The 'IAS Regulation' (Regulation 1606/2002) (link to EUR-Lex website) requires EU companies with securities admitted to trading on a regulated market at their year-end to prepare their consolidated financial statements in accordance with IFRSs as adopted by the EU. The IAS Regulation also gives member states an option to permit or require the use of IFRSs as adopted in the EU in other cases such as within individual financial statements of listed companies and the consolidated and individual financial statements of unlisted companies.

The EC is currently evaluating whether the initial objectives of the IAS Regulation are still relevant and to identify areas for improvement in the functioning of the IAS Regulation, if needed. This review is required to be completed by 31 December 2014 by Article 9.2 of Regulation 258/2014.

In June 2014, the EC announced the membership of an informal 'Expert Group on the evaluation of the IAS Regulation' that is intended to advise and assist the EC in conducting the retrospective evaluation of the IAS Regulation. The public consultation will contribute to part of the EC's evaluation process.

The evaluation of the IAS Regulation is also intended to integrate the recommendations of the special advisor Mr. Maystadt on how the EU's contribution to International Financial Reporting Standards can be reinforced and how the governance of the European bodies involved in developing these standards can be improved. The evaluation is designed to complement Mr. Maystadt's recommendations by providing factual data about the IFRS experience in Europe so far.

The public consultation seeks views from "all citizens and organisations" but especially "capital market participants and companies preparing financial statements or using them for investment purposes (whether or not they use IFRS)". Respondents are asked to complete a questionnaire giving their views on aspects such as:

• The continued relevance of the initial objectives of the IAS Regulation;
• The scope of the IAS Regulation;
• Costs and benefits of the IAS Regulation;
• The current EU endorsement mechanism and criteria;
• The quality of IFRS financial statements; and
• Enforcement of IFRSs.

The press release and the full consultation are available on the European Commission website. 

On 28 October 2014, the European Commission announced that the deadline for responding to this consultation has been extended to 7 November 2014.  Please see the updated information on the EC website.

This report reveals systematic differences in how large and complex banks in 16 countries disclose fair values of loans and write off bad or “impaired” debt across countries. The report suggests that enhancing disclosures is necessary for comparing bank balance sheets. The study also provides a breakdown of credit default swap spreads which reflects bank-specific risks from a capital markets perspective.

The report is available for download on the CFA Institute website. Part 1 of the CFA Institute's study, which discussed the assessment of key factors influencing price-to-book ratios, was published in July 2014.

The Charity Commission identified 1,348 charities whose accounts reported a net current liability position and then randomly selected 98 of those for a more detailed follow up.  

The review identified that of the 98 accounts reviewed, 42 charities did not discuss the net current liabilities issue in the Trustees’ Annual Report.  The charity commission comments that these charities “missed the opportunity to explain their funding model, how the risk was being managed and how they planned to continue to operate”.

The Charity Commission has used the results of the review to remind trustees of charities with net current liabilities that “they should have a good understanding of their charity’s activities and its financial position, so that the financial risks can be identified and managed”.  It further comments that “trustees should use their Trustees’ Annual Report and accounts as an opportunity to reassure their funders, supporters and beneficiaries that they are actively managing the situation” and also reminds trustees that “communicating the financial position of a charity is a key requirement of the SORP”.

The press release and full report can be obtained from the Charity Commission website.

The proposals are contained in IPSASB Exposure Draft 55 Improvements to IPSASs 2014 and would see amendments made to four IPSASs:

• IPSAS 1, Presentation of Financial Statements - clarification of comparative information requirements
• IPSAS 17, Property, Plant and Equipment - classification of servicing equipment, clarification of the revaluation methodology, acceptable methods of depreciating assets
• IPSAS 28, Financial Instruments: Presentation - tax effects of distributions to holders of equity instruments
• IPSAS 31, Intangible Assets - clarification of the revaluation methodology, clarification of acceptable methods of amortising assets.

The exposure draft contains an appendix which outlines all of the items the IPSASB considered including in the document, and the rationale as to why changes equivalent to those made by the IASB in recent narrow scope amendment projects have not been proposed by the IPSASB. Reasons include where:

• IASB amendments relate to IFRSs without an equivalent IPSAS, e.g. first-time adoption, business combinations , share-based payments and interim financial reporting (in some cases, the IPSASB has projects underway in these topic areas)
• the existing IPSAS is not fully converged with IFRSs, e.g. borrowing costs, related parties, employee benefits, segment reporting, financial instruments
• minor amendments are not considered relevant.

