ED 88 Arrangements Conveying Rights over Assets proposes amendments to IPSAS 47 Revenue and IPSAS 48 Transfer Expenses. The proposed amendments to IPSAS 47 are consistent with the principles already exposed in ED 84 Concessionary Leases and Right-of-Use Assets In-kind (Amendments to IPSAS 43 and IPSAS 23) that were strongly supported by stakeholders. Additionally, ED 88 proposes illustrative examples to accompany IPSAS 47 and IPSAS 48 on other types of arrangements conveying rights over assets that are common in the public sector. Feedback to both ED 88 and ED 84 will inform the final pronouncement on other lease-type arrangements.

Comments on the exposure draft are requested by 31 May 2024. Please click for additional information and access to the drafts in the press release on the IPSASB website.

The new members will initially serve a five-year term with the pos­si­bil­ity of being renewed for another three years. Nom­i­na­tions for IASB board mem­ber­ship close on 31 May 2024. For more in­for­ma­tion, see the press release on the IASB’s Web site.

Trustees’ re­spon­si­bil­i­ties include oversight of the organisation in the public interest, its strategic direction, ap­point­ments to the IASB, the ISSB, the IFRS In­ter­pre­ta­tions Committee and the IFRS Advisory Council, and ensuring the financing of the organisation and approving its budget. Trustees are expected to engage with the markets in their regional ju­ris­dic­tion.

Please click for ad­di­tional in­for­ma­tion in the press release on the IFRS Foun­da­tion website.

Background

In September 2022, the International Accounting Standards Board (IASB) published the exposure draft of a third edition of the IFRS for SMEs accounting standard. For this exposure draft, the IASB had considered alignment with full IFRS Accounting Standards that are effective on or before 1 January 2020. Nevertheless, during the redeliberation of the proposals in the exposure draft, the IASB also looked at all amendments to full IFRSs with an effective date after 1 January 2020 to see whether any of these would warrant inclusion in the final amendments.

At its meeting in October 2023, the IASB decided to include the amendments to full IFRSs for supplier finance arrangements and lack of exchangeability. As these amendments had not been part of the original exposure draft and as the IASB wanted the public to be able to comment on these amendments before including them in the third edition of the IFRS for SMEs, the IASB decided to develop an addendum to the original exposure draft that would be exposed for public comment prior to finalising the amendments.

Suggested changes

The proposed amendments in exposure draft IASB/ED/2024/2 Addendum to the Exposure Draft 'Third edition of the IFRS for SMEs Accounting Standard' are:

Alignment with IAS 7 as amended by Supplier Finance Arrangements

The IASB proposes that an SME would disclose the following information about its supplier finance arrangements:

• the terms and conditions - aggregated, but with separate disclosure of the terms and conditions of supplier finance arrangements that are dissimilar;
• at the beginning and end of the reporting period for reportable supplier finance arrangements:
  • the carrying amounts of the financial liabilities and where they are included in the statement of financial position,
  • the carrying amounts of the financial liabilities for which suppliers have already received payment from the finance providers; and
  • the range of payment due dates of the financial liabilities compared to trade payables that are not part of a supplier finance arrangement; and
• the type and effect of non-cash changes in the carrying amounts of the financial liabilities.

Alignment with with IAS 21 as amended by Lack of Exchangeability

The IASB proposes to amend the IFRS for SMEs:

• to specify when a currency is exchangeable into another currency;
• to set out the factors an SME would need to consider when assessing whether a currency is exchangeable and to specify how those factors affect the assessment;
• to specify how an SME determines the spot exchange rate when a currency is not exchangeable into another currency; and
• to require an SME to disclose information that would enable users of its financial statements to understand the effects of a lack of exchangeability.

Comments on the proposed changes are requested by 31 July 2024.

Effective date

The IASB proposes that the amendments have the same effective date as the other amendments to the IFRS for SMEs. 

Additional information

Please click for:

• IASB press release
• Access to the exposure draft on the IFRS Foundation website
• Our UK Accounting Plus project page for the Second comprehensive review of the IFRS for SMEs
• Our related Need to know publication

As the FRC continues its work to restore public trust and confidence in audit, corporate reporting and governance, while embedding its remit to support UK economic growth and competitiveness, the Plan and Budget sets out how it intends to deliver on its strategic priorities.

