The purpose of the review was to assess the quality of independent board evaluation in the UK listed sector and identify ways in which it might be improved. It was carried out at the request of the Department of Business, Energy and Industrial Strategy (BEIS).  In conducting the review, ICSA considered not only the available evidence on the current state of the market for independent board evaluations in the listed sector, but also the potential impact of the actions taken by the Financial Reporting Council (FRC) in 2018 to strengthen the UK Corporate Governance Code.

The report concludes that there is scope for broader adoption of good practice and greater transparency on the part of both board reviewers and companies using their services.  It also concludes that this is best done through a voluntary rather than a regulatory approach.  It makes a number of recommendations:

• The FRC should consider adopting the terminology ‘board performance review’ instead of ‘board evaluation’ when it next updates the UK Corporate Governance Code and the Guidance on Board Effectiveness.
• Any set of actions to improve the conduct and accountability of external board performance reviews must be addressed to companies as well as reviewers and must enhance the ability of shareholders and other stakeholders to hold both to account.
• Any actions expected of board reviewers and listed companies as a result of the report should be voluntary, at least initially.
• A code of practice should be published to which all organisations conducting external board performance reviews for FTSE 350 companies, and those that aspire to do so, should be encouraged to become signatories. While the Code would be voluntary, signatories would be expected to demonstrate that they adhere to the standards set out in the code on an ‘apply and explain’ basis.  The proposed Code is included in an appendix to the report.
• BEIS should either issue the Code itself or identify a suitable organisation to become the ‘owner’ of the Code. Ownership should entail maintaining a public register of signatories and checking that applicants have made the disclosures required by the code before their status as signatories is ratified.
• Details of how board reviewers can register should be announced as soon as practicable, but reviewers should be given a reasonable period to adjust their practices and update their disclosures as necessary before the register ‘goes live’. Depending on how quickly these arrangements can be agreed, the recommendation is that the register would become active by the end of 2021.
• Listed companies, and other organisations using the services of external board reviewers, should be encouraged voluntarily to adopt principles of good practice covering the selection of the reviewer and how the review is conducted and reported on. The report includes proposed Principles in an appendix. The Institute will promulgate these Principles with its own members and recommends that BEIS and the FRC consider doing so more broadly.
• The FRC should issue additional voluntary guidance to listed companies on how to report against Provisions 21 and 23 of the 2018 UK Corporate Governance Code (which require companies to make certain disclosures relating to board evaluation), with the aim that companies should be able to draw on the guidance in their annual reports published in 2022. Proposed guidance is included in an appendix to the report.
• As part of this guidance, listed companies that used an external board reviewer in the period covered by the annual report should disclose whether that reviewer was a signatory to the new Code of Practice. This could provide an incentive for reviewers to become signatories.
• As a matter of good practice, listed companies should agree with the reviewer any references to the process followed by the reviewer, and any observations attributed to them, and confirm in the annual report that they have done so.
• The Code of Practice for board reviewers should not define ‘independent board performance review’ in such a way that a reviewer is required to follow prescribed methodologies in order to be accepted as a signatory, nor should it prescribe minimum qualifications. However, it should include a ‘de minimis’ definition that excludes those firms that simply supply companies with software or other tools that the company then uses as part of its internal review.
• Board reviewers should not be prevented from providing other services to their clients, but both reviewers and companies should explain how any conflicts of interest or threats to the independence of the reviewer are managed in these circumstances, and companies should indicate in the annual report whether the fees paid for the board performance review exceed those paid for other services.
• Board reviewers should disclose their policies relating to the length of their relationship with clients. Companies should disclose whether the relationship exceeds six years and, if so, explain how any conflicts of interest or threats to the independence of the reviewer are managed. An explanation should also be provided by the company where the reviewer has any other connections with the person leading the appointment process for the company.
• The FRC should assess board performance review practice and reporting in the listed sector as part of its regular monitoring of the UK Corporate Governance Code, and report on its conclusions.
• BEIS should conduct or commission a formal review of the impact of these measures three years after the proposed register of board reviewers becomes active. This review should consider whether mandatory measures or enhanced oversight of the Code of Practice for board reviewers are required, as well as whether changes are needed to the content of the Code of Practice, Principles or guidance.

Alongside the report the ICSA has published:

• Principles of good pracrice for listed companies using external board reviewers; and
• Reporting on board performance reviews. 

