The request for papers states that the group does not judge whether products are compliant with the requirements of Shariah law as this is beyond the group's remit. Rather, the members of the group intend to focus on challenges that may arise in applying IASB pronouncements to Islamic products and to make recommendations to the Board about steps that it might take.

The working group was formed as a result of the IASB's 2011 agenda consultation and held an initial meeting in Kuala Lumpur in July 2013. During the meeting, the group identified four areas that it wants to address and invite papers on. These areas are identified in the request for papers as follows:

• The application of IFRS 9's classification and measurement principles;
• the application of the IASB's proposed lease standard to Ijarah;
• whether restricted and unrestricted investment accounts are to be presented on- or off-balance sheet; and
• profit equalization reserves (PER) because of significant differences in practice.

The request for papers published today addresses the first of the four issues. Respondents are asked to answer whether some or all of the Islamic products typically owned by Islamic banks qualify for amortized-cost classification.  If they believe the answer is "yes," they are asked to provide the basis for their conclusion. If they believe the answer is "no," they are asked to explain what steps, if any, the Board should take to either clarify the classification of these contracts or to amend IFRS 9 Financial Instruments. Papers should be submitted by 1 August 2014.

Additional information available on the IASB's website:

• Press release
• Request for papers
• Comparison of 17 Islamic banks and the Islamic products offered
• Notes on the bank comparison

Please see also our UK Accounting Plus page with general information on Islamic accounting.

The IASB uses the annual improvements project to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.  The ED proposes amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits and IAS 34 Interim Financial Reporting. 

The proposed amendment to IAS 19 clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level). 

EFRAG “supports the IASB’s effort to develop short-term guidance dealing with countries where a high-quality corporate bond market does not exist and that use the same currency as other countries".  However EFRAG identify a number of “specific concerns” that they would like the IASB to consider before finalising the proposed amendment and comment that “in some circumstances it is unclear if the proposals would result in an outcome that is consistent with the IASB’s objectives”. 

Before finalising the IAS 19 proposals, EFRAG also comment that the IASB should “clarify the objectives and the rationale underlying the selection and use of a discount rate in measuring post-employment benefit obligations” to allow constituents to be able to use their judgment in applying the requirements of paragraph 83 of IAS 19.

EFRAG’s concerns regarding the proposed amendments to IAS 19 are also shared by the Financial Reporting Council in their comment letter.

Click for:

• Press release (link to EFRAG website).
• EFRAG comment letter (link to EFRAG website).
• Our previous story on the FRC comment letter.
• Our previous story on the Deloitte comment letter.
• Our previous story on the Exposure Draft ED/2013/11 Annual Improvements to IFRSs 2012–2014 Cycle. 
• Our UK Accounting Plus project page on the Annual Improvements to IFRSs 2012–2014 Cycle.

The Annual Improvements to IFRSs 2010-2012 Cycle incorporate eight amendments to seven standards being IFRS 2 Share-based Payment, IFRS 3 Business Combinations, IFRS 8 Operating Segments, IFRS 13 Fair Value Measurement, IAS 16 Property, Plant and Equipment, IAS 24 Related Party Disclosures and IAS 38 Intangible Assets. 

The Annual Improvements to IFRSs 2011-2013 Cycle incorporate four amendments to four standards being IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 3 Business Combinations, IFRS 13 Fair Value Measurement and IAS 40 Investment Property. 

For more information, see (links to EFRAG website):

• Annual Improvements 2010-2012 cycle
  • Press release
  • Effects study report
  • Endorsement advise letter to the EU Commission
• Annual Improvements 2011-2013 cycle
  • Press release
  • Effects study report
  • Endorsement advise letter to the EU Commission

In addition, the EFRAG has updated its endorsement status report to reflect these final endorsements.

The ACCA argue that corporate governance is about creating value and that “governance codes should be evaluated on how well they facilitate the creation of value”.  The consultation paper, ‘Creating value through governance – towards a new accountability’ considers whether corporate governance is actually helping businesses to create value and suggests that “reform” of the current approach to corporate governance and risk management is needed.  The ACCA comment: 

A fundamental rethink is required about how corporate governance and risk management contribute to creating value.  In losing its real purpose, governance has too often become about no more than compliance with structures and practices.   

The consultation paper proposes a new accountability framework based upon three components; ‘performing, informing and holding to account’; three complimentary components which can help companies perform in the interests of shareholders and wider society and which “are essential if a company is to create value sustainably”.  The consultation paper, which suggests that the three components are “not working well” highlights that the effectiveness of national governance codes and company approaches to governance in contributing to value creation can be assessed using this framework.           

