The agenda for the meeting is summarised below:

Agenda papers for the meeting are available on the IASB website.

At the US Chamber of Commerce conference last week, Mr Schnurr outlined three previous alternatives regarding the use of IFRS in the United States, including: (1) the outright adoption of IFRSs, (2) providing US registrants with the option to file IFRS financial statements, and (3) the so-called "condorsement" approach". During today's speech, Mr Schnurr provided an example of how IFRS could be incorporated in the US reporting system:

[W]e understand that some domestic issuers may, now or in the near future, prepare IFRS-based financial information in addition to the U.S. GAAP based information that they use for purposes of SEC filings. However, regulatory constraints may dissuade some issuers from providing this information, as current SEC rules would consider IFRS-based information to be a “non-GAAP” financial measure for a domestic issuer. Should IFRS-based information continue to be considered “non-GAAP” financial measures subject to the requirements for such measures, or should it be thought of differently? Under this line of thinking, issuers that do not believe IFRS-based information would be beneficial to investors would not be forced to undertake what we understand to be, in some cases, significant implementation costs. 

In her speech, Ms Erhardt examined IFRS-readiness of investors, issuers, and securities regulators today compared to 10 years ago, when the SEC staff began to look at whether accepting IFRS financial statements from foreign private issuers without a reconciliation to US GAAP should be recommended to the Commission. She concluded that members of these three groups are ready for the most part; they have sophisticated knowledge and experience with IFRSs though some groups (particularly retail investors) may not be "as comfortable" with IFRS as US GAAP. Ms Ernhardt discussed the SEC staff and its acceptance of IFRS financial statements from foreign private issuers without reconciliation to US GAAP:

I believe . . . that foreign private issuers may be subject to different disclosure requirements from those of U.S. issuers because effectively in exchange for this differential disclosure U.S. investors are able to achieve international diversity in their investment portfolios by buying and selling securities of foreign companies within the protections of the U.S. capital markets system.  As a point of fact I do not think this differential disclosure line of thinking would apply in considering whether to provide an IFRS reporting option to U.S. issuers, although of course other lines of thinking would come into play in considering this. 

Both speakers echoed that the IFRS dialog should continue in the United States. Mr Schnurr stated that he hoped to be ready in the "next few months" to discuss with the SEC Chair and Commissioners all of the alternatives and the related problems and concerns to reach a final recommendation. He stated:

Chair White and I both recognize that any continued uncertainty around IFRS results in uneasiness for investors across the globe. Therefore, it is a priority of mine to bring a recommendation to the Commission in the near future with the hope of resolving, or at least lessening, this uncertainty.

Both speeches are available on the SEC's website:

• Jim Schnurr's speech, including remarks on other issues including revenue recognition
• Julie Erhardt's speech

The FRC defines ‘complex supplier arrangements’ as consisting of fees, contributions, discounts, multiple offers and volume rebates – all of which require significant management judgement when estimating amounts to be included in accounts receivable and payable for both annual and interim reporting.

The FRC comments

Complex supplier arrangements such as fees and discounts may have a significant impact on the reported margins and other results of a company and on investors’ views of its performance.  Where this is the case, it is essential that investors are able to understand the basis and extent of judgement and estimation involved and the potential uncertainties affecting the accounts and future prospects.  Today’s announcement is a reminder to Boards of retail companies in particular of what they should consider and encourages them to review their reporting in this area as many have already announced.

The announcement follows a recent Financial Reporting Lab report which called on companies to provide additional disclosures to investors on how companies account for their material transactions and business streams.

The FRC indicates that their Conduct Committee will expect to see such high quality disclosure in the forthcoming annual and interim reports and accounts and will include the quality of such reporting as an area of focus when it reviews audits and accounts in 2015.

The full press release can be found on the FRC website.

The comment letter makes a number of additional points, including:

• For the proposed statement to have maximum effect, we encourage IOSCO to develop a common definition of 'non-GAAP financial measure' and to determine which such measures should be subject to the common discipline
• It is important for the efficient operation of global capital markets that national and regional guidance is consistent and does not contradict the requirements of globally-recognised financial reporting frameworks
• We agree that the proposed statement should apply to 'any non-GAAP financial measure wherever the measure is disclosed outside of the financial statements' as it recognises standard-setters' responsibility in relation to financial statements, and is a way of achieving consistency in the use of non-GAAP financial measures across the annual report as a whole, but suggest that IOSCO works with the IASB to clarify what is considered to be an 'IFRS measure'
• We encourage IOSCO to determine a consistent scope, application and enforcement of the proposed statement, as it is assumed that it would encompass information on websites and other non-regulated information, and some securities market regulators regulate press releases and web-based material, but others do not.

Read the full comment letter in our publications section.

