Mr Golden began his speech by acknowledging that comparable global accounting standards help reduce complexity and costs in financial reporting. He stated, however, that “by 2013, [the FASB had] come to realize that the ideal of single set high-quality global accounting standards was just that—an ideal. Different starting points, different cultures, and different legal systems made bilateral convergence impossible to achieve.”

After he highlighted the success of the joint FASB-IASB projects on business combinations, noncontrolling interests, fair value measurements, borrowing costs, segment reporting, stock compensation, and nonmonetary exchanges, Mr Golden reflected on the diverging strategies for the Boards’ projects on revenue recognition, leases, credit losses, and insurance. He closely examined the reasons for divergence, which were usually due to cost and complexity for US stakeholders.

Mr Golden discussed how the FASB is working to “[forge] a new model for how we support the goal of more comparable, high-quality accounting standards worldwide,” which includes:

• Development of high-quality GAAP — Mr Golden noted that considering opportunities to align with IFRS when possible is ‘embedded’ in the FASB’s process. He said the FASB is in ‘constant contact’ with the IASB about the IASB’s projects and that the Boards share research activities to “continue progress toward improved, aligned solutions.”
• Active participation in the Accounting Standards Advisory Forum (ASAF) — Mr Golden described the FASB’s commitment to the ASAF, which advises the IASB as it develops IFRS. He called the FASB’s involvement “an important opportunity to represent U.S. interests in the IASB’s standard-setting process” and noted that the ASAF provides a “valuable opportunity to work together with other standard setters on issues of common interest.”
• Enhancing relationships with other national standard setters — Mr Golden mentioned that the FASB meets individually with standard setters from many countries to “exchange ideas on improving our respective standards. This process also helped promote the broader flow of information and ideas that mutually inform our thinking. And to contribute to an environment that will foster greater alignment of standards across the globe.”

He made clear in his speech that the FASB will continue to work closely with the IASB to improve accounting standards worldwide. He also briefly provided his own opinion on sustainability reporting:

I think we should follow the IASB’s lead and remain focused on improving the financial statement. And leave sustainability reporting and other performance metrics—however important they may be—to other experts.

The full text of Mr Golden’s speech is available on the FASB's website.   

The research paper, originally published in December 2018, contains several updates and guides directors, preparers and auditors when preparing and auditing financial statements. Even though the guidance is not mandatory, it represents the IASB’s best practice interpretation of materiality.

Please click to access the updated research paper on the AASB website.

The update reports on the EFRAG Board meeting on 4 April, the EFRAG TEG and EFRAG User Panel meeting held on 16 April and the EFRAG TEG meeting held on 17 April. The update also lists an EFRAG publication issued in April:

• Comment Letter and Feedback Statement in response to the IASB's Exposure Draft ED 2018/2 Onerous Contracts - Cost of Fulfilling a Contract (Proposed amendments to IAS 37).

Please click to download the April EFRAG Update from the EFRAG website.

On IFRS IC agenda decisions, the Handbook continues to note that agenda decisions do not have the status of IFRSs and cannot add or change requirements in the standards, however, it now also states that in many cases an agenda decision includes explanatory material that explains how principles and requirements in IFRSs apply to the transaction or fact pattern described in the agenda decision. As these explanations provide "new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained", the Handbook states that entities might determine that they need to change an accounting policy as a result of an agenda decision.

The newly proposed Board agenda decisions are intended to support the consistent application of IFRSs by also providing explanatory material. The Board would publish agenda decisions when it has decided not to add a project to the standard-setting agenda but still concludes that consistency of application of the standards would be improved by providing material that explains how the applicable principles and requirements in the standards apply to a particular transaction or fact pattern. Again, the Handbook notes that agenda decisions do not have the same status as IFRSs, but that entities might nonetheless feel the need to change an accounting policy as a result of a Board agenda decision.

In addition to the proposed amendments on agenda decisions, the Trustees also propose to update Handbook regarding the procedures relating to the use of effects analysis to ensure that they are consistent with current activities.

Less prominent proposed updates regard the categories of education material produced by the IFRS Foundation, the consultation requirements for adding major projects to the Board’s work plan, the role of the IFRS Advisory Council, and the processes for approving amendments to the IFRS Taxonomy and the DPOC’s role in overseeing the IFRS Taxonomy due process.

Comments on the proposed updates are due by 29 July 2019. Please see the IASB website for the press release and the consultation document. The IFRS Foundation has also released a YouTube video with a short introduction of the consultation.

The feedback statement describes the thirteen comments received by EFRAG in response to its draft comment letter on the IASB's December 2018 ED, and how these comments were considered by EFRAG in finalising its comment letter to the IASB.

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

This publication includes reports from the EFRAG President Jean-Paul Gauzès and the outgoing TEG Chairman and CEO Andrew Watchman. It also features EFRAG's continued work on IFRS 17 Insurance Contracts including case studies and user outreach culminating in the IASB’s re-deliberations of IFRS 17; EFRAG’s work on the EC requests relating to the potential effect on long-term investment of IFRS 9’s requirements on accounting for equity instruments; and EFRAG’s position on the IASB project Financial Instruments with Characteristics of Equity with inputs resulting from a wide outreach programme as well as an early stage analysis.

