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May

ACCA report on integrated thinking

29 May 2021

The Association of Chartered Certified Accountants (ACCA) has published a report which looked at three key ways in which integrated thinking is communicated in the annual integrated report.

These are first through clear communication of strategy, second through pertinent discussions about non-financial value drivers that form the basis of the multi-capitals model, and third through consistency between the narrative report and the financial statements.

The ACCA reviewed fourteen 2019/20 integrated reports of companies in the International Integrated Reporting Committee's (IIRC's) <IR> Business Network.  It highlights that 'while the quality of many aspects of integrated reporting is improving....integrated thinking - or at least its representation in the report - is not yet at the stage where it can be considered a truly embedded management approach'.  Detailed findings, based upon the review of those companies, revealed that:

  • There were divided views about the purpose of an integrated report, with nearly half of the companies positioning their integrated reports as sustainability reports.
  • Strategy and strategic goals were not always communicated coherently.  The ACCA found that reporting on governance, business model and outlook were often divorced from strategy and lacked consideration of future horizons.
  • Sustainability objectives were not fully connected to the overarching corporate strategy. 
  • Multi-capitals thinking was yet to fully take root.  The ACCA found that key value drivers were not discussed consistently throughout the integrated reports, which might point to a lack of consensus across the business as to what the key value drivers are. 
  • The integrated report was not always consistent or connected with the financial statements, for example not referencing impairments recorded in the financial statements in integrated reports.

The report includes best practice examples and a set of 10 tips for organisations that wish to improve the way they communicate integrated thinking through their reporting.

A press release and the full report are available on the ACCA website.

UK Endorsement Board secretariat publishes final comment letter on IASB’s Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12

28 May 2021

The UK Endorsement Board (UKEB) secretariat has published its final comment letter on the International Accounting Standard Board’s (IASB's) Request for Information on its post-implementation review of IFRS 10 'Consolidated Financial Statements', IFRS 11 'Joint Arrangements' and 'IFRS 12 Disclosure of Interests in Other Entities' (the Standards).

The UKEB secretariat's final response has been informed from stakeholder roundtables and interviews, desk-based reviews of annual reports and public consultation on its draft response.  It concludes that the Standards have achieved their objectives and the objectives of them set by the IASB when issued and are working effectively overall.  The UKEB secretariat makes some recommendations in a few areas where it believes that the 'application of the Standards can be significantly improved'.  These are:

IFRS 10

  • Review the requirement to disclose why an investment entity is classified as such when it meets the investment entity criteria but does not exhibit the typical characteristics.
  • Review the application guidance for identifying investment entities to ensure it results in appropriate outcomes for all types of investment fund.
  • Require investment entities to consolidate those intermediate subsidiaries which are investment entities to improve visibility at group level of assets and liabilities held by those subsidiaries.
  • Additional guidance to improve consistency and comparability in accounting for acquiring a controlling interest in a single-asset entity

IFRS 11

  • Include principle-based guidance from IFRIC’s March 2015 Update on the assessment of other facts and circumstances.
  • Include additional guidance in the Standard to address any diversity of practice relating to the interaction of IFRS 11 with IFRS 15 and IFRS 16.

IFRS 12

  • Review the extent to which disclosures for unconsolidated structured entities have proved useful as an indicator of potential risk.
  • Consider including guidance on the level of aggregation and disaggregation of disclosures on interests in other entities as part of its Primary Financial Statements project.
  • Consider including enhanced disclosures for subsidiaries with material non-controlling interests.

The final comment letter and further information is available on UKEB website.

UK Endorsement Board publishes draft comment letter on the IASB’s DP/2020/2 Business Combinations under Common Control

28 May 2021

The UK Endorsement Board has published its draft comment letter on the International Accounting Standard Board’s (IASB's) Discussion Paper DP2020/02 Business Combinations under Common Control ("BCUCC").

In its draft comment letter the UK Endorsement Board supports the proposals in the discussion paper and indicate that the proposals will provide users of financial statements with information on BCUCC which it calls a 'significant step forward from the minimal information required today'.

In particular, the UK Endorsement Board expect the proposals in the Discussion Paper will lead to improvements over current financial reporting as follows:

  • Measurement and disclosure requirements in the DP will reduce diversity in accounting practice, improve transparency and lead to greater comparability between financial statements.
  • The proportionate approach, whereby the book value method is required in situations where non-controlling shareholders are not affected, will reduce complexity and cost for preparers.

Comments on the draft comment letter are requested by 30 June 2021. For more information, see the UKEB's website.

June 2021 IFRS Interpretations Committee meeting agenda posted

28 May 2021

The IFRS Interpretations Committee has posted the agenda for its next meeting, which will be held by video conference on 8-9 June 2021.

The Committee will discuss the following:

  • IAS 2 — Costs necessary to sell inventories
  • IAS 10 — Preparation of financial statements when an entity is no longer a going concern
  • IFRS 9 — European Central Bank’s third targeted longer-term refinancing operations programme
  • IFRS 16 — Power purchase agreements in a gross pool electricity market
  • Work in progress

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.

Updated IASB work plan — Analysis (May 2021)

28 May 2021

Following the IASB's May 2021 meeting, we have analysed the IASB work plan to see what changes have resulted from the meetings and other developments since the work plan was last revised in April 2021.

Below is an analysis of all changes made to the work plan since our last analysis on 30 April 2021.

