Main topics of the discussion will be:

• Taking stock on EPSAS developments
• Experiences from the development of the IPSAS conceptual framework
• Panel debate on "Assessing the need for a European conceptual framework and ways of developing it"

The roundtable is free of charge but the number of participants is limited. Please click for more information on the FEE website.

The updated agenda also reflects that the meeting on Thursday will end 15 minutes earlier. We have updated our agenda for the meeting accordingly.

The exposure draft, Addressing Disclosures in the Audit of Financial Statements, follows an earlier discussion paper, and proposes changes to a number of ISAs.

Key proposals include:

• Clarifying the meaning of the term "financial statements" to include all disclosures subject to audit, noting such disclosures may be found on the face of financial statements, included in related notes, and where permitted by the financial reporting framework, incorporated by cross-reference
• New application material to assist in the establishment of an appropriate focus on disclosures in the audit, and to bring forward consideration of disclosure to earlier in the audit process
• Enhancements to encourage a more robust risk assessment around disclosures, e.g. considering assertions for related disclosures when considering classes of transactions, events and account balances, considerations about the source of information for disclosures, and clarifying the nature of potential misstatements in disclosures (including non-quantitative disclosures)
• New application material to clarify and explain the expectations of an auditor when evaluating misstatements and forming an opinion, highlighting the types misstatements that might be identified, explaining that disclosure misstatements need to be accumulated, providing examples of disclosure misstatements that may impact the understandability of the financial statements, and how misstatement disclosures impact the evaluation of the presentation of the financial statements.

The IAASB acknowledges that the issues around disclosures are pervasive, and strongly linked to other initiatives, such as the IASB's disclosure initiative. The exposure draft notes:

In agreeing to this project, the IAASB acknowledged the view that many of the issues around disclosures cannot be solved by the IAASB alone. Moving forward in areas such as materiality will require collaboration and cooperation between many interested stakeholders, including accounting standard setters, regulators, preparers and users, for an effective response. The IAASB therefore has had active liaison and outreach with such stakeholders. For example, the IAASB has contributed to related initiatives of the International Accounting Standards Board (IASB), such as its work on disclosure frameworks and materiality. The IAASB will continue to closely follow relevant developments and activities of others to further inform its future activities.

Notwithstanding these observations, the IAASB believes the changes proposed in the exposure draft are necessary to proceed with "as an appropriate response to the concerns raised about the need to clarify the expectations of auditors when auditing financial statement disclosures, as well as to the need for additional guidance to assist auditors in addressing the practical challenges arising from the evolving nature of disclosures". In addition, the IAASB considers that the exposure draft's proposals to place a focus on disclosure earlier in the audit process may improve disclosures through companies also focusing on disclosures earlier in their financial statement preparation process.

The exposure draft is open for comment until 11 September 2014. Click for IAASB press release (link to IFAC website).

The agenda for the meeting is summarised below:

Agenda papers for this meeting will be made available on the IASB's website in due course.

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

TUESDAY, 13 MAY 2014

Items for continuing consideration

• IFRS 11 – Analysis of implementation issues

Finalisation of tentative agenda decisions

• IFRS 11 – Classification of joint arrangements

Items for continuing consideration

• IAS 16 – Whether 'core inventories’ held in an entity’s own facilities are accounted for as inventories or as property, plant and equipment

Finalisation of tentative agenda decisions

• IFRS 2 – Price difference between the institutional offer price and the retail offer price for shares in an initial public offering
• IAS 12 – Recognition of deferred tax assets for unrealised losses
• IAS 12 – Threshold of recognition of an asset on uncertain tax position
• IAS 37 – Measurement of liabilities under IAS 37 within the context of emission trading schemes
• IAS 12 – Impact of an internal reorganisation on deferred tax

Click here to go to the preliminary and unofficial notes taken by Deloitte observers for the entire meeting. Notes from the remaining sessions will be posted in due course.

The interim release contains additional taxonomy concepts that reflect new IFRSs and improvements to IFRSs published by the IASB and technical updates and corrections. It includes taxonomy elements for IFRS 14 Regulatory Deferral Accounts, which was issued on 30 January 2014.

