The project seeks to “engage asset owners, asset managers and policy makers across national and international jurisdictions to harmonise a global understanding of fidiciaty duty which incorporates sustainability”.

The project builds upon the findings of a report published in September 2015 and will focus on three primary objectives:

To encourage governments and regulatory agencies in the eight jurisdictions covered in the 2015 report (Australia, Brazil, Canada, Germany, Japan, South Africa, the UK and US) to clarify the scope of fiduciary duty such that investors must take explicit account of environmental, social and governance issues in their investment practices and proactively engage with companies on these issues.

To extend the original report’s analysis to key Asian markets: China (including Hong Kong), India, Malaysia, Singapore and South Korea. Developing country strategy plans for each of these jurisdictions and implementing country-specific recommendations accordingly.

To develop an international statement on fiduciary duty and sustainable development which would create a cohort of signatories committed to integrating sustainability into their fiduciary duties.

 The press release and more details about the project are available on the UNEP FI website.

The report highlights that when attempting to provide assurance over non-financial information, the objective – “to reduce the risk of a material misstatement of the subject matter to a low level” – is the same as that when assessing financial information.  However, there are challenges in establishing materiality in the context of assessing a non-financial report.

The main focus of the report is around how a practitioner decides what is material in order to be able to determine the level and extent of testing procedures.  The report identifies a number of steps that the practitioner could follow:

• Gain an understanding of the non-financial report content.  This would include the management process used to develop and define the report content and evaluating and understanding controls that management might have in place around the preparation of the information.
• Identify what within the non-financial information requires assuring and establish suitable measures to support tests used to evaluate content. 
• Identify claims and significant claims within the non-financial information.  The practitioner will need to use their understanding of the non-financial information to determine the significant claims investors will rely most upon. 
• Establish key assertions for each significant claim.  The report notes that for quantitative claims assertions will be existence, accuracy, ownership and presentation – very similar to those when assessing financial information.  For qualitative claims, the report identifies the assertions will typically be completeness, occurrence and accuracy and presentation and understandability.
• For each significant claim of the subject matter being reported on, identify a materiality threshold (if the subject matter is quantitative) or materiality factors (if the subject matter is qualitative). 

The report highlights that when setting a materiality threshold factors such as the intended needs of the user are important. 

The report also identifies a number of ‘materiality factors’ that should be considered when determining whether there has been a material misstatement of qualitative information.  These would include factors such as: 

• Has there been an omission of facts? 
• Has there been a misstatement of facts? 
• Is there a misrepresentation of trends? 
• Are claims unsubstantiated?  

For each of these factors the report highlights that “the practitioner needs to obtain sufficient evidence so as to be able to reach a reasonable opinion as to whether the user of the report might have been materially misled”.

The press release and full report are available on the ICAEW website.    

The IASB released its Exposure Draft in October 2015, with the objective of explaining and illustrating the concept of materiality and at helping preparers of financial statements in applying the concept. It covers three main areas:

• characteristics of materiality;
• presentation and disclosure in the financial statements; and
• omissions and misstatements.

It also contains a short section on applying materiality when considering the recognition and measurement requirements of IFRSs.

ESMA “highly welcomes” the guidance.  It agrees with the IASB that the guidance is provided in a non-mandatory form as “in certain jurisdictions mandatory guidance on materiality could conflict with national legal requirements”.  However, in order to emphasise the nature of the guidance, ESMA “considers that the guidance should take the form of Implementation Guidance to IAS 1 Presentation of Financial Statements” rather than as a Practice Statement.

Regarding the assessment of determining whether information is material or immaterial, ESMA supports the conclusion that information can be material when considered together with other information even if not judged to be material in its own right.  ESMA also welcomes the guidance on both quantitative and qualitative assessments of materiality.

ESMA considers that the examples in the draft Practice Statement “are helpful to make the guidance more practical and useful”.  It also considers that “the draft Practice Statement is only a first step to improve the understanding and application of the principle of materiality in the IFRS financial statements” and welcomes further work by the IASB in this area within the Principles of Disclosure project.

The full comment letter is available on the ESMA website.

The European Union published the EU Accounting Directive 2013/34/EU (‘the Directive’) on 26 June 2013. The Directive aimed to simplify the accounting requirements for small companies and improves the clarity and comparability of companies' financial statements within the Union.

Following a consultation by BIS in August 2014 and government response in January 2015, regulations were made (the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015) which implemented the EU Accounting Directive for limited companies.  Changes were also made by the Financial Reporting Council (FRC) to UK accounting standards in July 2015 to implement those changes.  At that time, the Government indicated that it would be consulting separately for LLPs and qualifying partnerships.