The consultation seeks responses by 31 August 2014 and asks eight key questions including: 

• Has corporate governance become too focused on form and compliance at the expense of the quality and integrity of decision making?
• Should creating sustainable value be the overarching purpose of governance?
• Do you find the framework likely to help to improve corporate governance and help focus companies on creating sustainable value?
• Which of the three areas, performing, informing and holding to account, is the most problematic? 

The ACCA intends to publish a follow up paper on the subject of governance and value creation based upon the responses received. 

Click for:

• Press release (link to ACCA website).
• ACCA report ‘Creating value through governance – towards a new accountability (link to ACCA website - including links to videos about the consultation and other related links).

The 'Red Book' contains all official pronouncements issued at 1 January 2014, including all pronouncements with an effective date after 1 January 2014, but not the pronouncements that will be replaced or superseded. Accordingly, the 2014 edition contains pronouncements as a result of amendments from IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39), amendments to IAS 19, IAS 36, and IAS 39, two sets of Annual Improvements to IFRSs (2011-2013 and 2010-2012), one new Interpretation (IFRIC 21 Levies), and the IFRS Foundation Constitution and Due Process Handbook.

eIFRS and Comprehensive subscribers can now access the electronic files of the 2014 IFRS (Red Book) via the Latest Additions section of eIFRS (you will be required to provide your login details).

The Red Book is also available through the IASB's Web Shop. Copies are priced at £68 each, plus shipping. Discounts are available for multiple copies, academics/students and residents of middle and low-income countries.

Editorial corrections to consequential amendments affect the following standards:

• Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (issued November 2013)
• IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (issued November 2013)
• Annual Improvements to IFRSs 2010–2012 Cycle (issued December 2013)

Editorial corrections affect the following individual pronouncements:

• IFRS 9 Financial Instruments (issued November 2009)
• IFRS 9 Financial Instruments (issued October 2010)
• Government Loans (Amendments to IFRS 1) (issued March 2012)
• IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (issued November 2013)
• Annual Improvements to IFRSs 2010–2012 Cycle (issued December 2013)
• Annual Improvements to IFRSs 2011–2013 Cycle (issued December 2013)
• Exposure Draft Annual Improvements to 2012–2014 Cycle (issued December 2013)

Editorial corrections to the 2013 IFRS (Red Book), A Guide through IFRS 2013 and 2014 IFRS (Blue Book) affect the following standards:

• IFRS 1 First-time Adoption of International Financial Reporting Standards
• IAS 21 The Effects of Changes in Foreign Exchange Rates
• IAS 33 Earnings per Share
• IAS 39 Financial Instruments: Recognition and Measurement

Editorial corrections do not change the meaning or application of pronouncements, but instead correct inadvertent errors.  Full details of the editorial corrections are available on the IASB website.

Mr Prada stressed his belief that global accounting standards are essential to the correct functioning and wellbeing of the broader global economy and noted that policymakers must hold firm in their commitment to a single set of high quality standards. He underlined that we no longer lived in a time where the providers and the consumers of financial information reside within the same country and that investors today routinely sought investment and growth opportunities across the globe. As a consequence, he said, preparers and users of financial information, as well as providers of capital, would be just as likely to be located on different sides of the world as in the same jurisdiction - which for Mr Prada made "a compelling case for a single set of high quality global accounting standards".

The progress towards IFRS as global standards he measured against the number of jurisdictions that have already adopted IFRSs (more than 100) and against progress in some key jurisdictions. Regarding the possible adoption of IFRSs in Japan he stressed that a voluntary use IFRSs was already possible and that the Japanese Financial Services Authority had recently expanded the number of companies eligible to adopt IFRSs. On China Mr Prada remarked that it had already introduced accounting standards that were very similar to IFRS and he expressed the hope that India would soon follow a similar path. The convergence plan of Saudi Arabia he praised as being well underway. Even on a possible adoption of IFRSs in the United States Mr Prada was optimistic. He admitted that "progress has been slower than many of us would have wished", but he also stated that "the factors that led to the US considering adoption of IFRS have not gone away" which led him to say: "That is why I believe that the US will ultimately come on board with IFRS – although it will most likely take longer than we had hoped."

