The webcast discusses the IFRS 16 requirements relating to the recognition exemptions and provides Ms. Lloyd's insight on the scope exemptions, practical examples, and implementation information.

The report stresses that ECON members see shortcomings in the governance of the IFRS Foundation and the IASB, notably in terms of transparency, prevention of conflicts of interest and diversity of Board members. The report also calls for also a more diversified and balanced financing structure also based on fees and public sources. The report's authors feel that their position is backed by the high degree of funding of the IASB's budget (14%) and of EFRAG (60%) by the European Union and conclude that this means that both organisations have to follow the European Parliament standards of democratic legitimacy, transparency, accountability and integrity.

The following documents are publicly available (all on the European Parliament website):

• Draft report discussed during the ECON meeting and submitted amendments (3 documents in all, 101 proposed amendments) - please scroll down to agenda item 10
• Recording of the meeting with votes on the amendments beginning at 12:22 hours

A new paper published in the Journal of Accounting Research looks into the economic consequences of disclosure and financial reporting regulation (including IFRS adoption), drawing on U.S. and international evidence. The authors highlight the challenges with quantifying regulatory costs and benefits, measuring disclosure and reporting outcomes, and drawing causal inferences from regulatory studies, but come to the following conclusions:

• There is a general lack of evidence on market-wide effects and externalities from regulation even though such evidence is central to the economic justification of regulation.
  
• Evidence on causal effects of disclosure and reporting regulation is still relatively rare.
• There is also a lack of evidence on the real effects of such regulation.

The article concludes with several specific suggestions for future research. It can be downloaded (for a charge) through the Wiley Online Library or accessed free of charge through SSRN.

The Reports on Payments to Government Regulations 2014 were introduced into UK law in December 2014.  Under the Regulations, an entity will be required to prepare and deliver a report to Companies House if it is a UK registered company or partnership and meets the test to be either a large undertaking or a public interest entity (PIE), and is engaged in mining, oil and gas or primary forestry logging activities.  Such companies will be required to report publicly payments made to governments in the countries where they undertake extractive and logging operations.  The amended EU Transparency Directive extended the requirements to include entities with securities traded on an EU regulated market (both debt and equity), therefore including non-EU incorporated companies with securities admitted to trading on an EU regulated market.  This requirement was implemented by the Financial Conduct Authority in January 2015.

The guidance seeks to answer the following questions:

• Which entities are under an obligation to prepare and deliver a report?
• Does every entity have to prepare a report or can a consolidated report be prepared for a group?
• Are any entities exempted from preparing reports under the UK Regulations?
• What are the reporting requirements for entities that are subject to equivalent disclosure regimes?
• Do the reports only cover payments made by the entities that have to prepare reports or do the reports cover payments made by other group entities?
• Which business activities are within the scope of the UK Regulations?
• Which types of payment have to be included in the report?
•  Who has the obligation to include payment information in a report in situations where a payment is made on behalf of multiple parties?
• Which government entities that receive payments have to be covered in the reports?
• How should payments be attributed to projects?
• When and how should reports be delivered? 

The guidance is available on the IOGP website.

The committee will be considering papers related to 10 topics. Three of those topics (Agenda items 6, 8 and 10) were originally scheduled for discussion in the March meeting but the Committee did not have sufficient time to deal with these matters. The staff papers for those topics are unchanged from those posted in March.

For eight of the matters being discussed the staff are recommending that the Interpretations Committee not take them onto the agenda. If the Committee agrees with these recommendations it will finalise three items and issue tentative decisions for the other five:

• Recommended final agenda decisions: Government assistance on research activities; derecognition of modified financial assets; and the recoverable and carrying amounts of a cash-generating unit in an impairment assessment.
• Recommended tentative agenda decisions: impairment of an investment in an associate or joint venture; service concession arrangements with leased infrastructure; written puts over NCI; recovery of deferred tax on indefinite life intangible assets; and fees and costs included in the derecognition test for financial liabilities.   

The meeting will also include a discussion the comments received on a proposal to amend IAS 40 Investment Property in relation to the conditions for reclassifying property to, or from, investment property. The Interpretations Committee has been developing the amendment for the IASB. The staff are recommending that, subject to some modifications to the proposal, the Interpretations Committee ask the Board to finalise the amendments. 

