The Act consolidates various enactments relating to co-operative societies, community benefit societies and other societies registered under the Industrial and Provident Societies Act 1965, with certain amendments.

The Institute of Chartered Accountants in England and Wales (ICAEW) has published a summary of the Act’s impact on annual reports, financial statements and audit reports on or after that date, irrespective of the financial year to which they relate.

Please click for:

• ICAEW summary (link to ICAEW website).
• Access to the 2014 Act (link to Regulations).

The working group was formed as a result of the IASB's 2011 agenda consultation and held an initial meeting in Kuala Lumpur in July 2013. During the meeting, the group identified four areas that it wants to address:

• The application of IFRS 9's classification and measurement principles;
• the application of the IASB's proposed lease standard to Ijarah;
• whether restricted and unrestricted investment accounts are to be presented on- or off-balance sheet; and
• profit equalisation reserves (PER) because of significant differences in practice.

The upcoming discussion in Kuala Lumpur will address the first of these points and will be based on a staff paper made recently available on the IASB's website. The paper identifies three main issues that need to be considered:

1. Which IFRS applies to the accounting of Islamic financial instruments? Are these contracts with customers that fall within the scope of IFRS 15 Revenue from Contracts with Customers?
2. Do some of the instruments common in Islamic finance meet the characteristics-of-the-instrument test in IFRS 9 Financial Instruments?
3. How should the revenue from Islamic finance instruments be described and measured?

Please click for access to the full staff paper offering background and considerations on the three issues on the IASB's website.

The proposed amendments clarify that entities reporting under FRS 102 should measure their obligations using the projected unit credit method and should not recognise additional liabilities to reflect funding valuations or agreements to fund deficits. Entities would therefore not need to recognise additional liabilities for a schedule of contributions, even if such an agreement would otherwise be considered onerous. This contrasts with the position for companies reporting under IFRSs, which may have to recognise an additional liability for such obligations in some circumstances.

The draft amendments also propose to clarify that remeasurements recognised in other comprehensive income include movements in irrecoverable surpluses, i.e. movements in those scheme surpluses that are not recognised as assets.

Please click for:

• Press release (link to FRC website)
• Financial Reporting Exposure Draft 55: 'Draft Amendments to FRS 102 – Pension Obligations' (link to FRC website)

The topics discussed at the meeting included:

• Conceptual Framework — The CMAC and GPF discussed (1) the distinction between liabilities and equity, and (2) the distinction between profit or loss and other comprehensive income.
• Disclosure Initiative — CMAC and GPF members provided input on debt reconciliation and principles of disclosure projects.
• Leases— GPF and CMAC members discussed three areas of lessee disclosures:
  1. maturity analysis of the contractual lease payments included in lease liabilities;
  2. reconciliations of the opening and closing balances of right-of-use assets and lease liabilities and alternative quantitative disclosures; and
  3. qualitative disclosures.
• Post-implementation Review of IFRS 3 — The IASB staff presented an overview of the status of project and solicited input from CMAC and GPF members on some of the more significant issues included in the Request for Information.

The next CMAC meeting is scheduled for 16 October 2014.

For more information, see the meeting page on the IASB's website.

In November the government expressed their support for the removal of mandatory quarterly reporting requirements which were one of the recommendations of Professor Kay in his review of the UK Equity market in 2012 (the “Kay Review”) (link to BIS website). 

The removal of mandatory quarterly reporting has been agreed at a European Union level as part of the amendments to the Transparency Directive and must be transposed into UK law by November 2015.  However, as part of the government’s autumn statement, they announced that they would bring forward this change in advance of the November 2015 deadline and adopted enabling secondary legislation in June 2014 allowing the FCA to implement this change.  In July 2014, the FCA issued a consultation on these proposals.

We supported the proposals of the Kay Review to promote long-term decision making, which called for this change. As the amendment to European law has now been transposed into UK law which now permits removal of this requirement, our comments are limited to asking the FCA to confirm removal as soon as they can in order that companies can update markets with their planned timetable for announcements.

Click for the full comment letter.

Background

The proposals in ED/2012/1 Annual Improvements to IFRSs: 2010-2012 Cycle included proposals to amend IAS 12 Income Taxes to clarify when a deferred tax asset should be recognised for unrealised losses. In response to constituent feedback on the proposals, the IASB decided that the accounting for deferred tax assets for unrealised losses on debt instruments should be clarified by a separate narrow-scope project to amend IAS 12.

Suggested changes

Based on the IFRS Interpretation Committee's identification of diversity in practice and the different views taken, the IASB proposes in ED/2014/3 Recognition of Deferred Tax Assets for Unrealised Losses (Proposed amendments to IAS 12) amendments aimed at clarifying the following aspects:

• Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use.
• The carrying amount of an asset does not limit the estimation of probable future taxable profits.
• Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.
• An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.

Transition requirements and effective date

The ED proposes limited retrospective application of the amendments for entities already applying IFRS. However, full retrospective application is proposed for first-time adopters of IFRS.