The progress towards IFRSs as global standards, Mr Prada noted, also led to the evolution of the IASB as a global standard-setter. Of the developments that illustrated this he mentioned the introduction of the Emerging Economies Group, the setting up of a working group on Sharia-compliant instruments and transactions, and the introduction of the Accounting Standards Advisory Forum (ASAF). He also pointed at the deepening of the co-operation with other international and regional organisations and cited the agreement with IOSCO signed in September 2013 and the agreement with the International Valuation Standards Council (IVSC) signed last week.

Please click for the full text of Mr Prada's speech on the IASB website.

The 2012 UK Corporate Governance (CG) Code (“the Code”) and associated Financial Reporting Council (FRC) Guidance on Audit Committees specify the issues the Audit Committee should consider and the way in which they should report these to the outside world in the annual report. 

The ACCA highlight in their report, 'Enhancing the value of the Audit Committee report', that “the examples are not necessarily best practice but should be seen as illustrative of the way in which Audit Committees are trying to fulfil their responsibilities under the 2012 edition of the UK CG Code”.  Examples are provided in the following areas of Audit Committee disclosure required by the Code: 

• the significant issues that the committee considered in relation to the financial statements, and how these issues were addressed;
• an explanation of how the Audit Committee has assessed the effectiveness of the external audit process;
• information on the approach taken to the appointment or reappointment of the external auditor;
• information on the length of tenure of the current audit firm and information on when a tender was last conducted; and
• if the external auditor provides non-audit services, an explanation of how auditor objectivity and independence is safeguarded. 

The report also looked at additional disclosures that companies made which were not specifically required by the Code such as information on lead partner rotation and outsourcing of internal audit.  A checklist is also provided to guide audit committee reporting in the above areas. 

Additionally, a short analysis is provided comparing current UK practice with the requirements of the United States Securities and Exchange Commission and the Australian Securities Exchange.  The ACCA comment that “it can certainly be argued that UK requirements for audit committee public disclosures appear to be more advanced and more formalised than almost anywhere else in the world.” 

The ACCA will be publishing a follow up paper later in the year examining compliance with the Competition Commission's final decision on remedies for the audit market. This decision includes a recommendation to the FRC that shareholders should be given a vote at the AGM as to whether the Audit Committee Report within the annual report is satisfactory.

The ACCA report follows a project into effective approaches to Audit Committee reporting undertaken by the FRC's Financial Reporting Lab which identified six key themes for Audit Committee chairman to consider in fulfilling their disclosure responsibilities under the Code.

Click for:

• Press release (link to ACCA website).
• ACCA report 'Enhancing the value of the Audit Committee report' (link to ACCA website).
• Our previous UK Accounting Plus story on the project of the FRC's Financial Reporting Lab.

Highlights were the publication of:

• Final comment letters on IASB EDs Equity Method in Separate Financial Statements and IFRS for SMEs
• EFRAG TEG approval of a comment letter on IASB ED Annual Improvements to IFRSs 2012–2014 Cycle and feedback statement on the IASB DP A Review of the Conceptual Framework for Financial Reporting
• Feedback statement on the IASB ED Equity Method in Separate Financial Statements
• Letter to the IASB on the EFRAG Project Accounting for Interests in Joint Operations structured through a separate vehicle in separate financial statements

Additional topics discussed in the newsletter are:

• IASB EDs:
  • Equity Method in Separate Financial Statements
  • IFRS for SMEs

• Long-term investment business models
• IASB projects:
  • Rate regulation
  • Leases
  • Disclosure initiative
  • Macro hedging
  • Annual improvements to IFRSs for 2012-2014 cycle
• IASB discussion paper on conceptual framework
• EFRAG project, Accounting for Interests in Joint Operations structured through a separate vehicle in separate financial statements
• Conceptual framework bulletins
• Joint papers on goodwill and separate financial statements
• IFRS Interpretation Committee issues

Click for the EFRAG Update (link to EFRAG website).

We question whether disclosure of market rate servicing contracts is consistent with the purpose of the 2010 amendments to IFRS 7 Financial Instruments: Disclosures and whether it will provide valuable information to users. We also believe that the issue of discount rates on defined benefit obligations should be considered more thoroughly; the proposed amendment to IAS 19 Employee Benefits may not be appropriate for all jurisdictions. Lastly, we recommend that the Board liaise with the IAASB before finalising the amendment to IAS 34 Interim Financial Reporting to ensure that no conflict between accounting and assurance standards arises.

Please click for:

• Our summary of the proposed amendments under the IASB's annual improvements project (cycle 2012-2014)
• Our comment letter to the IASB