additional scope exclusion for credit card contracts and similar contracts that provide insurance coverage as well as optional scope exclusion for loan contracts that transfer significant insurance risk.
  • Recognition of insurance acquisition cash flows relating to expected contract renewals, including transition provisions and guidance for insurance acquisition cash flows recognised in a business acquired in a business combination.
  • Clarification of the application of IFRS 17 in interim financial statements allowing an accounting policy choice at a reporting entity level.
  • Clarification of the application of contractual service margin (CSM) attributable to investment-return service and investment-related service and changes to the corresponding disclosure requirements.
  • Extension of the risk mitigation option to include reinsurance contracts held and non-financial derivatives.
  • Amendments to require an entity that at initial recognition recognises losses on onerous insurance contracts issued to also recognise a gain on reinsurance contracts held.
  • Simplified presentation of insurance contracts in the statement of financial position so that entities would present insurance contract assets and liabilities in the statement of financial position determined using portfolios of insurance contracts rather than groups of insurance contracts.
  • Additional transition relief for business combinations and additional transition relief for the date of application of the risk mitigation option and the use of the fair value transition approach.
  • Several small amendments regarding minor application issues.

Although the IASB had in its discussions leading up to the exposure draft voted unanimously to leave the annual cohort requirement in IFRS 17 unchanged and did not ask a question on it in the draft, some respondents commented on the IASB’s decision to retain the requirements unchanged. The IASB, therefore, included in its deliberations the question of annual cohorts in February 2020 once more. However, it came to the same conclusion as before and decided to retain, unchanged, the annual cohort requirement in IFRS 17.

 

Effective date and transition

The amendments to IFRS 17 are effective for annual periods beginning on or after 1 January 2023. Earlier application is permitted. They are applied retrospectively.

Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4) defers the fixed expiry date of the amendment to annual periods beginning on or after 1 January 2023. 

 

Additional information

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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.

IASB issues goodwill and impairment project webinars in English, Japanese and Chinese

19 Jun, 2020

The IASB has made available goodwill and impairment project webinars in English, Japanese and Chinese.

The webcasts discuss preliminary views on Discussion Paper Business Combinations — Disclosures, Goodwill and Impairment.

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

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