The ED does not contain a proposed effective date. The IASB will consider this point based on the comments that it receives.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• Our IAS Plus project page on IAS 12 — Recognition of deferred tax assets for unrealised losses
• Deloitte's Need to Know newsletter summarising the amendments

The Taylor & Francis research papers are sourced from Accounting and Business Research, Accounting Education, Accounting in Europe, China Journal of Accounting Studies, and European Accounting Review. Among the 25 articles are contributions on "A Multi-Issue/Multi-Period Analysis of the Geographic Diversity of IASB Comment Letter Participation", "Intended and Unintended Consequences of Mandatory IFRS Adoption: A Review of Extant Evidence and Suggestions for Future Research", and "The continued survival of international differences under IFRS". Access to all research papers is available here (link to Taylor & Francis Online).

The papers made freely available by SAGE include articles, editorials and book reviews sourced from Accounting History and are devoted to accounting topics from 800 AD to the financial crisis. Access to all research papers is available here (link to SAGE publishers online). Please note that free access to these papers expires on 31 August 2014.

The new EFRAG governance structure to which the new EFRAG Board belongs will become effective on 31 October 2014. According to the revised EFRAG Internal Rules, the EFRAG Board is responsible for all positions of EFRAG, after having considered the technical advice provided by EFRAG TEG and reflecting the results of EFRAG's due process and must ensure that EFRAG has an open and transparent due process including a public consultation process with European constituents on draft EFRAG positions such as discussion papers, draft comment letters, draft consultation documents and draft endorsement advices.

Further information is available in the related EFRAG press release and in more detailed form in the full text of the call for applications (link to website of the EU Commission).

The exposure draft, Proposed Changes to Certain Provisions of the Code Addressing the Long Association of Personnel with an Audit or Assurance Client, proposes to amend the Code in a number of ways, including:

• Providing more guidance regarding the threats that may be created by long association of audit personnel with audit clients
• Increasing the mandatory "cooling off" periods for rotated audit engagement partners from two to five years on audits of public interest entities (all other key audit partners would continue to be subject to a two year cooling off period)
• Tighter restrictions on the type of activities that can be undertaken by former key audit partners during the cooling off period, whilst clarifying that the cooling off period does not prevent an individual from assuming a leadership role in the firm
• Explicitly requiring consideration of potential threats created by the long association of all members of the audit team on all audit engagements
• Requiring concurrence of those charged with governance when certain exceptions to the rotation requirements are applied.

In developing the proposals, the IESBA considered whether the existing seven year "time on" period for key audit partners before rotation is required should be reduced to five years or some other shorter period. After an analysis of existing time on periods in various jurisdictions and other factors, the IESBA concluded that a seven year time on period "seems to provide the right balance between addressing the familiarity and self-interest threats to independence created by long association and the need to maintain relevant knowledge and experience to support audit quality".

The proposals are open for comment until 12 November 2014. Click for press release (link to IFAC website).

The paper, EFRAG Short Discussion Series – Levies: what would have to be changed in IFRS for a different accounting outcome? responds to constituent concerns raised during the European Union endorsement of IFRIC 21 Levies. The paper does not reach conclusions on the best accounting treatment for such levies, but instead seeks to investigate alternatives to address the concerns raised.

In particular, concern was raised about the immediate expensing of some levies, which the paper expresses as follows:

Combined with the requirements in IAS 38 Intangible Assets, IFRIC 21 will often result in the immediate expense of levies charged on an periodic basis (i.e., annually), when the law indicates an activity that occurs at a point-in-time. Some have expressed concern with this outcome because they believe that the cost of a levy charged periodically should be recognised over the period it refers to. They believe the economic substance of a recurring levy is that the entity is paying to operate over an annual period, although the law may identify a different activity that triggers the payment (such as being in operation at a certain date).

In exploring these concerns, the paper revisits the amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets proposed in the exposure drafts issued in 2005 and 2010 in the IASB's project on non-financial liabilities, and concludes that in EFRAG's view, the proposals would not address the concerns. Other alternative approaches that could address the concerns are also explored:

• amending the definition and recognition of a liability
• developing guidance to assess if the entity is receiving an asset or a service in exchange for the payment of the levy
• considering if other features of the law could affect when the obligating event occurs, beyond the date specified in the law
• amending IAS 34 Interim Financial Reporting
• applying the IAS 12 Income Taxes model
• carrying out a research project for levies and other similar transactions.

The paper notes that a possible solution relies on the identification of an asset or a service when one or the other arises. When such identification is not possible, a progressive recognition might be achieved by requiring recognition as soon as the entity does not have a realistic alternative to payment and linking the obligation to an activity performed over time: either through modifying the definition of a liability or adding an illustrative example in IAS 34. EFRAG also believes that a research project focusing on all transactions with government authorities "holds promise to provide a robust solution for levies".

The discussion paper is open for comment until 15 December 2014. Click for press release and the full discussion paper on the EFRAG website.