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EFRAG issues feedback statement on IASB's Exposure Draft ED/2014/2

10 Oct, 2014

The European Financial Reporting Advisory Group (EFRAG) has published a feedback statement summarising the main comments received from constituents invited to respond to their draft comment letter in relation to the International Accounting Standards Board’s (IASB’s) revised Exposure Draft ED/2014/2 ‘Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 'Consolidated Financial Statements' and IAS 28 'Investments in Associates and Joint Ventures').’

The IASB proposed in ED/2014/2 Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28) amendments aimed at clarifying certain aspects of IFRS 10 and IAS 28.

EFRAG published its draft comment letter in July 2014 and the final comment letter was published earlier in October 2014.  

The feedback statement (link to EFRAG website) provides an analysis of the EFRAG tentative position expressed in the draft comment letter, describes the comments received from constituents and then highlight how these comments were considered by the EFRAG Technical Group (EFRAG TEG) in reaching their final position on the IASB ED set out in their final comment letter to the International Accounting Standards Board (IASB). 

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FEE (Federation of European Accountants - Fédération des Experts-comptables Européens) (lt green) Image
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FEE 'cannot envisage' any alternative to IFRSs

10 Oct, 2014

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has responded to the European Commission's questionnaire seeking respondents' views on the impact of International Financial Reporting Standards (IFRS) in the European Union. FEE believes the use of IFRSs offers crucial benefits for the EU in remaining competitive, attracting foreign investment and restoring confidence in European financial markets. FEE even states that the scope of the IAS Regulation should be expanded.

In the response to the questionnaire, FEE states that the adoption of IFRSs has made companies' financial statements in the EU "significantly more transparent" due to increased disclosure, reduced divergence and increased comparability. As a consequence of increased transparency, comparability and reliability, FEE also sees significantly increased investor protection.

Given all these benefits, FEE believes that the scope of the IAS Regulation should be expanded by making IFRS compulsory for the individual accounts of listed companies on regulated markets and by allowing any company to opt for reporting under IFRS.

FEE also warns that the endorsement criteria for the EU adoption of IFRSs should remain as they are and that moving towards flexible endorsement of IFRSs would in fact be detrimental to Europe: "FEE fundamentally disagrees with 'opening a door' towards more flexibility for the EU in endorsing IFRSs as this would not bring flexibility, but would defeat the very purpose of having global standards."

FEE also warns that any implementation guidance on IFRSs should only come from the IASB and not from the EU or the national level.

Please click to download the full response (link to FEE website).

Note: On 30 October 2014, FEE supplemented its response to the questionnaire with a comment letter stressing once more and elaborating on FEE's views in relation to the endorsement and the enforcement of IFRSs in the EU. The comment letter can be accessed on the FEE website.

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Statistics show the proportion of women on boards is continuing to increase

09 Oct, 2014

Figures published today show that the proportion of women on UK boards continues to increase. However, further appointments are still required in order to achieve 25 per-cent female representation by 2015 as set by Lord Davies in his report in February 2011.

Statistics released by the Department for Business, Innovation and Skills (BIS) highlight that women made up 22.8 per-cent of FTSE 100 directors (as of 2 October 2014), up from 20.7 per-cent as of March 2014 and 12.5 per-cent as of February 2011 when Lord Davies reported.  The figures also highlight that 31.8 per-cent of all board appointments in the last six months have been women, down from 35.5 per-cent in the previous six months. To achieve the target set by Lord Davies, 24 more board seats on FTSE 100 companies are required to be held by women.  

FTSE 250 companies are also reporting an increase with 17.4 per-cent of women directors on their boards, up from 15.6 per-cent as of March 2014 and 7.8 per-cent as of February 2011.  24.3 per-cent of all board appointments to FTSE 250 companies in the last six months have been women, down from 33.3 per-cent in the previous six months. 

There are now no all-male boards in the FTSE 100, while the number of all-male boards for FTSE 250 companies has decreased from 48 in March 2014 to 28 in October 2014. 

The government acknowledges that the 25 per-cent target is "in sight" but cautions that "businesses must keep up the momentum" in order to reach that target by 2015.

