Exposure Draft 74 IPSAS 5 'Borrowing Costs' – Non-Authoritative Guidance proposes the addition of non-authoritative guidance to IPSAS 5 Borrowing Costs that consists of implementation guidance and illustrative examples to clarify how the existing principles for when borrowing costs can be capitalised should be applied in various regularly encountered public sector contexts. The exposure draft does not propose amendments to the authoritative guidance in IPSAS 5.

Comments are requested by 1 March 2021.

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

• Press release
• Access to the exposure draft and an At a Glance introduction

The forum will see the presentation of four academic papers, followed by a responses of an academic and of an IASB/NNS representative, and two panel discussions around research opportunities related to IFRS 9 and to IFRS 15. The audience will be invited to participate in the discussions. The papers are the following (all links to the IASB website):

• Accounting for Intangible Assets: Suggested Solutions
• The Impact of the Adoption of IFRS 11 on the Comparability of Accounting Information
• Standardization and comparability: A regulatory waltz
• Moving toward the Expected Credit Loss Model under IFRS 9: Capital Transitional Arrangement and Bank Systematic Risk

The FRC comments that “overall the quality of reporting by UK companies has remained consistent in recent years”. It notes that although there has been improvements in certain areas such as fewer inconsistencies between the disclosure of significant judgements and estimates and other related disclosures elsewhere in the annual report and accounts and within alternative performance measure (APM) disclosure there is “still room for improvement in other areas”. These areas include better explanation of judgements and estimates, disclosures of impairment testing and impairment losses and better disclosure of revenue recognition especially variable consideration and performance obligations.

The findings follow a review of 216 annual reports and accounts with 67% of those reviews in the FTSE 350. The FRC notes that the topics most frequently raised as a result of the reviews have remained similar to previous years. It stresses that as well as meeting the detailed disclosure requirements of the standards “companies need to meet the overarching objective of accounting standards”. The FRC highlights that a number of the disclosure issues could have been avoided had the disclosure objectives of the relevant accounting standards and legislation been more carefully considered when appraising the quality of reports and the needs of investors.

The FRC indicates that “the statement of cash flows remains the most common source of identified material errors”. The report highlights that these errors were considered “basic in nature” which “could have been spotted by carefully considering the appropriateness of various line items appearing on the face of the cash flow statement”. It identifies the ten most frequently raised topics where improvements to reporting quality are needed are:

• Judgement and estimates
• Impairment of assets
• Revenue
• Financial instruments
• Alternative Performance Measures
• Strategic Report
• Statement of Cash Flows
• Provisions and Contingencies
• Fair value measurement
• Business Combinations

Each of these topics is analysed in detail in the report with key findings and significant issues encountered from the reviews. Example disclosures that would meet the FRC’s expectations are also provided.

Whilst not in the ‘top ten’ list of areas noted above, the FRC also draws attention to issues it has encountered with respect to earnings per share and illegal dividends. It flags that most of the earnings per share findings arose as a result of a corporate restructuring not being correctly reflected in the calculation. With respect to unlawful distributions the most common issue was failure to file an interim set of accounts prior to the payment of a proposed distribution where the distribution was not supported by the latest set of PLC accounts circulated to members.

Although COVID-19 has had a significant impact on financial reporting, the FRC flags that the key considerations for companies when preparing their reports and accounts such as clarity, consistency, relevance and transparency remain. It indicates that better disclosures are specific to the entity and explain clearly how COVID-19 has affected the company’s reported position and performance, and how it may affect future prospects.

The report highlights the FRC’s key disclosure expectations for 2020/21 which reflect the impact of COVID-19 on users’ needs and priorities. It expects to see:

• disclosure of forward-looking information that is specific to the entity and which provides insights into the board’s assessment of the business’s prospects and the methods and assumptions underlying that assessment.
• a clear explanation of any material changes in the business model. The FRC will also assess whether a changed business model is appropriately reflected in the financial statement disclosures of, for example, operating segments, or the allocation and impairment testing of goodwill.
• going concern disclosures that explain the basis of any significant judgements, including whether there are any associated material uncertainties, and the matters considered when confirming the preparation of the financial statements on a going concern basis.
• consistency between the business model, going concern disclosures, the viability statement and financial statement assumptions and estimates, notably for impairment testing at group and parent company level.
• disclosures about significant judgements applied in the preparation of the financial statements, sources of estimation uncertainty and other assumptions made, that enable users to understand management’s exercise of judgement and views about the future.
• appropriate disclosure of information relevant to understanding the company’s financial risk management, particularly the potential impact of debt covenants on liquidity and the use of factoring and reverse factoring in working capital financing.
• adjusted for Covid-19’ alternative performance measures only in exceptional circumstances. The FRC highlights that “allocation of items such as impairment charges between Covid-19 and non-Covid-19 are likely to be highly subjective and therefore generally unreliable”.