The five strategic objectives of the FRC will remain unchanged and, in 2024-25, the FRC will particularly focus on the following areas highlighted in its new remit letter:

• Embedding its growth duty into its decision-making processes wherever this is not clear.
• Finalising work associated with its review of the UK Corporate Governance Code and its associated guidance.
• Commencing a full review of the Stewardship Code.
• Building on improvements in audit quality where they have been achieved, including in its role as shadow System Leader for local authority audit. The FRC will also support challenger and smaller audit firms to deliver better audit quality alongside their ambitions to scale in size and scope.
• Supporting the simplification and streamlining of corporate reporting by continuing its close engagement with the government on its review of non financial reporting requirements.
• Making the UK’s sustainability reporting framework world-class through its work with international standard setters and other regulators, and in its role as secretariat to the UK Sustainability Advisory Committee.
• Continuing its actuarial work and engagement with all parts of the pensions system in support of reliable and consistent pension projections.

The Plan and Budget provides details of the priorities and key deliverables of each of the FRC's five divisions (Regulatory Standards, Supervision, Enforcement, Corporate Services and CEO division) which highlight how the FRC intends to deliver on the above Government priorities set out in its new remit letter.  It also covers the operational requirements and resourcing of the FRC and the UK Endorsement Board (UKEB) and sets out targets to measure success.

In 2024-25 the FRC will pause planned further growth due to delays to legislation which would have given the FRC a broader remit and new powers and will instead prioritise existing resources.  The combined budgeted cost of the FRC and the UKEB is also set to increase to £71.5m from £66.3m in the prior year as set out in the proposed expenditure and funding budget.

During 2024-25 the FRC has signalled its intention to undertake a full review of its strategy and objectives, with a view to subsequently publishing a 3-year strategy, supplemented each year with an annual plan and budget.

A press release and the Plan and Budget 2024-25 are available on the FRC website.

The titles of the guides are as follows:

• Double materiality. The guiding principle for sustainability reporting, covering the interconnectedness of an entity's impacts on society and the environment with its financial performance.
• Due diligence. Can managing adverse impacts be simplified?, discussing how a business prevents, mitigates and accounts for its impacts.
• CSRD. Implications for companies outside the EU, setting out the benefits for policymakers in harmonising their sustainability disclosure regulations with the EU.

Please click to access the guides via the press release on the GRI website.

The 2024 IFRS Accounting Taxonomy is con­sis­tent with IFRSs as issued by the IASB at 1 January 2024, including those issued but not yet effective. The 2024 IFRS Taxonomy also in­cor­po­rates the changes made to the IFRS Taxonomy in 2023 re­flect­ing amended IFRSs and common reporting practice by companies that apply IFRS Accounting Standards as well as general taxonomy im­prove­ments.

For more in­for­ma­tion, see the press release and the 2024 IFRS Accounting Taxonomy page on the IFRS Foun­da­tion website.

The IASB is presently soliciting feedback on proposed amendments to IFRS 3 Business Combinations. These amendments would necessitate companies to divulge the objective and associated performance targets of their most significant acquisitions, along with whether these targets are achieved in subsequent years. Further, companies would be mandated to furnish details regarding anticipated synergies for all substantial acquisitions. Nevertheless, the proposals ensure that companies need not disclose information that could jeopardize their acquisition objectives. Additionally, the IASB suggests complementary adjustments to IAS 36 Impairment of Assets to refine the impairment test. Interested parties have until 15 July 2024 to provide their comments on the ED.

For more in­for­ma­tion, see the press release and Investor Per­spec­tives article on the IFRS Foun­da­tion’s website.

The amendments are focused on updating UK GAAP accounting requirements to reflect changes in IFRS Accounting Standards, particularly with respect to revenue and leases, and making other incremental improvements and clarifications.

