Please click to access the updated alignment dashboard prepared for the December 2020 IPSASB meeting on the IPSASB website.

Deloitte offers a summary of the provisions of all IPSAS in our IPSAS in your pocket publication.

Further information is available on the FRC website.

The consultation is intended to assess demand for global sustainability standards and what role the Foundation might play in the development of such standards.

Please click for access to the recordings on the IASB website. The introductory part in both sessions is the same, the questions put forward by the audience differ.

At its October 2020 meeting, the Board decided unanimously to separate the PIR of the IFRS 9 classification and measurement requirements (including FVOCI equity instruments) from the PIR of the rest of IFRS 9 and to start the PIR on classification and measurement as soon as possible.

One argument brought forward for a separation of classification and measurement was that this part of IFRS 9 did not have a transition resource group (TRG) and thus application issues have not been addressed since publication of the standard. It was also noted that there is not much overlap between classification and measurement and the rest of IFRS 9, so the PIRs can be done separately.

Please see the press release on the IASB website for more information.

The Advisory Council is the formal advisory body to the Trustees and the IASB. It advises the IFRS Foundation on its strategic direction, technical work plan and priorities.

The new and reappointed members of the Advisory Council are:

• Kristian Koktvedgaard - BusinessEurope
• Sibel Ulusoy Tokgöz - Capital Markets Board of Turkey
• Thorsten Sellhorn - European Accounting Association (EAA)
• Javier de Frutos - European Federation of Financial Analysts Societies (EFFAS)
• Saskia Slomp - European Financial Reporting Advisory Group (EFRAG)
• Ken Warren - External Reporting (XRB), New Zealand
• Ron Edmonds - Financial Executives International (FEI)
• Ian Burger - International Corporate Governance Network
• Antonio Quesada - International Organization of Securities Commissions (IOSCO)
• Marie Seiller - International Organization of Securities Commissions (IOSCO)
• Alan Trotter - Investment Company Institute
• Henry Daubeney - Pricewaterhouse Coopers
• Barbara McGowan - World Bank
• Eduardo Flores
• Tania Wimberley 

All appointments take effect 1 January 2021 and are for a three-year period.

In addition, the Trustees note that the following members are stepping down from the Council at the end of 2020 or have already stepped down earlier this year: Areewan Aimdilokwong, Clive Brown, Garth Coppin, Jean Paul Gauzes, Professor Ann Jorissen, Ton Meershoek, Pam O'Connell.

The press release announcing the new appointments can be found on the IASB's website.

The IFRS Foundation disclosed this decision in its Coronavirus update.

The errors affect the stand-alone standards only.

Editorial corrections do not change the meaning or application of pronouncements, but instead correct inadvertent errors. The editorial corrections can be viewed on the editorial corrections page of the IASB's website.

For the first phase of the project, the task force was split into several work streams to assess the current situation and report on it to the European Commission. The streams included focuses on special groups (e.g. financial institutions, SMEs) EU focuses (e.g. current reporting practices and momentum of reporting in the EU) and an international focus (which initiatives exist and can their work be leveraged).

While the EU-focused assessment includes "all current, developing and expected European initiatives", the international assessment, despite the 31 October cut-off date, makes no reference to newer initiatives such as the Trustees' consultation on establishing a global sustainability standard-setter, the WEF publication on an ESG framework and common metrics for reporting or the statement of intent of CDP, CDSB, GRI, IIRC, and SASB to work together towards a comprehensive corporate reporting system. A vague reference to these developments might be read into the statement that "Convergence and harmonisation efforts among some initiatives are taking place. These efforts include Memorandums of Understanding, Statements of Intent, Consultation processes and, from a technical standpoint, tables of translation from one initiative to another." However, the report dismisses these efforts in the very same paragraph and states: "Despite such efforts, the number of initiatives has continued to grow over the past years."

Please click to access the full progress report on the EFRAG website.

The FCA’ review, conducted in early 2020, looked at listed companies’ compliance with certain FCA rules relating to corporate governance. The FCA reviewed annual reports across several years for issuers across different listing segments and categories. The review highlights a number of areas for improvement including:

• That when stating how they have complied the Principles of the Code under Listing Rule (LR) 9, Premium listed issuers should ensure that that disclosure is sufficient to enable shareholders to evaluate how the Principles have been applied rather than just stating that they have been applied. Premium listed issuers are also encouraged to consider including specific details of how the company has applied the Principles in that accounting period with the use of examples and cross references where appropriate.
• Making use of cross references to other parts of the annual report and/or examples to evidence good corporate governance. The FCA found that for the premium listed population sampled, some of the disclosures appeared boilerplate and did not change year on year.
• The quality of Board Diversity Reporting.

Additionally the FCA observed that:

• Some closed-ended investment funds which had executive directors may have been erroneously using the exemption in LR 15.6.6R.
• A number of standard listed issuers either provided little or no information to meet the disclosure requirements of DTR 7.2.5R and DTR 7.2.7R.
• Standard listed issuers who state that they have applied the Provisions of the Code ‘as far as is relevant’ without providing any further detail do not appear to meet the requirements set out in DTR 7.2.3R (1).

The FCA has indicated that going forward it will work with the Financial Reporting Council (FRC) to consider areas for improvement. It will also use the results of its review to inform decisions about the deployment of future surveillance and monitoring efforts.

The full report is available on the FCA website.