The press release with links to supporting documents are available on the ICSA website.

Separate questions have been developed for preparers and users of financial statements. Auditors, standard setters and regulators are also invited to participate in the survey. The survey is open until 16 April 2021.

Please click for more information and access to the survey on the EFRAG website.

The objective of the survey is to understand the factors that influence companies’ reporting of sustainability-related risks and opportunities and the impacts on the business model. The project task force is seeking stakeholder views on users’ expectations and needs, and preparer challenges associated with current reporting practices

Responses are requested by 20 February 2021.

A press release and the survey are available on the EFRAG website.

Board Work Plan Update: This is a regular update of the work plan. Within the next six months the IASB expects to finalise amendments related to three projects and publish consultation documents for six projects. The Board will not start any remaining research pipeline projects or the PIR of IFRS 5. Rather, as decided at the Board’s October 2020 meeting, the Board will obtain updated information about those projects as part of the 2020 Agenda Consultation to help reassess their relative priority. The Board will be asked at a future meeting to add a narrow-scope project on disclosure requirements in relation to supply chain financing arrangements.

Maintenance and Consistent Application—IFRIC Update: The IASB will discuss the December 2020 IFRIC Update.

Disclosure Initiative— Subsidiaries that are SMEs: The IASB is developing a Standard setting out reduced disclosure requirements for subsidiaries that apply IFRS Standards but meet the definition of an SME. At this meeting, the Board will discuss disclosures about cash-generating units containing goodwill and intangible assets with indefinite useful lives and the scope of the proposed Standard. The staff recommend that it apply to entities that, at any point during their reporting period, are subsidiaries of a parent presenting consolidated financial statements applying IFRS Standards and that the scope should not be limited to single entity financial statements. They also recommend that the consultation document should be an ED.

Primary Financial Statements: In December 2019, the IASB published Exposure Draft ED/2019/7 General Presentation and Disclosures. At the December 2020 meeting the Board began discussing summarised feedback from the 215 comment letters it received, outreach activities, fieldwork and a review of academic literature. The Board did not discuss four of the 11 papers and at this meeting will continue its discussions. The staff are also presenting a redeliberation plan.

Our pre-meet­ing summaries are available on our January meeting notes page and will be sup­ple­mented with our popular meeting notes after the meeting.

The Committee will discuss the following:

• Ad­min­is­tra­tive matters
• IFRS 10 and IFRS 16 — Sale and leaseback of an asset in a single-asset entity
• IAS 2 — Costs necessary to sell inventories
• IAS 10 — Preparation of financial statements when an entity is no longer a going concern
• Work in progress

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries as well as observer notes from the meeting on this page as they become available.

The topics covered during the meeting were the following (numbers in brackets are ref­er­ences to the cor­re­spond­ing para­graphs of the summary):

• Rate-regulated activities (1–9): The ASAF members outlined their plans for outreach on an upcoming Exposure Draft on regulatory assets and regulatory liabilities.
• Cryptoassets (10–18): The ASAF members provided their preliminary views on the EFRAG’s discussion paper Accounting for Crypto-assets (Liabilities) and whether they support changes to IFRS requirements.
• Financial instruments with characteristics of equity (19–42): The ASAF members provided feedback on potential refinements to the disclosure requirements discussed in Discussion Paper Financial Instruments with Characteristics of Equity. The session included discussions on the priority of financial instruments on liquidation of an equity, disclosure on an individual entity versus consolidated basis, non-financial liabilities, legal effects, carrying amounts versus fair value, potential dilution of ordinary shares, and terms and conditions of financial instruments.
• Dynamic Risk Management (43): The staff provided the ASAF members with an update on outreach on core dynamic risk management model.
• Lack of Exchangeability (Amendments to IAS 21) (44–45): The ASAF members were updated on the developments on the project and were introduced to the upcoming Exposure Draft on narrow-scope amendments to IAS 21 The Effect of Changes in Foreign Exchange Rates.
• Update and agenda planning (46–48): The ASAF members discussed the Board’s current work plan and planned topics for the March 2021 ASAF meeting.

A full summary of the meeting is available on the IASB's website.

