The update reports on the EFRAG Board webcast meeting on 11 and 18 May, the EFRAG Board and EFRAG TEG joint webcast meeting on 26 May, the EFRAG TEG webcast meetings on 6 and 11 May as well as the meeting of the European Lab Steering Group on 28 May.

The update also lists EFRAG publications issued in May:

• EFRAG’s final comment letter in response to the IASB Exposure Draft ED/2020/2 Covid-19-Related Rent Concessions (Proposed amendment to IFRS 16);
• EFRAG’s final comment letter in response to the IASB Exposure Draft ED/2020/1 Interest Rate Benchmark Reform – Phase 2 (proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16);
• EFRAG's draft comment letter in response to the IASB Exposure Draft Classification of Liabilities - Deferral of Effective Date - Proposed amendments to IAS 1;
• EFRAG's draft comment letter in response to the IASB's Discussion Paper DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment; and
• EFRAG's 2019 Annual Review summarising EFRAG activities in the field of financial and corporate reporting.

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

The webcast is hosted by IASB Vice-Chair Sue Lloyd and technical staff member Sid Kumar and covers the following areas:

• ECL model development
• Important characteristics of the ECL model
• ECL related disclosures
• Interaction with regulatory provisions

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

The guide has been prepared primarily to support pension scheme auditors navigate the additional challenges they are likely to experience as a consequence of COVID-19 in meeting their responsibilities towards the scheme’s annual report, including the audited financial statements. Trustees and accounts preparers may also find the guide useful.

The Guide is relevant to private sector occupational defined benefit (DB) and defined contribution (DC) trust-based pension schemes in the UK, including hybrid schemes and DC master trusts, applying Financial reports of pension schemes: A statement of recommended practice (the Pensions SORP), published by PRAG.

The guide covers a wide range of topics including:

• responsibilities for reporting to The Pensions Regulator
• the impact of COVID-19 on the control environment of pension schemes
• the trustees' report and the chair's statement
• going concern and the trustees' assessment of going concern
• accounting for scheme investments
• events after the end of the reporting period
• audit issues
• the auditor's statement about contributions.

It should be read alongside the latest available COVID-19 guidance from The Pensions Regulator, the Financial Reporting Council (FRC) and other key third parties.

A press release and the full guide is available on the ICAEW website.

The group’s membership includes:

• Charles Mario Abela, not-for-profit organisation (Malta)
• Maria Alexiou, preparer (Greece)
• Estelle Aymard-Young, financial institution (France)
• Emilie Beral, user (France)
• Donato Calace, digital tools (Italy)
• Daniela Cholakova, preparer (Bulgaria)
• Jean-Philippe Desmartin, user (France)
• Laura Girella, not-for-profit organisation/ academia (Italy)
• Michael Goebbels, preparer (Germany)
• Ulrika Hasselgren, user (Denmark)
• Christian Hell, accountancy profession (Germany)
• Marcus Looijenga, accountancy profession (Netherlands)
• Gloria Mazzocco, preparer (Italy)
• Giuseppe Milici, accountancy profession (Italy)
• Tegwen Le Berthe, user (France)
• Isabel Gavín Pérez, financial institution (Spain)
• Eckhard Plinke, user (Germany)
• Gunnar Rimmel, academia (Sweden)
• Dawn Slevin, other stakeholder (Ireland)
• Mirjam Wolfrum, not-for-profit organisation (Germany)

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

Update: On 27 July 2020, EFRAG announced that Charles Mario Abela and Dawn Slevin will be co-Chairs of the task force.

We support the deferral of the effective date for recent amendments to IAS 1 and believe that it is important that entities have sufficient time to analyse the potential effect of the amendments on the classification of their liabilities and, if necessary, renegotiate their debt covenants. In addition, we have observed some diversity in views on how to apply the recent amendments and suggest the Board consider additional guidance on how the recent amendments should be applied.

Please download the full comment letter here.

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.

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.

Click for:

• Press release (link to BEIS website)
• Corporate Governance and Insolvency Bill (link to Parliament website)
• BEIS factsheets (link to BEIS website)
• FRC press release (link to FRC website)
• FRC updated Q&As (link to FRC website)

The document gives a broad explanation of that law and of the role and content of the Guidance on realised and distributable profits (TECH 02/17BL) issued by ICAEW and the Institute of Chartered Accountants of Scotland (ICAS). It aims to inform readers who are not accountants about the subject generally and to make TECH 02/17BL and its principles more widely accessible. The document does not change or supersede TECH 02/17BL which remains in effect as written.

The document covers:

• Laws relevant to dividends and other forms of distribution. This provides an overview of the various laws that directors should be aware of before making dividend payments. These laws include laws specific to dividends in the Companies Act 2006.
• General principles on the realisation of profits and losses. This outlines the general principles when applying the laws specific to dividends in the Companies Act 2006, including those derived from TECH 02/17BL.
• Directory of TECH 02/17BL. This briefly describes the subject matter of each chapter of TECH 02/17BL to help users of that publication to navigate its contents.

A press release and the full publication are available on the ICAEW website.

Accountancy Europe notes that the COVID-19 pandemic has resulted in rapid deployment of government financial resources and development of support programmes. As governments should be very transparent about the effects of this, the recommended short-term actions include:

• Controls over public sector expenditure have been relaxed. It is essential that governments are transparent as to the amount of funds received by beneficiaries and that such payments are retrospectively audited to ensure they have been correctly used.
• Public sector entity reporting and auditing requirements may need to be temporarily relaxed in certain circumstances. But transparency is important, and they should report what truly matters.
• Central governments should urgently provide guidance for public sector entities on reporting of going concern, post balance sheet events and management commentary.

Accountancy Europe also notes that it will not be business as usual once the crisis is over and that governments should seize the opportunity to drive forward programmes that support long-term fiscal resilience. The recommended long-term actions, therefore, include:

• Public sector balance sheets will be more important than ever with public sector assets and liabilities set to balloon.
• Post coronavirus crisis, the public sector finances will need to be restored and economies will need a kick-start. Robust accruals-based accounts provide the foundation necessary for forward looking estimates and economic models.
• Governments will need record levels of borrowing, much of it from open markets, and investors will want to see reliable, internationally comparable and timely information. Adopting internationally recognised public sector accounting standards (IPSAS) would provide such foundations.

The actions recommended by Accountancy Europe are available in a summary overview, an in-depth analysis of the short-term actions and an in-depth analysis of the long-term actions.

EFRAG assesses that the amendment meets the technical endorsement criteria of the IAS Regulation and is conducive to the European public good. It therefore recommends its endorsement.

The European Commission's Accounting Regulatory Committee's (ARC) vote, the next step in the endorsement process, is expected to take place later in June, however, final endorsement is currently expected not before "Q3/Q4 2020".

Please click to access the final endorsement advice letter and a corresponding press release on the EFRAG website.