Sir Win Bischoff highlighted the work of the FRC in promoting good corporate behaviour through its Culture Coalition; a group of organisations containing the Chartered Institute of Internal Auditors (IIA), the Chartered Institute of Personnel and Development (CIPD), the Chartered Institute of Management Accountants (CIMA), the Institute of Business Ethics (IBE) and City Values Forum specifically focused on culture.  Sir Win Bischoff previously discussed the issue of corporate culture at a conference in March 2016.

Speaking at the Deloitte Forum, Sir Win Bischoff commented that “Nobody is in a position to develop a better feel for the culture of an organisation than its auditor.” He further stated that despite this not being a specifically prescribed duty for the auditor, it nevertheless “is a responsibility you may well agree you have towards investors.”

The full text of the speech can be obtained from the FRC’s website. 

Changes to the work plan include:

Major projects

• No changes made to major projects.

Im­ple­men­ta­tion projects

• Annual Improvements (2015-2017): Updated to indicate that a decision on the direction of the project is now expected within 3 months; previously it was within 6 months.
• Remeasurement at a Plan Amendment, Curtailment or Settlement / Availability of a Refund of a Surplus from a Defined Benefit Plan: Updated to indicate that a decision on the direction of the project is now expected within 3 months; previously it was within 6 months.
• Draft IFRIC Interpretation — Uncertainty over Income Tax Treatment: Updated to indicate that a decision on the direction of the project is now expected within 3 months; previously it was within 6 months.
• Draft IFRIC In­ter­pre­ta­tion — Foreign Currency Trans­ac­tions and Advance Con­sid­er­a­tion: Updated to indicate that a final interpretation is expected within 6 months; prviously it was after 6 months.

In addition, the work plan makes clear that exposure drafts on the definition of a business and on the remeasurement of previously held interests are to be expected next week since the work plan still states that these will come out in June (which ends next week).

Finally, the IASB has updated the details of the primary financial statements research project indicating that initial research will focus on:

• the structure and content of the statement(s) of financial performance;
• the potential demand for changes to the statement of cash flows and the statement of financial position; and
• the implications of digital reporting for the structure and content of the primary financial statements.

The revised IASB work plan is available on the IASB's website.

Specifically, the changes to the IFRS Taxonomy due process are:

• “[T]he Board will review and approve IFRS Taxonomy content where it reflects new or amended IFRS Standards.”
• “[A] newly established IFRS Taxonomy Review Panel of three-to-five Board members will review the IFRS Taxonomy common practice content.”
• “[T]he drafting and approval of each Proposed IFRS Taxonomy Update will take place at the same time that the related IFRS Standard is finalized.”
• “[T]he role of the IFRS Taxonomy Consultative Group will be formalised within the due process.”

The updated Due Process Handbook also incorporates an amendment approved by the DPOC to extend the interval between the Board’s Agenda Consultations from three-to-five years, a change proposed by the Board as part of its 2015 Agenda Consultation.

For more information, see the press release, feedback statement, and Due Process Handbook page on the IASB’s Web site.

The Directive entered into force on 20 July 2013 and was required to be implemented into the law of EU member states by 20 July 2015. It was aimed at reducing unnecessary and disproportionate administrative costs on small companies by simplifying the preparation of financial statements and reducing the amount of information required by small companies in the notes to financial statements. The Directive contains a significant number of member state options so that implementation can differ between member states.

The EFAA report focuses on whether the implementation has resulted in the creation of a harmonised European accounting framework. It reflects the results of an EFAA survey of its members in eight EU member states.

The report identifies some areas in which the countries surveyed have implemented the Directive in a similar way, in particular through the creation of a reduced disclosure regime for micro-entities. However, the main findings of the report point to the notable differences between member states’ implementation of the Directive. The report also highlights the lessened transparency of financial information about SMEs that is now available to the public as a result of reduced disclosure following implementation of the Directive.

Please click here to access the full report The New Accounting Directive: A Harmonised European Accounting Framework? on the EFAA website.

Please click through for direct access to the notes:

Monday, 20 June 2016

• Goodwill and impairment — progress reports (IASB-FASB meeting)

Wednesday, 22 June 2016

• Insurance contracts
• IFRS implementation issues
• Conceptual framework

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

The Directive entered into force on 20 July 2013 and was required to be implemented into the law of EU member states by 20 July 2015. The EFAA report focuses on whether this implementation has resulted in the creation of a harmonised European accounting framework. It reflects the results of an EFAA survey of its members in eight EU member states.

The report identifies some areas in which the countries surveyed have implemented the Directive in a similar way, in particular through the creation of a reduced disclosure regime for micro-entities. However the main findings of the report point to the notable differences between member states’ implementation of the Directive. The report also highlights the lessened transparency of financial information about SMEs that is now available to the public as a result of reduced disclosure following implementation of the Directive.

Please click here to access the full EFAA report - The New Accounting Directive: A Harmonised European Accounting Framework? 

Please click here to access Deloitte's Closer Look publication on the UK implementation of the EU Accounting Directive.

Mr Kabureck focused on the following key aspects:

• The importance of a robust conceptual framework.
• An understanding that rules will not be able to cover all situations.
• Use of reasonable judgement in the decision making process.
• Comparability in the application in accounting rules and the benefit to primary users of financial statements.

For more information, see the article on the IASB’s Web site.

The new members will initially serve a five-year term with the possibility of being renewed for another three years. Nom­i­na­tions for IASB board mem­ber­ship close on 8 July 2016. For more information, see the press release on the IASB’s Web site.

• FRC has approved PAF (the members of which are Audit Scotland, the National Audit Office (NAO), the Northern Ireland Audit office (NIAO) and the Wales Audit Office)  as a SORP making body for the first auditing SORP - this is a new departure for the FRC following the revision to the policy on developing SORPs in March. In future, matters which were previously dealt with in sector-specific practice notes issued by the FRC may be dealt with a SORP developed by an approved body and reviewed by the FRC.
• The key changes in the proposed SORP compared to the extant PN10 are:
  • removing references to the Audit commission and referring to the new local audit arrangements that apply in England under the Local Audit and Accountability Act 2014;
  • updating, where appropriate, references to the Codes of Audit practice issued by the national audit agencies which require public sector audits to comply with the auditing standards in their work on financial statements; and
  • making the guidance more principles-based and applicable to all public sector auditors, whether these are audit agencies or auditing firms.
  • updating PN 10 (revised) for the new auditing standards issued on 17 June 2016.
• Comments are welcome by 23 September
• The press release can be found on the FRC website.
• Click for further information on draft PN.

In their revised toolkit, HMRC notes that, when making loans to/from directors/employees where there is no explicit interest rate or if the rate is not charged at market rate, the prescribed accounting treatment depends on which accounting framework has been adopted by an entity.

• Where an entity applies either FRS 102 Financial Reporting Standard applicable in the UK and Ireland or FRS 102 Section 1A Small Entities then such loans are required to be accounted for as if they were a loan with a market rate of interest.
• Where a company applies FRS 105 Financial Reporting Standard applicable to the Micro-entities Regime, there is no requirement to account for such loans as if they were a loan with a market rate of interest. Instead such loans would initially be recorded at the amount borrowed/advanced.

However, the choice of accounting treatment does not affect the amount chargeable for tax purposes, which is still determined by Section 455 of the Corporation Tax Act 2010.

S455 is a key anti-avoidance weapon for owner-managed companies. Without it, owner managers could easily avoid a tax charge by arranging for ‘their’ company to lend them funds (as opposed to paying a ‘taxable’ bonus or dividend).

The updated guidance is available on the HMRC website.