October

Survey of accounting for intangibles by SMEs

13 Oct, 2020

The European Federation of Accountants and Auditors for SMEs (EFAA) has published the results of a survey that examined the extent of harmonisation of the accounting for intangibles by SMEs across Europe.

Intangible assets are often, and increasingly, the primary drivers of the value of a company. While there is significant European Union regulation governing how publicly accountable companies report intangible assets in their financial statements, the accounting directive has no explicit regulations for SME companies except for the accounting for goodwill. Therefore, EFAA carried out a study to gain insights into the accounting treatment of intangible assets across jurisdiction of EFAA member bodies.

The objectives of the study were: 

  • To determine the applicable regulatory framework for accounting for intangible assets in each jurisdiction;
  • to compare these frameworks;
  • to establish whether there are incentives that influence the acquisition and valuation of intangible assets; and
  • to inform the current debate on intangible assets in Europe.

Not surprisingly, the study revealed that there are significant variations between jurisdictions in Europe when it comes to the accounting treatment of intangibles by SMEs and, consequently, users of SME financial statements need to be alert to the lack of comparability of information on intangibles.

Please click to access The Financial Reporting of Intangibles by SMEs in Europe on the EFAA website.

Updated IASB work plan — Analysis (October 2020 meeting)

31 Oct, 2020

Following the IASB's October 2020 meeting, we have analysed the IASB work plan to see what changes have resulted from the meeting and other developments since the work plan was last revised in September 2020. Changes are numerous.

Below is an analysis of all changes made to the work plan since our last analysis on 28 September 2020.

Standard-setting projects

  • Disclosure initiative — Subsidiaries that are SMEs — the decision of whether to issue a discussion paper or an exposure draft is now expected in December 2020 (previously fourth quarter of 2020)
  • Management commentary — the issuance of an exposure draft is now expected in the first half of 2021 (previously first quarter of 2021)
  • Primary financial statements — the review of the feedback to the exposure draft is now expected in December 2020 (previously fourth quarter of 2020)

Maintenance projects

  • 2019 Comprehensive review of the IFRS for SMEs — the feedback on the request for information is now expected to be discussed in December 2020 (previously fourth quarter of 2020)
  • Accounting Policies and Accounting Estimates (Amendments to IAS 8) — the issuance of final amendments is now expected in December 2020 (previously fourth quarter of 2020)
  • Deferred tax related to assets and liabilities arising from a single transaction — the Board decided to finalise the amendments (no date given)
  • Disclosure initiative — Accounting policies — the issuance of final amendments is now expected in December 2020 (previously fourth quarter of 2020)
  • Disclosure initiative — Targeted standards-level review of disclosures — the issuance of an exposure draft is now expected in the first quarter of 2021 (previously first half of 2021)
  • Lack of exchangeability — the issuance of an exposure draft is now expected in the first quarter of 2021 (previously no date given)

Research projects

  • Dynamic risk management — the feedback on the core model is expected to be discussed in the first half of 2021 (outreach was undertaken through October 2020)
  • Equity method — a project newly added to the work plan, a project direction is yet to be decided
  • Financial instruments with characteristics of equity — a decision on the project direction is now expected in December 2020 (previously fourth quarter of 2020)
  • Goodwill and impairment — the feedback on the discussion paper is now expected to be discussed in the first quarter of 2021 (previously first half of 2021)
  • Pension benefits that depend on asset returns — a review of the research is now expected in December 2020 (previously November 2020)
  • Post-implementation review of IFRS 10, IFRS 11 and IFRS 12 — the issuance of a request for information is now expected in December 2020 (previously fourth quarter of 2020)

Other projects

  • 2020 Agenda Consultation — the issuance of a request for information is now expected in the first quarter of 2021 (previously first half of 2021)
  • IFRS Taxonomy Update — 2020 General Improvements and Common Practice — a proposed IFRS Taxonomy Update was published on 29 October 2020 and the feedback is expected to be discussed in the first quarter of 2021
  • IFRS Taxonomy Update — Amendments to IAS 1, IAS 8 and IFRS Practice Statement 2 — this project has been added to the work plan and a proposed IFRS Taxonomy Update is expected in December 2020
  • IFRS Taxonomy Update — Amendments to IFRS 17, IFRS 4 and IAS 16 — the feedback on the proposed IFRS Taxonomy Update has been discussed and a final IFRS Taxonomy Update is expected in the first quarter of 2021
  • IFRS Taxonomy Update — Interest Rate Benchmark Reform — Phase 2 — the feedback on the proposed IFRS Taxonomy Update was expected to be discussed in October 2020, however, the date entry has been removed
  • Sustainability reporting — newly added to the work plan; the feedback on the Trustees' consultation paper is expected to be discussed in December 2020 (although the consultation period does not end until 31 December 2020)

The above is a faithful comparison of the IASB work plan at 28 September 2020 and 31 October 2020. For access to the current IASB work plan at any time, please click here.

We comment on the comprehensive review of the IFRS for SMEs

23 Oct, 2020

We have published our comment letter on the IASB’s Request for Information ‘Comprehensive Review of the IFRS for SMEs Standard’, which was published by the IASB on 28 January 2020.