The following principal amendments, which were consulted on within Financial Reporting Exposure Draft (FRED) 82 Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs – Periodic Review and FRED 84 Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Supplier Finance arrangements, have been made:

• New accounting requirements for revenue in FRS 102 and FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime based on the five-step model for revenue recognition from IFRS 15 Revenue from Contracts with Customers, with appropriate simplifications. The extent to which this will change an entity’s revenue recognition in practice will depend on the nature of its contracts with customers.
• New lease accounting requirements in FRS 102, based on the on-balance sheet model from IFRS 16 Leases, with appropriate simplifications, for example a higher threshold for recognition of low-value assets on balance sheet where that exemption is taken. This is expected to result in an impact on the financial statements of most entities that are lessees under one or more operating leases.  No equivalent change has been made to FRS 105.

Other incremental improvements and clarifications to FRS 102 include:

• Greater clarity for small entities in the UK applying Section 1A Small Entities regarding which disclosures need to be provided in order to give a true and fair view.
• A revised Section 2 Concepts and Pervasive Principles, updated to reflect the IASB’s Conceptual Framework for Financial Reporting, issued in 2018.
• A new Section 2A Fair Value Measurement, replacing the Appendix Fair Value Measurement to Section 2 and updated to reflect the principles of IFRS 13 Fair Value Measurement.
• New disclosures requirements about supplier finance arrangements within Section 7 Statement of Cash Flows.
• Additional guidance within Section 26 Share-based Payment to aid preparers in applying the principles in certain situations.
• New guidance in Section 29 Income Tax on accounting for uncertain tax positions.
• A number of improvements and clarifications to existing guidance in Section 34 Specialised Activities and consequential changes as a result of other amendments.
• Removal of the option to newly adopt the recognition and measurement requirements of IAS 39 Financial Instruments: Recognition and Measurement under paragraphs 11.2(b) and 12.2(b) (unless needed to achieve consistency with group accounting policies), in preparation for the eventual removal of this option. Entities already applying the IAS 39 option are permitted to continue to apply it.

When applicable, similar incremental improvements and clarifications are made to FRS 105.

As part of the periodic review, the FRC has not made changes to introduce an expected credit loss model, consistent with IFRS 9 Financial Instruments, and no changes have been made to align the standards with IFRS 17 Insurance Contracts.  The FRC has said that any alignment with IFRS 17 or further alignment with IFRS 9 will be part of a future project and subject to consultation in due course.

In developing the Amendments, the FRC considered major and minor changes to IFRS Accounting Standards, the International Accounting Standard Board’s (IASB's) proposed changes in developing the third edition of the IFRS for SMEs Accounting Standard, stakeholder feedback in response to the FRC’s 2021 request for views, and FREDs 82 and 84, and other developments in corporate reporting.

The principal effective date of the amendments is accounting periods beginning on or after 1 January 2026, with early application permitted provided all amendments are applied at the same time.  Earlier effective dates apply to new disclosures about supplier finance arrangements in Section 7 of FRS 102 (periods beginning on or after 1 January 2025, with early application permitted) and a new requirement in Section 6 Transition to this FRS of FRS 103 Insurance Contracts (periods beginning on or after 1 January 2024). Transitional provisions are included. 

The FRC will be holding a webinar on 15 May 2024 to provide an overview of the changes.  During 2024 the FRC will also publish new editions of the standards and updated staff factsheets with guidance on key aspects of the new requirements.

A press release, including links to the Amendments, a three-page summary of the main changes, impact assessment and feedback statement is available on the FRC website. 

European enforcers examined the financial statements of 703 issuers representing an average examination rate of 17% of all IFRS issuers with securities listed on regulated markets. These examinations resulted in 250 actions taken to address material departures from IFRS. As in the past, most infringements were identified in the areas of accounting for financial instruments, impairment of non-financial assets, presentation of financial statements and revenue recognition.

Enforcers also assessed the non-financial information for 389 issuers, covering approximately 17% of the total estimated number of issuers required to publish a non-financial statement, resulting in 91 enforcement measures.

The report also looks at ESEF reporting as for financial years beginning on or after 1 January 2021, issuers must prepare their annual financial reports according to XHTML requirements and mark-up those IFRS consolidated financial statements contained therein according to iXBRL requirements.

Please click to access the full report on the ESMA website.