The ACCA believes that the limits of a smaller company’s size should be increased to the maximum permitted by EU law for accounting purposes, but that the size limits for audit purposes should remain at the levels currently set by UK law. It comments that "many interested parties, including ACCA, would be cautious about an increase in the audit exemption limit to the same extent as the small company accounting limit. The value often perceived to be added by an external audit indicates that an impact assessment would, at least, be needed."

It also expresses concern over the reduction in notes to the financial statements for smaller companies, commenting:

ACCA does not believe that this is a good idea, as important information may be lost from the financial statements that stakeholders such as creditors and shareholders may want to see. The UK, however, has limited room for manoeuvre given what is in the EU Directive. We agree with the notes that BIS intend to require and understand that the overriding obligation for the accounts to show a true and fair view remains. But this combination is not going to make life easier for small companies. Directors, and in some cases auditors, will have to consider whether the few disclosures mandated by the law will be sufficient for their accounts to show a true and fair view. We think in many cases, more will be needed.

The ACCA supports the extension of small company relaxations to public limited companies  which would otherwise qualify as small if they were private, regarding this as "appropriate for the size and ownership profile of these companies". The response is not in favour of the proposals to permit small companies to prepare only abbreviated accounts, however, noting that it considers "...the stewardship responsibilities of directors to the company’s shareholders to be very important and transparency via the annual report and accounts are an important element in their discharge." It suggests that, as a minimum, shareholder approval should be required.

Click for:

• Press release (link to ACCA website)
• Full comment letter (link to ACCA website)
• Our previous UK Accounting Plus news story on the BIS consultation

Mr Prada commented on the ever growing number of jurisdictions adopting IFRS and explained that for most industry sectors in the world, IFRS is now the predominant basis on which companies' financial statements are prepared. As part of the reason for this success he made out that "investors have a clear bias for the familiar" and that IFRS have by now become the means to provide that familiarity to international investors. Jurisdictions or companies that decide not to apply IFRSs would need to be aware of becoming increasingly isolated and that the "costs of being outside the familiarity of the IFRS system" would rise.

Mr Prada then looked at the large economies that still have not adopted IFRS (China, India, the US, and Japan) and made out encouraging developments in all of them although he admitted that in the case of the US "progress has been slower than anticipated". Among these jurisdictions, he especially noted Japan and the careful and considered approach to the use of IFRS in Japan that has been chosen. He claimed that the option of voluntary adoption of IFRS was being watched carefully by other jurisdictions as it would allow larger, multinational companies to benefit from IFRS without immediately forcing smaller, more domestically focused companies to adopt a new system.

Among the Japanese encouraging developments, Mr Prada also looked at the introduction of Japanese Modified International Standards (JMIS) where an exposure draft has been published in July 2014. He commented:

I have no strong views on JMIS, and it is up to the Japanese authorities to determine what transitional steps to IFRS are required. However, if investor familiarity is the goal then this can only come from the full use of IFRS.

Mr Prada concluded his speech by underlining that the IFRS Foundation and the IASB have evolved into a global accounting standard-setter, willing and able to take on the resulting responsibilities but also willing to always keep and open mind and listen to and learn from the stakeholders.

The full text of Mr Prada's speech is available on the IASB's website.

Mr Mackintosh began by stating that most of Europe and many other parts of the world have already made the transition to IFRS and that “IFRS is a decade-old news story.” He noted the following:

• The European Union’s adoption of IFRS on 1 January 2005, with Australia, New Zealand, Hong Kong and South Africa adopting soon after.
• IFRS becoming the predominant reporting language for most global industry sectors.
• Survey of 138 countries showed that 114 countries require the use of IFRS; while the remaining countries surveyed have shown positive progress towards IFRS.

Next, he commented on the more than 12 year collaboration by the IASB with the FASB to develop converged high quality standards. He mentioned that the convergence project has had several achievements (segment reporting, business combinations, fair value measurement, and revenue recognition) as well as setbacks (financial instruments).

Further, he provided his expectation for the IASB for the next decade. He believes there would be a “period of calm” in the standard-setting process after the IASB completes its leases, insurance, and conceptual framework projects. However, he noted with next year’s agenda consultation, constituents will have a chance to comment on the future path the IASB will take.

Lastly, he goes on to emphasise the need to consistently implement IFRS across all jurisdictions. Several steps the IASB has done to achieve consistent implementation include:

• Public consultation during each phase of standard-setting.
• Co-operation with national and regional accounting standard-setters.
• Emerging Economies Group to gain perspective of countries without deep and liquid capital markets.
• Islamic Finance consultative group to consider the effect of IFRS for Shariah-compliant transactions.
• Expanding the role of the IFRS Interpretation Committee to address divergence in practice.
• A Statement of Protocols with the IOSCO and ESMA to share information on the implementation of IFRS worldwide.
• Education Initiative.

Text of the full speech is available on the IASB's website.