The exposure draft does not indicate a proposed effective date for the amendments if they are finalised. The comment period on the exposure draft closes on 30 September 2014. Click for access to the exposure draft (link to the IFAC website).

The topics discussed were as follows (click through to access detailed Deloitte observer notes for each topic):

TUESDAY, 15 JULY 2014 (10:00-17:35)

Items for continuing consideration

• IFRS 11 – Analysis of implementation issues
• IAS 12 – Recognition of current income tax on uncertain tax positions
• IAS 16 – Core inventories
• IAS 19 – Remeasurement at a plan amendment or curtailment
• IFRIC 14 – Availability of refunds from a defined benefit plan managed by an independent trustee

Finalisation of tentative agenda decisions

• IAS 1 – Going concern disclosure
• IAS 39 – Classification of a hybrid financial instrument by the holder
• IAS 34 – Condensed statement of cash flows
• IFRS 2 – Price difference between the institutional offer price and the retail offer price in an initial public offering
• IAS 12 – Recognition of deferred tax for a single asset in a corporate wrapper

WEDNESDAY, 16 JULY 2014 (9:00-10:15)

New items

• IFRS 12 – Disclosure of summarised financial information about material joint ventures and associates
• IAS 16 – Accounting for proceeds and cost of testing on fixed assets
• IAS 39 – Holder's accounting for the exchange of equity instruments
• IAS 21 – Foreign exchange restrictions and hyperinflation

The FRC issued a call for comments in June 2014 with the intention of using such comments received to assist it in developing its own response to the IAASB  and to assist it in developing proposals for the adoption into the UK equivalent ISAs (UK and Ireland) when the changes to the ISAs are finalised.

The IAASB ED, which follows an earlier discussion paper, proposes changes to various International Standards on Auditing (ISAs) to better deal with disclosures in financial statement audits. The ED seeks to achieve an appropriate focus by auditors on disclosures and encourage earlier auditor attention on them during the audit process, including disclosures where the information is not derived from the accounting system.

We agree with the need for the IAASB’s project, given the increasing relevance of disclosures to users of financial statements, and indicate our broad support for the IAASB’s proposals. The IAASB is proposing only minimal changes to the requirements of the standards, but extensive additions to the application material. 

We note the IAASB’s plans to change the assertions underlying the audit, which, whilst only in the application material, are fundamental to many firms’ methodologies. We note that whilst integrating “and related disclosures” into the underlying assertions relating to valuation, existence, completeness etc. will make auditors think in a joined up way, there is possibility that this might deemphasise the importance of disclosures which had previously had their own assertions. Linked to this proposal, the IAASB also needs to consider how these integrated assertions will cover disclosures that are not tied to specific balances, classes of transactions and events.

The application material offers auditors the chance to use different assertions as long as they can be shown to cover the same issues.  We suggest that the IAASB’s proposed Staff Publication could usefully indicate that where firms use this as a way of continuing to use the old assertions they will nevertheless need to be able to demonstrate a mapping to the new ones, including any necessary supplementation to policies and procedures to comply with the other changes in the application material.

The IAASB is proposing to change “adequate disclosures” to “appropriate disclosures” throughout the ISAs. This is welcome, because it recognises that the test of good disclosure should not just be “adequacy”; in some circumstances more disclosure can obscure an issue and be inappropriate. We ask that the IAASB co-ordinate finalisation of this project with the IASB’s ED/2014/1 Disclosure Initiative (Proposed amendments to IAS 1) which covers similar ground for preparers of financial statements.

Further comments and full response to all questions raised in the invitation to comment are contained within the full comment letter.

The CMAC is a group of professional financial analysts who meet three times a year with  members of the IASB to provide the views of professional investors on financial reporting issues.

Please click for more information about the CMAC and the call for members on the IASB's website.

On 31 March 2014, the IPSASB issued its Strategy Consultation, which proposes its work program for 2015-2019 and strategic objectives. We support the strategic objective of the IPSASB to improve transparency in financial reporting by the public sector through increasing adoption of accrual-based IPSASs and continuing to develop high-quality financial reporting standards. We suggest that the IPSASB's focus should be on the development of IPSASs and allocate a limited amount of resources towards related activities since those activities can be carried out by governments, multilateral organisations and through the IFAC’s Transparency Now campaign.

We also recommend the review of the IPSASB’s current standard setting due process to ensure it is sufficiently robust and met the current best practices. Further, we support the approach of basing IPSASs on IFRSs when determining potential future projects and that convergence with IFRSs should be the normative action.

The full comment letter can be downloaded here.