The remaining item is the draft interpretation of IAS 21 The Effects of Changes in Foreign Exchange Rates, when there is advance consideration. Discussion of this item is likely to continue at future meetings of the committee.   

The full agenda for the meeting and our detailed pre-meeting summaries can be found here. We will update this page for any changes to the agenda and our Deloitte observer notes from the meeting as they become available.

During 2016/17 the FRC intends to focus on the following key priorities:

Audit regulation – Make effective use of its significant new role as UK competent authority under EU audit regulation and directive.

Audit quality – Promote audit quality so that by 2019 at least 90 percent of FTSE 350 audits require no more than limited improvements.

Corporate governance – Identify and promote good practice through its work on corporate culture. Promote effective engagement between boards and investors.

Corporate reporting – Help embed recent changes, influence the development of IFRS and help smaller listed and AIM companies with the quality of reporting.

Actuarial standards – Implement new framework of Technical Actuarial Standards. In 2017, consult publicly on the future of actuarial regulation.

Key projects will include:

• Corporate governance: to continue to promote corporate governance and corporate cultures which support the long-term success of companies.  During 2016/17 the FRC will publish a report of the findings of its market-led initiative launched in 2015 in order to gather practical insight into corporate culture and the role of boards. This report will include observations, identify best practice and develop practical and market-led ‘how to’ resources. There will also be feedback published in 2016/17 on the discussion paper on ‘UK Board Succession Planning’ with the eventual aim of replacing the FRC’s Guidance on Board Effectiveness.
• Investor stewardship: to focus on promoting effective investor engagement, including the monitoring of reporting by Stewardship Code signatories and encouraging advisers and intermediaries to help to facilitate engagement. The relevant parts of the EU Shareholders Rights Directive will also be implemented by the FRC. In addition the FRC will publish its annual assessment of the quality of engagement.
• Corporate reporting: The FRC will direct their annual programme of reviews of corporate reports at “companies of economic significance where a material misstatement could have implications not just for the individual company but for confidence in the market as a whole”.  Priority sectors will be:
  • Extractive industries and companies using extractive companies
  • Companies servicing the public sector
  • Media businesses

There will be a “targeted review” of tax disclosures and this will be an area of corporate reporting that the FRC seeks improvements.  The FRC will follow up on its project to improve the quality of reporting by smaller listed and UK AIM quoted companies. The FRC will continue to influence the IASB’s agenda and work on its Conceptual Framework and standards on financial instruments, leasing and insurance.  In continuing to develop its ‘Clear & Concise’ initiative the FRC will assist the Department for Business, Innovation and Skills (BIS) in the UK implementation of the EU Non-Financial Reporting Directive. The Financial Reporting Lab is also expected to deliver its report on Business Model reporting and develop its project on the Digital Future.

• Audit and assurance: The FRC will implement the Audit Regulation and Directive (ARD) “with a clear delineation of responsibility” between the FRC and the professional bodies.  It comments that it will seek to ensure that this new framework “serves the interests of investors in the reliability of financial statements; and that it supports the UK audit profession in delivering statutory audit to the necessary high standards and with close regard to the public interest”.  In 2016/17 the FRC will monitor and report on audit quality of approximately 140 individual engagements and will impose appropriate sanctions where poor quality has been identified.  In particular the FRC will pay particular attention to the quality of first year audits, revenue recognition policies, tax provisioning and the audit of IT controls.  Additionally the FRC will undertake thematic reviews of firms’ quality review processes, the use of data analytics on audits and firms’ root cause analysis of the findings from internal and external monitoring.

The full Plan and Budget and Levies 2016/17 contain effectiveness indicators that the FRC will use to assess progress against these objectives and additional areas of focus to the ones identified above.  The FRC also identify actions it will take to enhance actuarial regulation and standards and explain how these key activities for 2016/17 will be funded.

The full details of the plan and budget and press release can be obtained from the FRC website.  Our previous story on the draft plan and budget sets out further information on the background behind these areas of focus.

Support of the consistent application of IFRSs through developing a wider range of educational activities is part of the Foundation's part strategic plan for 2016 and beyond. As of May 2016, Mr Tilling will be part of the newly-formed integrated team covering interpretations of standards, implementation, adoption support and educational activities. He was was previously based in Perth, Australia, where he split his time between professional accounting and academia.

Please click for the press release on the IASB website.