In December 2013, EFRAG and ICAS published the results of a literature review on the use of information by capital providers. One of the conclusions of the literature review was that not much direct evidence exists on how financial statements are used by major capital providers. Therefore, EFRAG and ICAS have decided to sponsor an empirical study on the use of financial information by professional investors. The study aims to inform the debate on the IASB Conceptual Framework by assessing professional investors' opinions of financial reporting information. For the study, EFRAG and ICAS are looking for users who are either currently working, or have had experience in the recent past, as buy-side analysts, fund managers or, by other means, have had experience with investment decisions.

Please click for more information on the EFRAG website.

Note: On 16 December 2014 EFRAG and ICAS have extended the interview period for the study to the end of February 2015.

In August 2014, the EC initiated a public consultation where it asked interested parties to provide their thoughts on the impact of IFRS in the EU. In particular, the EC looked for views concerning the scope, relevance, and the cost/benefits of the IAS Regulation; the current EU endorsement mechanism and criteria; quality of IFRS financial statements; and enforcement of IFRSs. The IFRSF letter provides its view on those concerns as well as emphasising two key points.

First, IFRS should be considered as a “global language” for accounting and explains that “jurisdictions have made very few modifications to IFRS, and the few that have been made are generally regarded as temporary steps in the jurisdiction’s plans to adopt IFRS. If jurisdictions such as the EU were to make modifications, they would not be adopting IFRS and so would lose the benefits of using the globally-accepted language of IFRS. EU companies would no longer have the benefit of the global financial reporting passport that IFRS provide, including their ability to access international capital markets using their IFRS financial statements, without reconciliation to local standards. Investors would be deprived of comparable accounts and therefore essential information.”

Second, the IFRSF noted that IFRS is critical in achieving the objectives of the new Commission. The letter states that “[g]iven the global nature of capital markets and the need for comparability within the EU market to mirror internationally-accepted best practice, only IFRS can provide those requirements. The transparent financial reporting provided by companies reporting under IFRS helps participants in capital markets to make more efficient and informed resource allocation and other economic decisions, and makes investment more attractive to capital providers. Having a comparable and familiar financial reporting language is, therefore, a vital feature to encourage the investment that is so necessary for the growth that the Commission seeks for the EU."

The response letter is available on the IASB's website.

The MOU commits the following valuation organisations to adopt, or declare that their own standards are in compliance with, International Valuation Standards within the next three years:

• American Society of Appraisers
• Appraisal Institute of Canada
• Asociación Profesional de Sociedades de Valoración  (Spain)
• Australian Property Institute
• Canadian Institute of Chartered Business Valuators
• Chamber of Professional Appraisers - Kazakhstan
• China Appraisal Society
• Expertise Institute for Valuation of Assets of Georgia
• Hong Kong Institute of Surveyors
• Institute of Philippine Real Estate Appraisers
• Instituto Brasileiro Avaliacoes (IBAPE)
• Indonesian Society of Appraisers
• Nigerian Institute of Estate Surveyors and Valuers
• Property Institute of New Zealand
• Republican Chamber of Appraisers Kazakhstan
• Royal Institution of Chartered Surveyors
• Slovene Institute of Auditors
• South African Institute of Valuers
• Thai Valuers Association

The press release can be viewed on the IVSC website.

Overall we support the proposals, although we have some concerns around certain aspects of the consultation. Our key comments are as follows:

• we believe that, since compliance with UK accounting standards is generally accepted as being necessary in order to give a true and fair view, the role of UK accounting standards will be significant under the new regime in guiding directors of small companies as to whether further disclosures may be necessary, in addition to those mandated by law, in order to present true and fair accounts;
• we question the value of the proposal to permit small companies to prepare an abbreviated balance sheet and profit and loss account for shareholders as such accounts will still need to give a true and fair view;
• we strongly support the provision of increased flexibility in the layout of primary statements, particularly to accommodate the application of IFRS layouts and terminology for companies adopting FRS 101;
• we believe that there should be one single definition of a public interest entity which should be applied consistently wherever it is used in UK company law;
• we believe that the audit exemption threshold should be consulted on as part of the implementation of the Audit Directive rather than as a separate consultation, making good on the deregulatory promises made in the Government’s 2011 Plan for Growth;
• we believe that it is essential that the requirements for LLPs are aligned with the requirements for companies with effect from the same date; and
• we recommend that the Government and the Financial Reporting Council work closely together to make the new regime available to companies as soon as possible, including permitting early adoption.

Further comments and full response to all questions raised in the invitation to comment are contained within the full comment letter which can be downloaded below.

Click for:

• Our response to the consultation
• Our previous news story on the consultation

EFRAG welcomes the publication of DP/2014/2 Reporting the Financial Effects of Rate Regulation and supports the IASB's decision to initially examine a generic type of rate regulation called 'defined rate regulation'. However, EFRAG stresses that the DP can only represent a starting point in the discussion:

As the project progresses, we believe the IASB will need to consider in which circumstances an entity's right to recover an agreed amount of revenue and obligations to perform certain activities creates enforceable rights and obligations that should be recognised in financial statements.

EFRAG also believes that the IASB may need to consider whether it should widen the scope of a potential future standard to require disclosures of the effects of rate regulation other than those where assets and liabilities are recognised.

EFRAG generally supports the accounting approach of developing specific IFRS accounting requirements to defer or accelerate the recognition of a combination of costs and revenue but "remains open" to a 'cost deferral approach' should further work of the IASB show that it might produce relevant information.

Comments on the draft comment letter are due by 31 December 2014. It is available on the EFRAG website.

The International Accounting Standards Board (IASB) published 'Annual Improvements to IFRSs 2012–2014 Cycle' in September 2014.

The improvements affect IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits, and IAS 34 Interim Financial Reporting.

EFRAG supports the adoption of these improvements and recommends their endorsement.  EFRAG’s initial assessment is that these improvements meet the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.     

EFRAG’s conclusion is supported by an Effects Study Report which considers the costs and benefits of implementing these improvements. EFRAG’s assessment is that the benefits for preparers and users in implementing these improvements outweigh the costs.

Comments are requested by 24 November 2014. 

Click for (all links to EFRAG website):

• Press release
• Draft endorsement advice and effects study report

The amendments were issued in September 2014 and affect IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits, and IAS 34 Interim Financial Reporting. Endorsement of the amendments is currently expected in the third quarter of 2015.

The endorsement status report, dated 24 October 2014, is available here.

The International Accounting Standards Board (IASB) published 'Equity Method in Separate Financial Statements (Amendments to IAS 27)' in August 2014. This amendment reinstates the equity method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements. This means that an entity can account for investments in subsidiaries, joint ventures and associates in its separate financial statements:

• at cost,
• in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9), or
• using the equity method as described in IAS 28 Investments in Associates and Joint Ventures.

EFRAG supports the adoption of this amendment to IAS 27 and recommends its endorsement.  EFRAG’s initial assessment is that this amendment meets the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.     

EFRAG’s conclusion is supported by an Effects Study Report which considers the costs and benefits of implementing this amendment to IAS 27. EFRAG’s assessment is that the benefits for preparers and users in implementing this amendment outweigh the costs.

Comments are requested by 21 November 2014. 

Click for (all links to EFRAG website):

• Press release
• Draft endorsement advice and effects study report