Standard-setting projects

  • Management commentary —  ED/2021/6 was published on 27 May 2021 with comments requested by 23 November 2021; feedback to the exposure draft is expected to be discussed in H1 2022
  • Rate-regulated activities — feedback to the exposure draft is now expected to be discussed in Q4 2021 (previously H2 2021)

Maintenance projects

  • Deferred tax related to assets and liabilities arising from a single transaction — This project has been removed from the work plan due to the issuance of the final amendments on 7 May 2021
  • Lease Liability in a Sale and Leaseback — feedback on the exposure draft was discussed at the IASB's May meeting; a decision on the future project direction is expected in Q3 2021

Research projects

  • Extractive Activities — a decision on the project direction is now expected in July 2021 (previously Q3 2021)
  • Goodwill and Impairment — feedback on the discussion paper was discussed at the IASB's May meeting; a decision on the future project direction is expected in Q3 2021
  • Post-implementation Review of IFRS 10-12 — feedback on the request for information is now expected to be discussed in July 2021 (previously Q3 2021)

Other projects

  • no changes

The above is a faithful comparison of the IASB work plan at 30 April 2021 and 28 May 2021. For access to the current IASB work plan at any time, please click here.

Discounting in financial reporting

28 May 2021

On 9 July 2021, the European Accounting Association (EAA), the European Financial Reporting Advisory Group (EFRAG), and the Institute of Chartered Accountants of Scotland (ICAS) will host a webinar on discounting in financial reporting.

At the event, three studies on discount rates in financial reporting will be presented:​​

  • The Theory and Practice of Discounting in Financial Reporting Under IFRS
  • Discount rate in accounting: How practitioners depart the IFRS Maze – Towards the end of determinism in accounting
  • Black Box Accounting: Discounting and disclosure practices of decommissioning liabilities

The presentation of the studies will be followed by a panel discussion that will include Sue Lloyd, Vice Chair of the IASB.

Please click for more information on the EFRAG website.

Update: On 14 July 2021, the EFRAG has released a recording of the joint webinar.

IFRS Foundation appoints new Trustee

28 May 2021

The IFRS Foundation has announced the appointment of Masamichi Kono as Trustee of the IFRS Foundation. His appointment will begin on 1 July 2021.

Mr Kono is currently serving as Deputy Secretary General of the Organisation for Economic Cooperation and Development (OECD), where his responsibilities include setting the strategic direction of OECD policy on environment, tax, trade and agriculture, along with leading financial and enterprise affairs. He oversees initiatives on infrastructure and sustainable growth and represents the OECD at the Financial Stability Board.

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

IASB supports narrow-scope amendment to IFRS 17

27 May 2021

At its meeting this afternoon, the IASB discussed the presentation of comparative information on initial application of IFRS 17 and IFRS 9. Insurers had raised concerns about an accounting mismatch between financial assets and insurance contract liabilities that could arise from the continued application of IAS 39. The staff suggested the Board could consider adding a specific transition requirement to IFRS 17 to enable insurers to present comparative information on a basis that is consistent with how IFRS 9 would be applied going forward, without unnecessarily disturbing the transition requirements in IFRS 9.

The majority of Board members and all Board members who participated in the discussion agreed that something should be done. When discussing the staff's analysis, they stressed that

  • communication about this possible narrow-scope amendment is very important,
  • they had been aware of the problem, but not of its magnitude,
  • evidence provided by the insurers has become much more well-founded because implementation is progressing,
  • the amendment would be very specific and narrow-scope, so this is not "opening IFRS 17 up again",
  • the stable platform for IFRS 17 is very important, however, this possible amendment is smoothing implementation, rather than disrupting it,
  • while the optionality of the amendment would mean a decrease of comparability between companies, comparability within the financial statements of the individual companies increases.

The staff will bring back detailed proposals for the possible narrow-scope amendment at a future meeting.

UK Endorsement Board receives delegated powers

27 May 2021

On Friday 21 May 2021, the Secretary of State for Business, Energy and Industrial Strategy (BEIS) delegated statutory powers to the UK Endorsement Board (UKEB). Under its delegated functions, the UKEB will play a pivotal role in influencing the development of international financial reporting standards (IFRS) and is responsible for the endorsement and adoption of IFRS for use by UK companies.

Legislation to formally establish the UKEB was passed in April 2021. It reports to the Secretary of State for BEIS on technical matters and to the Financial Reporting Council (FRC) on its governance and due process procedures.  Pauline Wallace was appointed Chair in September 2020 and inaugural UKEB Board members were appointed in March 2021.

The International Accounting Standards (Delegation of Functions) (EU Exit) Regulations 2021 are available here.

FRC Lab calls for participants in a survey on UK Electronic Reporting

27 May 2021

The Financial Reporting Lab (FRC Lab) has launched a survey, as part of its work on digital reporting, to understand the impacts and progress towards digital reporting for companies with securities on a regulated market in the UK.

Last year the FCA delayed the mandation of Disclosure and Transparency Rule 4.1.14, which introduced a requirement for companies on a regulated market to publish annual reports in XHTML format. The majority of companies opted not to produce XHTML accounts for 2020, although a number did. 

The FRC lab is seeking to understand the readiness of companies and providers for XHTML for 2021. They also like to understand the experiences of those who have already trailed or published XHTML annual reports. 

The survey is open until 25 June 2021. 

Further information and the survey are available on the FRC website.

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