The FRC reviewed 15 audits across the seven largest audit firms covering both the financial statement opinion and the Value for Money arrangements conclusion work. The FRC paid particular attention to the valuation of property (including investment property), multi-employer pension deficits, occurrence and completeness of expenditure, first year audit procedures, the impairment of receivables and the fraud risk assessment and response thereto.

The FRC indicates that the results of its inspections were “concerning” with just 40% (down from 64% in 2018/19) of the audits requiring no more than limited improvement. It comments that “overall, some firms are still not consistently achieving the necessary level of audit quality and therefore need to make further progress”. Most of the findings leading to reviews requiring more than limited improvements were identified in the areas of property valuation (including investment property), sufficiency of audit procedures over the occurrence and completeness of expenditure, the response to fraud risks, the impairment of receivables, valuation of pension assets and the effectiveness of the Engagement Quality Control Review.

With regards to Value for Money conclusion work, the FRC observed that “the quality of VfM conclusion work across all firms remains high”. All 15 reviews were assessed as either good or requiring limited improvements and, unlike the prior year, no reviews were graded as requiring improvement.

A press release and the full report is available on the FRC website.

Board work plan update: This was the first periodical update of the work plan, replacing the research update. The staff have been reviewing the timing of consultation documents and recommend some changes to the timing of consultations (such as delaying the Management commentary ED until May 2021) and extending some comment periods (such as for the DP on BCUCC), all of which the Board supported. The work plan on the IFRS Foundation website was updated after the meeting.

2020 Agenda consultation: The IASB is preparing to issue a Request for Information (RFI) in the first quarter of 2021, as part of the public consultation on its work plan that it is required to undertake every five years. The Board decided that the RFI describe 27 potential projects identified from outreach undertaken.

Maintenance and consistent application — Deferred tax related to assets and liabilities arising from a single transaction: In July 2019, the Board published an ED proposing amendments to IAS 12. The Board confirmed the proposal to narrow the scope of the recognition exemption so that it will not apply to transactions that give rise to equal amounts of taxable and deductible temporary differences. The Board also decided to remove the capping proposal.  

Management commentary: This was the last decision-making meeting for the ED. The Board gave the staff permission to begin the formal drafting and balloting processes. The staff papers included the working draft of their guidance on the provision of information about matters that could affect an entity’s long-term prospects, intangible resources and relationships, and ESG matters, but this was to elicit feedback rather than seeking any formal decisions. The ED is expected to be published in May 2021.

Extractive activities: The staff presented findings on the diversity of accounting policies applied to exploration and evaluation expenditure within the scope of IFRS 6. The staff’s research indicates that diversity is primarily due to the extent to which an entity recognises exploration and evaluation expenditure incurred during the reporting period as an asset and the unit of account that an entity decides to apply to its exploration and evaluation expenditure asset. Most of the entities in the sample use area of interest accounting.  The ‘full cost’ and successful efforts methods are the most common accounting policies for oil and gas companies not applying ‘area of interest’ accounting. The Board was not being asked to make any decisions. Board members mentioned that a potential solution could be to amend IFRS 6 by requiring further disclosures but that the staff have to increase engagement with financial statement users for a better understanding of the disclosures that they would consider relevant.

Equity method: Work on reviewing aspects of IAS 28 began in May. The Board decided that the objective of this review be to assess whether application problems with the equity method for associates and joint ventures can be addressed by identifying and explaining the principles of IAS 28. The Board decided not to consider whether the equity method is a one-line consolidation method or a measurement method, whether it should be replaced by one of the measurement bases in the Conceptual Framework or whether significant influence should be the basis for when to apply the equity method.

Disclosure initiative — Subsidiaries that are SMEs: The IASB is developing a Standard setting out reduced disclosure requirements for subsidiaries apply IFRS Standards but meet the definition of an SME. At this meeting the IASB decided on how entities will communicate that they have applied the reduced disclosure requirements and how the disclosure requirements of IAS 8 should be applied by these entities.

The staff gave an oral update on Dynamic Risk Management (DRM). The staff is setting up meetings to discuss the DRM model with 25 banks from different jurisdictions between now and the end of January 2021. The staff expect to present the feedback from this outreach to the Board in March or April 2021. The Board will then decide the project direction.