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IFAC provides recommendations to G-20

08 Oct, 2014

The International Federation of Accountants (IFAC) has issued a letter to the G-20 outlining eight recommendations for the G-20 to consider at the G-20 Leader’s Summit on 15-16 November 2014. The recommendations focus on supporting economic growth and a resilient economy as well as addressing financial regulatory reform and the international taxation system. They include the adoption and implementation of IFRSs.

The IFAC classified each recommendation within one of three categories: (1) global consistency for sound financial regulation, (2) financial management, reporting, transparency, and accountability by governments, and (3) effective taxation systems.

 

Global consistency for sound financial regulation

In this category, the IFAC provides recommendations that will assist in providing a consistent global framework when addressing issues. These recommendations to the G-20 include:

  • Continue its momentum for regulatory reform and convergence.
  • Governments and regulators adhere to principles of high-quality regulation.
  • Strengthening international regulatory organizations’ resourcing and governance arrangements, including a clarification of expectations and responsibilities of standard setters.
  • Adoption and implementation of IFRSs, ISAs, IPSASs and the Code of Ethics for Professional Accountants’ requirements for auditor independence.

Financial management, reporting, transparency, and accountability by governments

In this category, the IFAC provides recommendations that may enhance a government and/or public sector’s financial management practices. These recommendations to the G-20 include:

  • Adoption of accrual-based accounting by governments and public sector institutions.
  • Increase transparency and accountability in public sector financial management to protect the public and investors in government bonds.
  • Require the FSB to encompass public sector arrangements; create a working group within the FSB that examines public sector financial reporting, transparency (including deficit spending), and accountability; direct the FSB to include IPSASs.

Effective taxation system

In this category, the IFAC recommends an enhancement to the taxation system that applies to all organizations, regardless of size. In addition, the G-20 should support the OECD in its work concerning the transparency and integrity of the taxation system and reporting.

For more information, see the letter to the G-20 on the IFAC’s website.

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Agenda for October 2014 CMAC meeting

08 Oct, 2014

Representatives from the International Accounting Standards Board (IASB) will meet with the Capital Markets Advisory Council (CMAC) in London on Thursday, 16 October 2014. The agenda for meeting has been released, and includes discussions on rate regulation, fair value measurement, the post-implementation review of IFRS 8, business combinations, the disclosure initiative, and the involvement of investors on research projects.

The CMAC, formerly called the Analyst Representative Group (ARG), consists of a number of professional financial analysts who meet at least three times a year with members of the IASB to provide the views of professional investors on financial reporting issues.

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

Thursday, 16 October 2014 (08:45-17:00)

  • Welcome
  • Breakout sessions:
    • Rate regulation
    • Proposals for clarifying the fair value measurement of quoted investments in subsidiaries, joint ventures and associates
  • Post-implementation review - IFRS 8 Operating segments
  • Business combinations under common control
  • Research projects and investor involvement
  • Disclosure initiative:
    • Cash flow statements and related disclosures
    • Non IFRS/Non GAAP information in financial statements
  • Closed session

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

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FRC publishes revised operating procedures for corporate reporting reviews

07 Oct, 2014

The Financial Reporting Council (FRC) has today published revised operating procedures for the Conduct Committee when it is performing corporate reporting reviews. The revised operating procedures follow a consultation published in April 2014 and are effective immediately.

Under the Companies Act 2006 ("the Act"), the Conduct Committee of the FRC reviews the reports and accounts of public and large private companies to determine whether they comply with the Act and other reporting requirements. Where it appears that those requirements have not been complied with, the Conduct Committee investigates the position and determines the action to be taken, in accordance with their operating procedures, to address any non-compliance.  

The key areas that have been revised include:

  • Formally reflecting the concept of a ‘Committee Reference’.  Currently, where a Conduct Committee enquiry gives rise to a significant correction or improvement which it considers investors and preparers ought to be aware of but where there is less cause to inform the market at large, it may ask the company to refer to interaction with the Conduct Committee in the annual report and accounts where a change as a result of the investigation is made.  The operating procedures now explicitly refer to Committee References and include an explanation when a committee reference may be requested or a press notice issued by the FRC’s Conduct Committee in respect of an individual case.  The operating procedures also now indicate that the Conduct Committee will expect to be given the opportunity to comment on the disclosure that the company makes.
  • An amendment to the operating procedures to allow the names of those companies that have published Committee References and a brief description of the issue to be included within the Corporate Reporting Review Annual Report.
  • An explanation within the operating procedures that the Conduct Committee’s letter to a company may include references to aspects of reporting other than compliance with mandatory requirements, to encourage improvements to the quality of its future reporting.
  • Amending the operating procedures to clarify how the Conduct Committee manages complaints, including how anonymous complaints are handled and providing a link to the FRC’s reference and advice to whistle-blowers. 