Local authorities in the United Kingdom are required to keep their accounts in accordance with 'proper practices'. This includes compliance with the terms of the Code of Practice on Local Authority Accounting in the United Kingdom (the Code) prepared by the CIPFA LASAAC Local Authority Accounting Code Board (CIPFA LASAAC).

The first area for consultation relates to the accounting for the secure tenancy for tenants within local authorities in the context of both IAS 17 Leases and IFRS 16 Leases. The consultation considers:

• Whether the leasing standards apply to housing revenue account tenancy agreements (i.e. whether they meet the definition of a lease (under both IAS 17 and IFRS 16).
• If the leasing standards do apply, whether they are operating or finance leases.
• What disclosure requirements will be needed by the users of local authority financial information relating to housing tenancies and the related assets.

CIPFA/LASAAC are of the view that secure housing tenancies do not meet the definition of a lease under IAS 17 and therefore do not propose a change to the 2020/21 or 2021/22 Codes. However they have concluded that secure housing tenancies do meet the definition of a lease under IFRS 16. As CIPFA/LASAAC has taken the decision to delay the implementation of IFRS 16 to 1 April 2022, the proposed amendments to the Code therefore mainly focus on changes to the 2022/23 Code. However, consideration has also been made as to whether secure housing tenancies meet the definition of a lease under IFRS 17 to ensure that the accounting prior to the implementation of IFRS 16 is correct.

As CIPFA LASAAC has decided to defer the implementation of IFRS 16 to 1 April 2022, it is also keen to understand whether it would be useful to local authority stakeholders if provisions were included in the Code to provide guidance on the accounting treatment for COVID-19-related rent concessions. UK GAAP under FRS 102 Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime already provides such guidance and so the proposed amendments to the 2021/22 Code (and possibly as an update to the 2020/21 Code) cross refer to this treatment. This might be useful to local authorities with subsidiaries that apply FRS 102 and that have received such rent concessions.

Comments are requested by 12 March 2021.

A press release, the Invitation to comment and copies of the exposure drafts are available on the CIPFA website.

The IIRC launched the revision process in February 2020 and identified three key themes of the revision: a) business model considerations, b) responsibility for an integrated report, and c) charting a path forward. The third theme was not directly related to the revision but focused on future of corporate reporting, including extended assurance and the role of technology, and was intended to inform the IIRC’s longer-term strategy.

The revisions published today focus on a simplification of the required statement of responsibility for the integrated report; improved insight into the quality and integrity of the underlying reporting process; a clearer distinction between outputs and outcomes; and a greater emphasis on the balanced reporting of outcomes and value preservation and erosion scenarios. The press release states:

As business resilience is tested so severely in the wake of the global pandemic, climate change and growing inequality, effective integrated thinking and reporting is more important than ever. We believe these revisions can help businesses deliver more robust, balanced reporting. The revisions are also aligned with our efforts to develop a global, comprehensive corporate reporting system.

Please click to access the following information on the IIRC website:

• Press release
• Revised International <IR> Framework
• Consultation draft feedback
• Analysis of consultation draft feedback
• Treatment of consultation draft feedback
• 2013/2021 comparison document which allows a comparison of changes that have been made to the 2021 <IR> Framework to be seen.  Changes have been outlined in a table format on a side-by-side basis for ease of comparison.

In addition, the South African Integrated Reporting Committee (IRC) has published a version of the International <IR> Framework (2021) with marked up changes. Please click to access the document on the IRC website. 

The webinar will be held on 27 January 2021.  For the convenience of stakeholders in different time zones, there will be two sessions of the webinar:

• 09:00-10:00 GMT
• 15:00-16:00 GMT

To register for the webcast or for more information, please see the press release on the IASB's website.

Exposure Draft 75 Leases proposes a model that is aligned with IFRS 16 Leases for lease accounting in the public sector. For lessees, ED 75 proposes a right-of-use model that will replace the risks and rewards incidental to ownership model in IPSAS 13 Leases. For lessors, ED 75 proposes to substantially carry forward the risks and rewards incidental to ownership model in IPSAS 13.

The request for information published alongside ED 75 will provide the IPSASB with further information on the issues that need to be considered in accounting for concessionary leases and other arrangements similar to leases that are quite common in the public sector.

Comments on both documents are requested by 17 May 2021.

Please click to access the following additional information on the IPSASB website:

• Press release
• Access to the exposure draft, a short video and an At a Glance introduction
• Access to the request for information