The staff gave an oral update on the IFRS Taxonomy, and the proposed updates (PTU/2019/1 Interest Rate Benchmark Reform—Amendments to IFRS 9, IAS 39 and IFRS 7 and PTU/2020/2 Amendments to IFRS 17, Extension of the Temporary Exemption from Applying IFRS 9 and Property, Plant and Equipment—Proceeds before Intended Use). Concerns continue to be raised about the paucity of comment letters (only one was received for PTU/2019/1 and none for PTU/2020/2).

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

The online event covered the following topics:

• Improving disclosure about business combinations;
• improvements to the goodwill impairment test; and
• a possible reintroduction of amortisation of goodwill.

During the discussion, participants from a range of backgrounds such as enforcement, auditing, academia, valuation and preparation of accounts, shared their views and concerns around the proposals contained in the Discussion Paper Business Combinations —  Disclosures, Goodwill and Impairment.

Please click to access the summary report on the EFRAG website.

The update reports on the EFRAG Board webcast meeting on 8 and 30 October 2020, the EFRAG webcast on 15 October 2020 and the EFRAG TEG webcast meeting on 21-22 October.  The publication also covers the activities of the European Reporting Lab.

The update also lists EFRAG publications issued in October including:

• EFRAG's final endorsement advice on amendments to IAS 37, IFRS 3, IAS 16 and the Annual improvements to IFRS Standards 2018-2020; and
• EFRAG's summary report on joint DASB-EFRAG-IASB outreach event on the Exposure Draft General Presentation and Disclosures.

The October EFRAG Update can be found on the EFRAG website here.

This technical release is an updated version of TECH 07/13BL and provides guidance on eligibility for and application of the provisions in s479A-479C of the Companies Act 2006. These provisions permit subsidiary companies and limited liability partnerships to take an exemption from audit if the parent undertaking guarantees all outstanding liabilities to which the subsidiary is subject at the end of the financial year to which the guarantee relates, until they are satisfied in full.

The revised technical release applies for periods beginning on or after 1 January 2021. It reflects changes to UK law made since the previous version; most notably it reflects changes arising as a result of the UK’s withdrawal from the EU. In particular, for periods commencing on or after IP completion day (defined as 31 December 2020 at 11.00pm UK time), the exemption is only available where the guarantee is given by a parent undertaking that is established under UK law. This represents a narrowing of the availability of the exemption; for periods beginning before IP completion day, the exemption is available where the guarantee is given by a parent undertaking established in the EEA.

The technical release is available on the ICAEW’s website.

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

• Goodwill and impairment (1–9): The ASAF discussed the initial feedback on the discussion paper from their stakeholders, and how that feedback compared to what the Board has heard so far. In addition, the ASAF members outlined their plans for outreach and fieldwork to stimulate feedback to the discussion paper.
• Business combinations under common control (10–15): The ASAF was given an update on the outreach plans for the forthcoming discussion paper. The ASAF members provided feedback on the proposed focus in the outreach, stakeholder events in their jurisdictions, and on how to facilitate effective stakeholder engagement.
• Conceptual Framework for Financial Reporting (16–19): The FASB provided an overview of its proposed Chapter 4 Elements of Financial Statements of FASB Concepts Statement No. 8 Conceptual Framework for Financial Reporting.
• Update and agenda planning (20–23): The ASAF members discussed the Board’s current work plan and planned topics for the December 2020 ASAF meeting.

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

The newsletter provides an update of the Lab's current projects and a brief overview of its other activities.  Some highlights include:

• an update on the Lab's recent reports and published guidance, including Video in Corporate Reporting, a set of tips to help companies make S172 statements more useful and guidance on reporting in times of uncertainty
• other activities of the Lab including work on climate change, the Future of Corporate Reporting discussion paper and the FRC Annual Review of Corporate Reporting
• a summary of published guidance for companies and auditors regarding COVID-19.

The full newsletter is available on the FRC website here.

Below is an analysis of all changes made to the work plan since our last analysis on 28 September 2020.