The annual review is available on the EFRAG website.

The topics discussed at the meeting included:

• Extractive activities:
  • Proposed scope of the research project
  • Additional disclosures: (1) minerals and resources and (2) other disclosures.
• Financial instruments with characteristics of equity:
  • Presentation of equity instruments
  • Presentation of financial liabilities — presentation of income and expenses arising from particular financial liabilities in other comprehensive income
• Targeted standards-level review of disclosures:
  • IAS 19 Employee Benefits
  • IFRS 13 Fair Value Measurement
• IAS 37 Provisions, Contingent Liabilities and Contingent Assets:
  • Aligning liability definition and guidance with the Conceptual Framework
  • Clarifying which costs to include in the measure of a provision
  • Specifying whether discount rate includes own credit risk
• Management commentary practice statement:
  • Challenges in current practice of reporting performance and position in management commentary
  • The interaction between management commentary and other reports
  • Overview of performance and position
  • Forecasts and targets in management commentary
  • Information about tax in management commentary
• Business combinations under common control

The next CMAC meeting will take place on 13–14 June 2019.

For more information, see the meeting page and the meeting summary on the IASB's website.

During the four minute conference call, DPOC members asked no questions, just gave the go ahead for a shortened comment period.

Please click to listen to the recording of the call on the IASB website.

A press release is available on the FRC website.

The report details four recommendations: audit committee scrutiny, mandatory joint audit, an operational split, and a five-year review of progress by the regulator.

Recommendation 1: Audit committee scrutiny

The goal of greater scrutiny by the new regulator would be to increase accountability and increase the focus on audit quality. The recommendation includes:

• Giving the regulator powers and a requirement to mandate minimum standards for the appointment and oversight of auditors.
• Giving the regulator powers and a requirement to monitor compliance with those standards, including the ability to require reporting or to place an observer on a Committee.
• Remedial action by the regulator where necessary, such as issuing public reprimands or direct statements to shareholders.

The CMA notes that this would be complemented by implementing recommendations from the BEIS Select Committee on transparency of fees and a requirement for the auditor to present at the AGM.

Recommendation 2: Mandatory joint audit

The goal of this remedy is to address choice and resilience problems. The recommendation includes:

• Legislation to give the regulator flexible powers to implement a joint audit regime and adapt it over time. The CMA believes key elements of this remedy would be:
  • Mandatory joint audit, including at least one non-Big Four firm, for most FTSE 350 companies (with certain exemptions for very simple entities or the largest and most complex entities, as well as those that choose a non-Big Four auditor).
  • Gradual introduction enabling adaptation over time, with companies making the transition no later than when their next tender arises.
  • Each firm receiving work that is substantial and relatively equal, representing at least 30% of the audit fee.
  • No changes to the existing liability framework.
• The regulator should have the power to appoint peer reviewers for companies that are not included in the joint audit remedy (which should not be one of the Big Four, unless reviewing an auditor that is outside the Big Four).
• The regulator should monitor the health of the Big Four audit firms, in the event of a risk of failure of one of the firms, using additional powers or taking executive control to limit the movement of clients to the other Big Three.

The CMA notes that joint audit will need to be implemented carefully to take into account challenger firms’ ability to grow and should be monitored and refined as appropriate by the regulator.

Recommendation 3: Operational split

The goal of this remedy is to strengthen the focus of auditors on delivering good audits, to remove the distraction of non-audit work, and to give audit practices incentives to bid competitively for more audits. The recommendation includes:

• Legislation to give the regulator powers to design the specific details of the operational split and to refine it over time. The CMA believes key elements of this remedy would be:
  • No profit sharing between the audit and non-audit practices, with audit partner remuneration linked to the audit practice only.
  • Separate financial statements.
  • Transparent transfer pricing, checked by the regulator, particularly for the use of non-audit specialists on audits.
  • The audit practice to include audit-related services and regulatory reporting requirements.
  • A separate CEO and board for the audit practice, with a majority of independent non-executive directors answerable to investors in audited companies and to the regulator. This board should be responsible for remuneration, career progression and quality standards and should conduct an AGM and produce an annual report.

The CMA notes that whilst an international structural split cannot be undertaken by the UK Government alone, the regulator and / or the government should initiate that debate at an international level.

Recommendation 4: Review of progress

The CMA recommends that the regulator should review the effectiveness of the remedies, initially after a five year implementation period.

The CMA’s recommendations have been made to Government to be taken forward through legislation, rather than the CMA putting in place its own order. This is partly to enable the Government to assess how other reforms proposed under, for example, the Kingman Review into the regulator the Financial Reporting Council, and the Brydon Review into the quality and effectiveness of audit, would work together with the CMA’s remedies.

A press release and the CMA final report are available on the CMA website.