The consultation had been launched in August 2014 to examine whether the adoption of IFRS improved the efficiency of EU capital markets by increasing the transparency and comparability of financial statements.

Access to the responses received is available here. The European Commission is expecting to publish a summary results of the consultation soon.

The FRC’s thematic reviews analyse further aspects of auditing which are not considered in detail during routine audit inspections of individual firms.  Thematic reviews seek to “identify both good practice and areas of common weakness” among audit firms.  The FRC announced in December 2013 that it would conduct a thematic review of bank and building society audits concentrating specifically on loan loss provisions and general IT controls.

The FRC’s Audit Quality Review team visited seven of the UK’s largest audit firms to review their audit methodology, guidance and training in respect of the audit of loan loss provisions and related IT controls. They also reviewed relevant aspects of the audit procedures performed on 13 individual audits during those visits, covering a range of banks and building societies.

During its review, the FRC identified a number of “good practice observations” which audit firms should continue:

• successful integration of IT specialists into the audit team;
• use of recently developed testing techniques such as benchmarking and data analytics, and adoption of more sophisticated techniques such as code reviews, which enabled the audit teams to carry out a more rigorous analysis of management’s data extraction and manipulation for statistical purposes;
• use of centrally developed templates to consider completeness and accuracy of data and to improve consistency in the assessment of loan loss provisions and valuation of more complex collateral held;
• increased use of other experts such as valuations experts; and
• provision of sector-specific training and implementation of sector-specific audit methodologies.

However, alongside these good practices there were also a number of areas where improvements are required. The report provides a number of key messages for auditors and audit committees to address these areas for improvement.

Key messages for auditors:

Be proactive in monitoring and enhancing bank audit quality, as well as being reactive to regulatory concerns. Ensure that bank audit initiatives and procedures remain fit for purpose and enhance them where significant issues are identified.

Revisit procedures to ensure that all regulatory and market risks are captured by risk assessment methodology and sector training and consider or enhance the use of benchmarking and data analytics as effective audit tools in the audit of loan loss provisions.

Ensure audit teams apply an appropriate degree of challenge and professional scepticism in the audit of loan loss provisions, rather than seeking to corroborate management’s views.

Make sector training mandatory for partners and staff engaged in bank audits where this is not already the case and monitor attendance at, and effectiveness of, those training courses.

Fast track the integration of non-IT specialists into the audit team using lessons learned in integrating IT specialists into audit teams.

Perform root cause analysis to understand why current quality control processes did not identify weaknesses highlighted by the review.

Key messages for audit committees:   

Discuss with auditors their proposed actions in response to this thematic review.

Understand the implications of the firm’s benchmarking and other data analytics on the quality and robustness of the audit of the financial statements.

Seek assurance annually that the sector expertise and competence levels of the audit team and the firm are appropriate in relation to the bank’s business activities.

Consider with the auditors the effectiveness of the bank’s relevant internal controls, and the extent to which the auditors review them and are able to place reliance on them.

Ensure management is assessing the impact of current and emerging issues on a timely basis and that the auditor and the bank jointly understand how these issues affect the assessment of significant risk.

Consider the timing of planning with group auditors and check it is sufficiently early in the process to obtain appropriate and relevant information from group or other component auditors.

The FRC concluded that “…there has been an increase in the quality of the audit of loan loss provisions and related IT controls in banks. In particular, improvements have been noted where significant issues have been raised previously. However we identified certain instances where audit teams were still not appropriately challenging in their audit testing…[W]hilst significant investment in sector specific audit procedures has been made by firms in response to our previous inspections, we consider that auditors need to be more proactive in ensuring that their procedures across all areas are fit for purpose, rather than implementing changes primarily in response to regulatory findings.”

This thematic review follows the thematic reviews of auditors' materiality judgements and the auditor’s identification of and response to fraud risks and the auditor’s consideration of laws and regulation.

The press release and full report can be obtained from the FRC website.

At the heart of the programme is statement of shared beliefs, signed by all participants, that:

• highlights the importance of high quality, transparent reporting for building trust in the capital markets and for making investment decisions;
• publicly reaffirms the IASB's commitment to continue to seek and consider investor views in the development of new accounting standards; and
• documents the investors community's commitment to the development of high quality financial reporting standards by working with the IASB to ensure that the investor perspective is articulated clearly and is considered in the standard-setting process.

As part of the programme, the investment firms commit to an ongoing dialogue, executive level support of the programme and access to analysts and portfolio managers. In return, the IASB has committed to providing an improved channel through which to influence standard development, developing investor-tailored webcasts, providing investor-friendly articles on proposed changes, providing access to IASB members and staff, and providing investor-focused education sessions.

Please click for more information on the new programme on the IASB's website.