Standard-setting projects

• Disclosure initiative — Subsidiaries that are SMEs — the decision of whether to issue a discussion paper or an exposure draft is now expected in December 2020 (previously fourth quarter of 2020)
• Management commentary — the issuance of an exposure draft is now expected in the first half of 2021 (previously first quarter of 2021)
• Primary financial statements — the review of the feedback to the exposure draft is now expected in December 2020 (previously fourth quarter of 2020)

Maintenance projects

• 2019 Comprehensive review of the IFRS for SMEs — the feedback on the request for information is now expected to be discussed in December 2020 (previously fourth quarter of 2020)
• Accounting Policies and Accounting Estimates (Amendments to IAS 8) — the issuance of final amendments is now expected in December 2020 (previously fourth quarter of 2020)
• Deferred tax related to assets and liabilities arising from a single transaction — the Board decided to finalise the amendments (no date given)
• Disclosure initiative — Accounting policies — the issuance of final amendments is now expected in December 2020 (previously fourth quarter of 2020)
• Disclosure initiative — Targeted standards-level review of disclosures — the issuance of an exposure draft is now expected in the first quarter of 2021 (previously first half of 2021)
• Lack of exchangeability — the issuance of an exposure draft is now expected in the first quarter of 2021 (previously no date given)

Research projects

• Dynamic risk management — the feedback on the core model is expected to be discussed in the first half of 2021 (outreach was undertaken through October 2020)
• Equity method — a project newly added to the work plan, a project direction is yet to be decided
• Financial instruments with characteristics of equity — a decision on the project direction is now expected in December 2020 (previously fourth quarter of 2020)
• Goodwill and impairment — the feedback on the discussion paper is now expected to be discussed in the first quarter of 2021 (previously first half of 2021)
• Pension benefits that depend on asset returns — a review of the research is now expected in December 2020 (previously November 2020)
• Post-implementation review of IFRS 10, IFRS 11 and IFRS 12 — the issuance of a request for information is now expected in December 2020 (previously fourth quarter of 2020)

Other projects

• 2020 Agenda Consultation — the issuance of a request for information is now expected in the first quarter of 2021 (previously first half of 2021)
• IFRS Taxonomy Update — 2020 General Improvements and Common Practice — a proposed IFRS Taxonomy Update was published on 29 October 2020 and the feedback is expected to be discussed in the first quarter of 2021
• IFRS Taxonomy Update — Amendments to IAS 1, IAS 8 and IFRS Practice Statement 2 — this project has been added to the work plan and a proposed IFRS Taxonomy Update is expected in December 2020
• IFRS Taxonomy Update — Amendments to IFRS 17, IFRS 4 and IAS 16 — the feedback on the proposed IFRS Taxonomy Update has been discussed and a final IFRS Taxonomy Update is expected in the first quarter of 2021
• IFRS Taxonomy Update — Interest Rate Benchmark Reform — Phase 2 — the feedback on the proposed IFRS Taxonomy Update was expected to be discussed in October 2020, however, the date entry has been removed
• Sustainability reporting — newly added to the work plan; the feedback on the Trustees' consultation paper is expected to be discussed in December 2020 (although the consultation period does not end until 31 December 2020)

The above is a faithful comparison of the IASB work plan at 28 September 2020 and 31 October 2020. For access to the current IASB work plan at any time, please click here.

Meeting activities included the following:

• Executive session:
  • Report of the Executive Director — The Trustees received a report from the Executive Director Lee White on activities since the last meeting.
  • Update on sustainability reporting — The Trustees discussed the initial reactions to the consultation paper on sustainability reporting that they published in September.
  • Committee reports — The Trustees discussed reports from the Business Process and Technology Committee, the Audit, Finance and Risk Committee, the Human Capital Committee, the Nominating Committee, and the DPOC. (A report of the DPOC meeting is attached to the meeting summary.)
• IASB Chairman’s report — The Chair of the IASB noted the successful completion of time-sensitive amendments to IFRS 17 Insurance Contracts and to the financial instruments standards to address the effects of the ongoing IBOR reform, and updated the Trustees on the continuing discussion in the EU about endorsement of IFRS 17.

For more information, see the full summary on the IFRS Foundation Trustees’ and DPOC meeting on the IASB’s website.

The virtual events will allow participants to learn and interact with experts and previous winners from around the world, who will be sharing their experience and insights. The virtual events will also be an opportunity for participants to understand how finance can play a crucial role in shaping a sustainable and resilient recovery.

The three events are:

• Driving change in the finance community - how education can reshape the future of finance – 13:00-14:30 GMT, 7 December 2020.
• Authentic integrated thinking - connecting purpose, people, planet and profit within everyday decision making – 13:00-14:30 GMT, 8 December 2020.
• Moving financial markets - how can we accelerate financial markets to drive a green and fair recovery? – 12:30-13:30 GMT, 9 December 2020.

The Finance for the Future Awards programme will be back in 2021 and aligned with the rescheduled COP26.

Further information and details of how to register is available on the ICAEW website.