Going forward, the FRC has indicated that its 2021 priorities will focus on the following areas:

• Disclosures addressing risk;
• Judgement and uncertainty in the face of the ongoing economic and social impact of COVID-19;
• The potential consequences of geopolitical tensions and the UK’s exit from the European Union; and
• Climate-related risks.

A press release, summary report and full report are available on the FRC website.

The amendment to FRS 101 changes the effective date of an amendment to the definition of a qualifying entity made in July 2019, effectively allowing relevant insurers to continue to apply FRS 101 for a further two years. The revised effective date for the new definition of a qualifying entity is accounting periods beginning on or after 1 January 2023. Consequential amendments have also been made to FRS 100 and FRS 102.

The amendments to FRS 102 and FRS 105, which were consulted on in Financial Reporting Exposure Draft (FRED) 76, introduce explicit requirements for accounting for temporary rent concessions for operating leases occurring as a direct consequence of COVID-19. Amendments have been made to Section 20 Leases of FRS 102 which require entities to recognise changes in operating lease payments that arise from COVID-19-related rent concessions on a systematic basis over the periods that the change in lease payments is intended to compensate. The FRC considers that this would best reflect the economic substance of the benefit of these concessions and their temporary nature and improve the consistency of reporting for users of financial statements. The requirements only apply to temporary rent concessions occurring as a direct consequence of the COVID-19 pandemic, when any reduction in lease payments affects only payments originally due on or before 30 June 2021. A similar amendment has been made to FRS 105. The effective date for these amendments is accounting periods beginning on or after 1 January 2020, with early application permitted.

The amendments to FRS 104, which were consulted in in FRED 75, clarify the requirement to assess the going concern basis of accounting and require the disclosure of any related material uncertainties when preparing interim financial statements in accordance with FRS 104. These amendments address an unintentional difference between FRS 104 and related IFRS requirements. IFRS Standards require management to assess an entity’s ability to continue as a going concern and disclose any related material uncertainties when preparing interim financial statements. Although these requirements are not contained within IAS 34 Interim Financial Reporting they apply to condensed interim financial statements prepared in accordance with IAS 34. FRS 104, which is based on the requirements of IAS 34, did not previously contain any explicit requirements covering the assessment and reporting on the going concern basis of accounting. However FRS 104 currently requires an entity to include a statement that the same accounting policies are applied in the interim financial statements as compared with the most recent annual financial statements, which would include a statement about the going concern basis of accounting. The amendments to FRS 104 introduce requirements covering going concern in a similar way to EU-adopted IFRS Standards. They are intended to ensure consistency in this regard going forward. The amendments are effective for interim periods beginning on or after 1 January 2021, with earlier application permitted.

A press release with links to all of the amendments is available on the FRC website.

The purpose of the session is to obtain feedback from academics on the proposals in the March 2020 DP and to discuss relevant academic evidence.

Please click for more information on the IASB website.

The Board will discuss the following:

• Board work plan update
• Agenda consultation
• Equity method of accounting
• Taxonomy
• Main­te­nance and con­sis­tent ap­pli­ca­tion
• Dynamic risk management
• Ex­trac­tive ac­tiv­i­ties
• Disclosure initiative — subsidiaries that are SMEs
• Management commentary

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 publication provides key data on the accounting profession, its member bodies and practising firms. The publication illustrates the size and shape of the accounting profession and shows how it has evolved over the years. It brings to together information about the major audit firms and accounting bodies including both those who offer audit qualifications and those who register and supervise audit firms.

The publication includes:

• information related to membership, students, income, costs and staffing of the seven accountancy bodies;
• information related to the supervision of statutory auditors;
• information on the registered audit firms with public interest entity clients and;
• a greater focus on the profession's track record on diversity and inclusion.

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

Further, the EFRAG General Assembly extended the mandate of all EFRAG Board members that was to expire on 31 October 2020 (date incorrect in press release) by six months to 30 April 2021, to allow the EFRAG Board in its current composition to finalise the endorsement advice on IFRS 17 Insurance Contracts.

For more information, see the press release on the EFRAG’s website.

In view of COVID-19, many companies are facing a challenging year-end. While the uncertainty creates risks for annual reporting it also presents opportunities. The two new guides look at key elements in respect of resources, action, and the future and in respect of going concern, risk, and viability. Both guides:

• summarise key messages from earlier reports;
• provide an update on recent developments in corporate reporting;
• offer some thoughts regarding how corporate reporting can develop; and
• contain practical examples from reports and presentations released by companies.

Please click to access COVID-19: Resources, action, the future - a look forward and COVID 19: Going concern, risk, and viability - a look forward on the FRC website.

The Trustee's published the consultation paper on 30 September 2020. Comments are requested by 31 December 2020.

Please click to access the video (just over three minutes long) on YouTube.