The IIRC notes that the B20 group of businesses indicated in its Infrastructure & Investment Taskforce Policy Summary that it supports a review by the IIRC and IASB in relation to making corporate reporting more conducive to infrastructure and other long-term investment and eliminating or addressing current barriers.  The IIRC is calling on the G20 to echo this support and push for action at a national level to align the principles of corporate reporting to the objectives of economic policy, in particular to the promotion of long-term investment, as part of the conclusions to the November 2014 G20 summit.

The October edition of the IIRC newsletter, which includes this recommendation, can be obtained from the IIRC website.

In its response to the EC questionnaire, the FRC agrees that the objectives of the IAS regulation are still valid and that it has furthered the move towards establishing a set of globally accepted high-quality standards.  It also believes that the IAS regulation has led to a significant increase in the transparency of the consolidated financial statements of EU companies listed on regulated markets and in the comparability of companies' financial statements.  This in turn has significantly increased the effectiveness of capital markets, making it easier and cheaper for companies to access capital and improving protection for investors.

The FRC believes that the current EU endorsement process for IFRSs remains appropriate.  In response to the recommendations of the Maystadt report, the FRC considers that assessment of whether accounting standards adopted endanger the financial stability or hinder the economic development of the EU could be undertaken as part of the existing requirement that IFRS adopted in the EU “are conducive to the European public good” and that accordingly the existing endorsement criteria do not need to be modified.  In addition, the FRC recommends that the assessment of public good should take into account factors such as:

• the benefit to EU companies from access to global capital markets; and
• acknowledgement that the objectives of prudential and capital market regulation can run contrary to one another.

The FRC also strongly believes that the current limitation in the IAS regulation on the EC's freedom to modify the content of IFRSs is appropriate and do not consider that this should be altered.  In its view, to allow the EC more leeway in this area is likely to seriously undermine progress towards high-quality global accounting standards.

The FRC's full response to the consultation can be downloaded from their website.

In particular, the outreach event will focus on the following questions:

• “Is there a need for a special standard for rate-regulated activities?
• Should balances arising out of rate-regulated activities be included in the balance sheet or is note disclosure a better way forward?
• How is the performance of rate-regulated activities best reflected?
• What corrections/adjustments are analysts making to the financial statements of companies with rate-regulated activities?”

Registration for this event is requested by 12 December 2014.

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

As stated in the Terms of Reference, “[a]ll aspects of ASAF and its operations shall be reviewed by the IFRS Foundation two years after the establishment of the group (as from the date of signing the Memorandum of Understanding (MOU)).” The questionnaire is the first step in assessing how the ASAF has performed in relation to its Terms of Reference and Memorandum of Understanding.

The IFRSF expects to publish a feedback statement detailing the findings and actions from the review after the Trustees and IASB have had time to consider the findings. It is expected to be issued mid-2015. Participants are requested to complete the questionnaire by 9 January 2015.

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

In July, the FCA consulted on proposals to remove mandatory quarterly reporting for companies covered by the DTR. The majority of respondents to the consultation were in favour of the FCA's proposals and so the FCA has now implemented this change through the publication of PS14/15.  At the moment the removal of the requirement for IMSs is only effective for issuers of shares admitted to trading on a regulated market where the UK acts as home Member State and the FCA’s DTRs apply.  Other issuers will have to wait until November 2015 when the revised EU transparency directive, which is the enabling legislation for this change, will be fully implemented on a pan-European basis.

At a detailed level, the amendments to the DTR:

• Remove the requirements in DTR 4.3 completely
• Remove DTR 4.4.6R and DTR 6.3.5R(3)(C) which will become obsolete
• Make consequential amendments to other rules in the DTR that refer to IMSs.

The press release and full policy statement can be downloaded from the FCA website.

In the response to the European Commission's questionnaire, ESMA agrees with most respondents that the adoption of IFRSs has made companies' financial statements in the EU significantly more transparent and comparable and was over all beneficial. ESMA states that continuous commitment to the use of IFRS is the most appropriate approach in the context of global markets and a growing use of IFRS around the world.

However, ESMA remains critical of the EFRAG reform and maintains that the responsibility for giving endorsement advice to the European Commission "can only be entrusted to a public body that has the duty to protect the public interest". The Maystadt report had originally recommended that the new EFRAG Board should consist of three pillars with one of them being European public institutions (ESMA, EBA, EIOPA and ECB). However, given that they believe that endorsement advice should entirely rest with public institutions, the European Supervisory Authorities and the ECB have declined full membership and will only be observers on the new Board.

ESMA also disagrees with many respondents in believing that two new endorsement criteria (that any accounting standards adopted should not jeopardise the EU's financial stability and that they must not hinder the EU's economic development) should be added to the IAS Regulation. Again, ESMA argues from a public interest and public good perspective. ESMA also adds that in pre-consultation with national enforcers, some proposed a specific consideration of transparency as part of the endorsement criteria.

Please click to download the full response (link to ESMA website). The endorsement mechanism and criteria are subject of questions 21 and 22.