The LLPs and qualifying partnerships consultation proposed to introduce similar changes to the regulatory framework for LLPs.

There was broad support for the proposals with “almost all” of respondents encouraging the government to introduce the revised framework as soon as possible.  As a result of the responses to the consultation, the government will introduce the following key changes for LLPs and qualifying partnerships:

• Increase thresholds used to determine the size of LLPs. The thresholds for determining what is a small LLP will, as for companies, be raised to the top end of the range permitted by the Directive. An LLP will be small if it meets at least two of: total assets <£5.1m, turnover <£10.2m, <50 employees.  An LLP will be medium-sized if it meets at least two of: total assets<£18m, turnover <£36m, <250 employees. 
• Limit the number of mandatory notes required of small LLPs. 
• Introduce a micro-entity regime for LLPs and qualifying partnerships. 
• Provide LLPs with the opportunity to use alternative layouts when preparing their profit and loss account and balance sheet, provided that the information given is at least equivalent to the information otherwise required by the standard formats. 
• Allowing small LLPs to prepare an abridged balance sheet and profit and loss account if approved by all members of an LLP. 
• Amend the approach in relation to the writing off of goodwill and development costs. In the rare situations where the useful economic life cannot be reliably estimated, these should be amortised over a maximum of ten years (the top end of the range permitted by the Directive).  Reversals of goodwill impairment will be prohibited. 
• Permit the use of the “equity method” in individual LLP statements. 

In addition to aligning the accounting requirements between companies and LLPs, BIS will also align the auditing provisions as well.

The new framework will apply for financial years beginning on or after 1 January 2016.  However, early adoption is permitted for LLPs and qualifying partnerships and groups who still have not agreed and filed their 2015 accounts prior to the regulations coming into force in 2016. 

*Update 11 March 2016 - Draft Regulations have been laid before parliament.  Click here for link to the draft regulations*

Click for:

• Full government response to the consultation (link to BIS website)
• Our previous news item on the original consultation

On major projects, the only change the Board notes is that the Conceptual Framework project is currently in the analysis stage (previously in public consultation). The disclosure initiative — principles of disclosure project is currently in the drafting discussion paper stage (previously in analysis).

Updates regarding the im­ple­men­ta­tion projects are:

• Annual improvements 2014-2016 — currently in analysis stage (previously drafting exposure draft stage).

• Annual improvements 2015-2017 — exposure draft is no longer expected after six month, instead the Board will decide the direction of the project within the next six months.

• Applying IFRS 9 with IFRS 4 — currently in the analysis stage and the direction of the project will be determined within 3 months.

• Clarifications to IFRS 8 arising from the post-implementation review — exposure draft issuance date is narrowed to May 2016.

• Clarifications of classification and measurement of share-based payment transactions — Standard issuance date is narrowed to May 2016.

• Clarifications to IFRS 15: Issues emerging from TRG discussions — Standard issuance date is narrowed to March/April 2016.

• Definition of a business — exposure draft issuance date is narrowed to May 2016.

• Disclosure initiative — amendments to IAS 7 is no longer in the work plan since standard has been issued on 29 January 2016.

• Remeasurement of previously held interests — obtaining control or joint control in a joint operation that constitutes a business — exposure draft is narrowed to May 2016.

The revised IASB work plan is available on the IASB's website.

Topics discussed in the video include:

• Background information during IFRS 9 developed.
• Effects IFRS 9 will have on the accounting for loan losses.
• Information on work done since IFRS 9 was completed in 2014.
• Implementation considerations for companies.
• IFRS 9’s interaction with prudential regulations.
• Connection between the work on EDTF and IFRS 9.
• Next steps

For more information, see the Debrief video on the IASB’s website.

A summary of the agenda for the meeting is set out below:

Agenda papers for the meeting are available on the IASB's website.

Ms Liesel Knorr follows Ms Tricia O’Malley, past chairman of the Accounting Standards Board of Canada (AcSB) and IASB member from 2001 to 2007. The IFASS (formerly known as National Standard-setters, NSS) is a grouping of national accounting standard-setters from around the world, plus other organisations that have a close involvement in financial reporting issues.

Further information can be obtained in the related press release on the ASCG website.

Please click through for direct access to the notes:

Tuesday, 16 February 2016

• Insurance contracts
• Goodwill and impairment

Wednesday, 17 February 2016

• IFRS implementation issues
• Financial instruments with characteristics of equity

You can also access the pre­lim­i­nary and un­of­fi­cial notes taken by Deloitte observers for the entire meeting.

ESMA supports the proposed amendments that would affect three IFRSs: IFRS 1, IFRS 12, IAS 28.

The full comment letter is available on the ESMA website.