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Public Sector Integrated Reporting conference to be held

06 Oct, 2014

The World Bank is convening a conference bringing together the world's leading thinkers on public sector Integrated Reporting <IR>.

The aim of the conference is to increase awareness of how <IR> can support integrated thinking in the public sector and how <IR> can improve the performance of government agencies and entities.

Interested participants should email info@theiirc.org to register by mid-October.

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Papers presented at the IASB Research Forum

03 Oct, 2014

The first IASB Research Forum was held on 2 October 2014 in Oxford. The meeting offered two panel discussions and saw the presentation of six academic papers.

Topics focused on areas in financial reporting that are either already on the IASB's research agenda for consideration, that have been brought to the IASB's attention by stakeholders as areas that the IASB should consider addressing or as research that focuses on issues related to the implementation of IFRS. The papers presented were (all links below are to the IASB website):

Please click for more research and education information on our dedicated website.

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Sir Winfried Bischoff speaks at the NAPF Stewardship Conference

03 Oct, 2014

Sir Winfried Bischoff, Chairman of the Financial Reporting Council (FRC), delivered the keynote address at the NAPF Stewardship Conference on 16 September 2014.

Sir Winfried spoke about the importance of fostering investment to the FRC's overall mission.  He talked about the objectives and application of the UK Stewardship Code, first issued by the FRC in 2010, looking at the impact it has had from the point of view of both companies and investors.  He also covered the European Commission’s proposed revisions to the Shareholder Rights Directive, which could mean that the Stewardship Code moves from be a voluntary code of best practice to a legal requirement for managers and owners.

Following on from this he discussed the imminent changes to the UK Corporate Governance Code, which were finalised on 17 September 2014.  These changes include the FRC's final response to the recommendations of the Sharman Inquiry - increased responsibilities for boards in relation to risk management and internal control and the requirement for a new viability assessment in the annual report.

The full text of the speech can be obtained from the FRC's website.

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FRC publishes transcript of its 2014 Annual Open Meeting

02 Oct, 2014

The Financial Reporting Council (FRC) has published the transcript and proceedings of its Annual Open Meeting, held on Thursday 17 September 2014. The meeting began with an opening address by Chairman Sir Winfried Bischoff and a report by the Chief Executive Stephen Haddrill on the key activities of the FRC, followed by a question and answer session.

In his opening speech Sir Winfried Bischoff paid tribute to his predecessor, Baroness Hogg, and noted the many activities of the FRC since he became Chairman. These included:

He also noted that, looking forward, attention will be focussed on the need to expand the work of the Conduct Committee in the light of EU and Competition Commission developments.  Major projects on the quality of reporting by smaller and AIM listed companies and Clear and Concise reporting will continue, and the results of the thematic review on the audits of banks and financial institutions will be issued later in 2014.

Stephen Haddrill then discussed the work of the FRC during the past year. Main activities included:

  • promoting high quality corporate governance and effective investor stewardship by having investors that were willing and able to engage with companies was essential to the effective operation of the comply or explain principle on which the Code was based;
  • setting standards for accounting, audit and actuarial information;
  • monitoring the quality of audit reports and auditing - the FRC is a world leader in its approach to publishing information about the firms it monitors;
  • overseeing the accountancy and actuarial professions, including the provision of a disciplinary scheme; and
  • engaging with EU and international organisations, including liaising with the international Boards for accounting standards and auditing standards, the European Commission and European supervisory authorities and with other European Member States.

He also discussed the significant changes to the Code as a result of the revisions just published, corporate reporting developments during the year (including the introduction of the new UK GAAP regime and simplified requirements for micro-entities) and the FRC's contribution to developments around audit choice and auditor reporting.

He highlighted the importance of the FRC's international role, ensuring that the views of the UK and its capital markets were understood both in Brussels and in Washington. In relation to this he particularly highlighted the FRC's relationship with the International Accounting Standards Board (IASB).

The full transcript can be downloaded from the FRC website.

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