The CMAC is a group of professional financial analysts who meet three times a year with members of the IASB to provide the views of professional investors on financial reporting issues.

Please click for more information about the CMAC and the call for members on the IASB's website.

The framework A professional judgement framework for financial reporting decision making - An international guide for preparers, auditors, audit committees, regulators and standard setters across business and not-for-profit sectors identifies core principles and provides a structured process to guide decision makers through how to make, assess and document significant judgements. It targets significant judgements across narrative and financial reporting including accounting treatment, materiality and disclosures.

The framework is designed to fit within the context provided by applicable accounting standards. It also provides a useful training guide for students or those new to decision making.

Please click to access the framework and a corresponding press release on the ICAS website.

The topics discussed at the meeting included:

• IASB and Interpretations Committee Update. Members discussed the support of consistent application of IFRSs and the agenda consultation.
• Materiality. Members discussed a proposed ‘four-step approach’ for making materiality judgements when preparing a financial report:
  • Step 1 — identifying the primary users and their information needs;
  • Step 2 — making a materiality judgement, considering quantitative factors as well as qualitative entity-specific and environmental factors;
  • Step 3 — organising material information within the financial report; and
  • Step 4 — stepping back and reviewing the financial report as a whole.
• Statement of Cash Flows. Topics discussed were the classification of cash flows (positively defining cash flows from operating activities, presenting cash outflows for acquiring property, plant and equipment as cash flows from operating activities, presentation of cash flows related to financing liabilities, cash received from customers and presentation of cash flows related to tax), cash equivalents and the management of liquid resources, reconciliation of operating activities, and direct or indirect method.
• Primary Financial Statements. Members discussed the structure and content of the statement of profit or loss and OCI as regards line items and subtotals as well as alternative performance measures, the structure and content of the statement of financial position, and the interaction between items reported in different primary financial statements.
• Financial instruments with characteristics of equity. Focus of the discussion were shares redeemable at fair value and cumulative preference shares.

The next CMAC meeting will be held on 3 November 2016 and the next GPF meeting will be held on 29 November 2016. The full meeting summary is available on the IASB's website.

An agenda with supporting papers and details on how to register for the public meeting can be found on the EFRAG website.

The study begins by pointing out that the current system presumes that information is consumed by humans, therefore machine-readable formats are often neglected or viewed as secondary. However, the study concludes that the use of data and technology can result in a more effective and efficient overall financial reporting process in which users at every level receive more transparent, better-quality information on a timely basis. The three levels the study identifies are companies, auditors and investors.

• Companies. Using standardised data from very early on in the process (and not only at the regulatory filing stage) would enable companies to use applications that are able to pull information from different data sources to write automated reports, which will streamline current labor-intensive processes.
• Auditors. Structuring data early in the process would also allow auditors to use audit data analytics to make the audit more efficient and potentially provide users with a better quality and greater granularity of financial information with greater reporting frequency and possibly a higher level of assurance.
• Investors. Structured quantitative data not bounded by the document in which the information is contained would give investors the possibility to apply current technology to sift through data and analyse the numbers in a faster and more comprehensive manner.

However, the study also notes that to achieve these changes, regulators need to improve access to and searchability of information within the regulator’s primary source documents.

Please click to access the full study on the CFA Institute's website.

It notes that convergence has not been achieved:

The international and US accounting standard setters have issued separate standards on expected loan loss provisioning (to come into force in 2018 and 2020 respectively), both of which are forward-looking and take account of the lessons of the crisis. These standards have not converged, and the FSB has asked the standard-setters to monitor their consistent implementation and to continue to seek opportunities for meeting the G20’s call for further accounting convergence.

Please click for the full report on the FSB website.

The IFRS Interpretations Committee will discuss eight issues — finalising two agenda decisions, continuing its work on two Interpretations and two sets of amendments to IFRS, and considering two new items.

Agenda decisions

The staff are recommending that two agenda decisions be finalised:

• IFRIC 12 Service Concession Arrangements - service concession arrangements in which the infrastructure is leased (agenda paper 7).; and
• IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement - fees and costs included in the 10 per cent test for derecognition of financial liabilities (agenda paper 9).