The year-end advice letter covers the following key areas:

2020 year-end reporting environment

COVID-19 and its impact on corporate reporting

The effects of COVID-19 present challenges to businesses of providing clear and transparent information that focuses on issues most relevant to users. To assist preparers in reporting in a COVID-19 environment, the letter draws the reader’s attention to the FRC guides published during the year in relation to Covid-19:

• The Joint statement issued by the FRC, FCA and PRA and subsequent updates.
• The FRC’s thematic review on the financial reporting effects of COVID-19.
• The FRC’s Lab reports on ‘Going Concern, Risk and Viability’ and ‘Resources, action, the future’, issued in June which highlight the information that investors indicate they find most critical to understand the impact of COVID-19 on a company.
• The FRC’s updates to the June Lab reports, issued in October.

The FRC highlights that a thematic review on cash flow and liquidity, due to be published shortly, and which provides guidance on the disclosure of liquidity risk, going concern and viability, may also provide a useful reference.

The letter highlights that the FRC expects preparers:

• To consider the principles contained in IAS 1 Presentation of Financial Statements and provide disclosures that allow users to understand the impact of events and conditions on a company’s position and financial performance. These should, where possible, quantify the impact of COVID-19 on a company’s performance, position and prospects.
• To increase disclosure of relevant sensitivities or ranges of possible outcomes where judgements are made on significant estimation uncertainties.
• To quantify the historical effect of COVID-19 in narrative reporting in the strategic report. However companies are ‘strongly encouraged’ not to make arbitrary splits of items between COVID-19 and non-COVID-19 financial statement captions as such allocations are likely to be highly subjective and therefore unreliable. Companies are also expected to apply their existing accounting policies for exceptional and other similar items consistently to COVID-19-related income and expenditure.
• To clearly articulate the impact of COVID-19 on their business and strategies and how the changes are compatible with future forecasting assumptions used in other areas of the financial statements such as going concern, viability, impairment testing and recognition of deferred tax assets. Specifically the FRC expects any significant judgements made in determining whether or not there is a material uncertainty in relation to going concern to be disclosed and explained.
• To describe and explain any other significant judgements and estimates made especially with regards impairment reviews. Disclosures are expected to describe the approach used to determine key impairment assumptions and explain significant year-on-year changes, including any changes due to COVID-19.

In light of the light of the impacts of COVID-19, the FRC has encouraged boards to carefully consider whether they should lengthen their reporting timetables for 2021, making use of the extensions to reporting deadlines.

Impact of Brexit

The FRC expects company reports to explain company-specific risks and uncertainties arising as a result of Brexit. This should include the impacts on different parts of the business and any effects on the financial statements including major sources of estimation uncertainty, amounts at risk and ranges of potential outcomes.

Insights and observations from the FRC’s monitoring work

The FRC makes reference to its latest Annual Review of Corporate Reporting which provides the FRC's assessment of corporate reporting in the UK based on evidence from a variety of sources, including the work of the FRC's own Corporate Reporting Review (CRR) team. The report sets out the FRC’s expectations of areas of corporate reporting that require improvement and what it expects companies to focus on in the coming reporting season. The key areas of focus, included in the letter, have been drawn from, and are consistent with, the findings included in the FRC’s Annual Review of Corporate Governance and Reporting.

Specifically the FRC highlights frequent challenges around disclosure of judgements and estimates, impairment of non-financial assets and working capital finance arrangements such as reverse factoring. Preparers should consider these findings during the year-end reporting process.

Insights and observations from thematic reviews

The letter summarises key points identified from thematic reviews carried out during the year. Specifically it focuses the reader’s attention on:

• Climate change – the FRC indicates that “users expect companies to provide full information about the future impact of climate change on the business and how the company’s activities affect the environment”. Its climate change thematic review provides key findings and FRC expectations.
• IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases - Recently the FRC published the results of two thematic reviews covering the current reporting on IFRS 15 and IFRS 16. The reviews identified a number of areas where companies need to improve their reporting.
• Cash flow and liquidity – the FRC’s forthcoming thematic review which looks at how companies reported cash flows and liquidity risk sets out the following expectations in this area:
  • Companies should provide a clear explanation of the matters considered in assessing going concern, viability and liquidity.
  • Company disclosure should include the methods, assumptions and judgements made in assessing going concern and viability.
  • There should be consistency in the amounts and descriptions of items in the cash flow statement, and other areas of the annual report, including: the strategic report, other primary statements, disclosures of changes in financing liabilities and other notes.
  • Company disclosures should include accounting policies and judgements in relation to the cash flow statement, particularly for large, one-off transactions.
  • Companies are expected to address what the FRC calls as ‘basic errors’ in the preparation of their cash flow statements by performing robust pre-issuance reviews of the cash flow statement.

Narrative reporting and corporate governance matters

Section 172 statement and reporting on workforce engagement

The FRC indicate that many companies are failing to explain how their directors discharged their section 172 duty and in particular the responsibility to have regard to the consequences of decisions in the long term. Additionally whilst companies are reporting on the methods of engagement with stakeholders they are not reflecting how the feedback affected decision making. Some companies are treating the statement as one of compliance.

The letter draws attention to the recent s172 review by the Financial Reporting Lab of the Financial Reporting Council (FRC) which provides a set of tips intended to help companies consider what content to include in a Section 172 statement, how to present it and how to facilitate the process of preparing the statement.

The letter also highlights the FRC’s expectations around reporting on workforce engagement and indicates that reporting should improve in that area. The FRC draws attention to its Lab report on workforce reporting in January 2020 to assist in this area.

Other areas covered

Other areas covered in the letter include:

• Chair tenure
• Future endorsement of IFRS Standards in the UK
• The requirement to consider new IFRS Standards including Interest Rate Benchmark Reform and amendments to IFRS 16 for COVID-19-Related rent concessions.

The press release and full letter are available on the FRC website.  Our related Governance in brief publication is here.