We support the proposed alignment of the IFRS for SMEs Standard with full IFRS Standards, which includes the alignment of principles and important definitions; however, we suggest the Board should assess which principles and definitions are relevant to the users of the IFRS for SMEs Standard. In addition, we agree with the Board’s proposal to use the principles of relevance, simplification and faithful representation to provide a framework that assists in determining whether and how the IFRS for SMEs and the suggestions by the Board in Part B of the RFI on the specific sections of the IFRS for SMEs Standard that should be aligned with full IFRS Standards except for the proposed alignment with IFRS 16 Leases. Lastly, we note that the IFRS for SMEs Standard does not provide guidance on how SMEs should account for assets held for sale and discontinued operations. We believe that the Board should consider alignment with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations with simplifications, where appropriate.

Click to view the comment letter.

We comment on the FCA’s consultation paper 20/3 'Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations '

02 Oct, 2020

We have published our comment letter on FCA’s consultation paper 20/3 Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations (“the CP”).

Deloitte Touche Tohmatsu Limited’s (DTTL’s) Global CEO, Chairman and CFO are signatories to the statement of support for the Task Force on Climate-related Financial Disclosures (TCFD) and DTTL was actively involved in its work through our colleague Eric Dugelay, a member of the TCFD.

Climate change is an undiversifiable risk, which requires an immediate and urgent response. It is essential for businesses to integrate consideration of climate-related risks into their existing operations. Corporate reporting in line with TCFD recommendations can play an important role in achieving that outcome.

TCFD is market-driven and investor-focused, and is recognised as an appropriate framework by the International Organization of Securities Commissions (IOSCO) globally and by the European Securities and Markets Authority (ESMA) in the EU. It is an important contribution to developing global sustainability-reporting standards for climate-related information. In recent weeks we have seen significant steps made by IOSCO and the IFRS Foundation. Furthermore, leading international sustainability standard setters and frameworks have published a statement of intent to work towards a comprehensive corporate reporting system and issued an open letter to call on IOSCO to take a leadership position in creating the standard-setting architecture that would deliver a global climate reporting standard that incorporates TCFD recommendations. This global direction of travel should be taken into account in the development of any UK climate-related disclosure requirements. Therefore we believe that the introduction of a rule regarding TCFD should be considered a short-term measure which aims to encourage those businesses in scope to embed climate-related considerations into their operations and prepare for mandatory compliance with a reporting standard in coming years.

For this reason, we recommend that the rule does not ‘hard wire’ specific elements of TCFD into the rule, as these could be updated as TCFD moves to a global standard. Instead we suggest that it should reference application of the TCFD recommendations in the round. Experience of existing Listing Rules relating to the UK Corporate Governance Code shows that the time lag to consult on an FCA rule change every time the Code changes can discourage early adoption by issuers.

Regarding the rule itself, we believe all companies should be thinking about climate. We recognise that many companies are a good way along the journey in doing so but a significant number are not. We consider that a “comply or explain” approach may not have the effect of driving adoption of the recommendations; as it stands, a company may comply with the draft rule by repeatedly explaining non-compliance. Also, as TCFD is a set of recommendations rather than a reporting standard, it may prove challenging to determine what compliance might look like in some respects. It may be more valuable to require reporters to explain how they have had regard to TCFD; to what extent they have adopted and made disclosures according to the recommendations of TCFD; and, where necessary, the plans they have to adopt further recommendations in future years. This will not only allow investors to hold directors to account now, but also in future if insufficient progress is made.

Given the need for urgent action to stand any chance of meeting the Government’s target to be carbon neutral by 2050, we think issuers should be reporting progress now. Therefore, despite the extension of the consultation period, we believe that the new rule should take effect for periods commencing on or after 1 January 2021; we suggest that the Technical Note relating to current requirements also encourage early adoption of the new rule.

In the long term, we believe reporting of climate related information in line with TCFD recommendations or subsequent climate reporting standards should be required for all large economic enterprises – including both users and providers of financial capital. A rule for commercial premium-listed issuers is a good start; further rules for other issuers, larger private companies (perhaps those for whom a Statement of Corporate Governance Arrangements is required), and for major investors should follow. We encourage the FCA to work with the Prudential Regulation Authority (PRA), the Pensions Regulator (tPR), the Department for Business, Energy and Industrial Strategy (BEIS) and other UK regulators to ensure a consistent and joined-up approach to the introduction of climate-related reporting requirements across the various types of entity within the regulators’ respective remits.

Finally, we support the provision of guidance to issuers about how the current regulatory regime applies to climate change-related risks and encourage the FCA to finalise and publish the Technical Note as soon as possible so that it is available for December 2020 year-end reporting.

Click to view the full comment letter including our responses to the specific questions raised in the CP.

Webinar on Trustees' sustainability consultation

29 Oct, 2020

The Trustees of the IFRS Foundation have announced a webinar and moderated Q&A on their sustainability consultation launched in September.

The consultation is intended to assess demand for global sustainability standards and what role the Foundation might play in the development of such standards.

For the convenience of participants from different time zones, there will be two sessions of the webinar both discussing the same topics:

  • Tuesday 17 November 2020, 10:00–11:00 GMT and
  • Tuesday 17 November 2020, 15:00–16:00 GMT.

Each session will last a maximum of 60 minutes and include a moderated question-and-answer session. Questions can be submitted in advance.

Please click for more information, registration, and submitting questions in the press release on the IASB website.

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.