Interpretations

The Interpretations Committee issued a Draft Interpretation IAS 12 Income Taxes – Uncertainty over income tax treatments in October 2015. At this meeting the Committee will have an initial discussion of the comments received from the public consultation (agenda paper 2).

The Committee is being asked to approve the preparation of a draft interpretation of IFRS 9 Financial Instruments and IAS 28 Investments in Associates and Joint Ventures, addressing how those standards interact (agenda paper 4).

Amendments

The Committee has been considering the comments received from the public exposure of proposed amendments to IAS 19 Employee Benefits and IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. At this meeting the Committee will be asked to finalise its recommendations to the IASB on those amendments (agenda paper 3).

The Committee has also started to develop an amendment to IAS 16 Property, Plant and Equipment that would require any proceeds from selling items produced while testing PP&E being constructed to be recognised in profit or loss. The Committee will continue those discussions (agenda paper 5).

New items

The Committee will be considering two new items. In both cases the staff are recommending that matters not be taken onto its agenda:

• IAS 12 Income Taxes – recognition of deferred taxes in asset acquisitions (agenda paper 6); and
• IFRS 9 Financial Instruments - Modification or exchange of financial liabilities that do not result in derecognition (agenda paper 8).

Agenda consultation

The Interpretations Committee will be given an update of the conclusions of the agenda consultation.

The pre-meeting summaries for the meeting can be found here. We will update this page for our Deloitte observer notes from the meeting as they become available.

Regulation (EU) No 258/2014 of the European Parliament and of the Council of 3 April 2014 established a programme of EU co-financing of the International Financial Reporting Standards (IFRS) Foundation, the European Financial Reporting Advisory Group (EFRAG), and the Public Interest Oversight Board (PIOB). The regulation formed the legal basis for the continuation of financing the IFRS Foundation and PIOB for the period 2014-2020 and of EFRAG for the period 2014-2016. The agreement limited the financing period of EFRAG to three years in view of prospective reforms that might arise from the Maystadt Report.

In April 2016, the EC concluded that the governance reform of EFRAG has been successfully implemented on 31 October 2014. Consequently, the EC proposed to extend the European Union co-financing of EFRAG for the period 2017 - 2020 under the programme established by the regulation. Later the same month, a committee referral was announced in Parliament with a final ECON vote expected on 11 October 2016.

The draft report prepared for the ECON meeting this Wednesday acknowledges "EFRAG’s key role in ensuring a clear and strong European voice on accounting matters at international level" and "agrees with the Commission proposal to continue the Union’s Co-Financing of EFRAG for the period of 2017-2020 in order to meet the long-term objectives of the Union programme". However, the report also notes that:

Regulation (EU) No 258/2014 requires the Commission to prepare an annual report on the activity of the IFRS Foundation as regards the development of IFRS, of PIOB and of EFRAG. With regard to EFRAG, such annual report should also refer to the follow-up and implementation of the recommendations and demands made in the European Parliament’s resolution of 7 June 2016 on International Accounting Standards (IAS) evaluation and the activities of the IFRS Foundation, EFRAG and PIOB.

The June 2016 EP resolution is not legally binding but serves as guidance and reference in future EU law-making processes.

Please click for the following addition information on the EP website:

• EC proposal to extend the European Union co-financing of EFRAG
• ECON draft report supporting the proposal

The recommendations are grouped into two overarching aims:

• Stronger governance for trust and integrity in business and public sector. In this context the IFAC calls on the G20:
  
  1. to strengthen governance, to combat fraud and corruption, and to restore public trust and integrity;
  2. to enhance public sector financial management by actively encouraging the adoption of accrual-based accounting in the public sector and by requiring the FSB to encompass the public sector; and
  3. to promote integrated reporting.
• Creation of a cooperative, consistent, and smart global regulatory environment. The five recommendations in this case are:
  
  1. to develop and promote the global adoption of clear principles for good regulation;
  2. to acknowledge the importance of international standards;
  3. to enhance global consistency;
  4. to call for cooperation on taxation; and
  5. to establish a permanent G20 secretariat.

The recommendation on international standards expressly refers to IFRSs:

Please click to access the full letter and a corresponding press release on the IFAC website.