More details (and a link to the interim release) are available in the press release on the IASB website. Our dedicated XBRL page is here.

The FRAB's primary objective is "to promote the highest standards of financial reporting by government".  In its fulfilment of this objective it provides advice to the Treasury, the Scottish Ministers, the Executive Committee of the Northern Ireland Assembly and the Welsh Assembly Government on the introduction of new accounting standards, as well as supporting them in their efforts to better meet the needs of users of public sector financial reports.  Annually, the FRAB publishes a report on its activities over the past year.

In the period from April 2013 to March 2014, the main issues considered by the FRAB were:

• The application of the new suite of consolidation standards (IAS 27 (revised 2011) Separate Financial Statements, IAS 28 (revised 2011) Investments in Associates and Joint Ventures, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities) to the public sector.  A key area of focus in this was the effect of these standards on the accounting for local authority maintained schools in England and Wales.  The efforts in this area culminated in the release in February 2014 of recommendations that local authorities should consolidate community schools, voluntarily controlled, voluntary aided and foundation schools.
• The application of IFRS 13 Fair Value Measurement by public sector bodies.  An acceptable conclusion on this has not yet been reached and a further delay in application has been deemed necessary.  This stems from the fact that a form of replacement cost current value is currently used to measure public sector assets and the consideration of whether this approach is the right one in terms of the information needs of users of public sector accounts and in relation to the guidance in IFRS 13.

The FRAB's role in stimulating the debate around the application of Fair Value accounting has shown how it can be most effective in promoting the highest standards of financial reporting.  However, the delay to public sector adoption of IFRS 13 again raises the issue that the time and resources needed to respond to new standards that are being developed cannot be underestimated.

Looking forward, the FRAB expects that developments arising from the European Commission’s European Pubic Sector Accounting Standards (EPSAS) project will have a significant impact on its activities and may even mean that its role has to adapt for it to continue to fulfil its statutory function.

The full report can be downloaded from the FRAB section of the UK Government website.

ESMA had published the proposed guidelines in February 2014 with the aim of improving the transparency and comparability of financial information, reducing information asymmetry among the users of financial statements, contributing to coherent use and presentation of alternative performance measures (APMs), and restoring confidence in the accuracy and usefulness of financial information.

In our comment letter, we note that we see the need to address the presentation of alternative performance measures (APMs) in various types of communications by issuers to the investors' community but we also point out that the debate is not restricted to Europa alone and especially mention the IFAC's draft guide on the use of supplementary financial measures also published in February 2014 and IASB's April 2014 decision to undertake a research project, as part of the disclosure initiative project, on the matter.

Regarding the proposed guidelines, our most significant concerns relate to the scope of documents to which the APM guidelines would apply as well as the type of APMs that would be captured in the proposed scope.

• We understand that the proposed guidelines may apply to a scope of documents larger than those that National Competent Authorities (NCAs) would usually review and we question how their application could be enforced if the scope of documents to which they apply goes beyond the reach of NCAs.
• We also believe that the scope of the guidelines is too broad regarding the types of APMs that would be captured. We suggest that the guidelines are limited to the presentation of, and information about, APMs that are financial measures that have been prepared using financial data underlying the preparation of an entity's historic, current or future financial statements.

In addition, we also believe that it is essential that users have transparent information on the level of external assurance, if any, attached to APMs presented.

Please click for access to the full comment letter.

In the final comment letter on the proposed guidelines, EFRAG comments that alternative performance measures (APMs) "can provide useful information to users when properly used and presented, and assist investors in gaining a better understanding of a company's financial performance".  EFRAG supports the idea that APMs should be “clearly defined and explained by preparers and presented consistently over time”. However, EFRAG believes that the proposed definition of an APM is “overly broad” and does not work very well in the context of IFRS financial reporting. 

EFRAG also believes that the scope of the proposed guidelines is “much broader” than appropriate and that the reference to 'all documents containing regulated information made publicly available' “lacks a clear underlying principle”. EFRAG especially recommends keeping prospectuses and part of prospectuses out of the scope as was the case with the CESR Recommendation the new ESMA guidelines are intended to replace. 

Generally, EFRAG observes that ESMA "has not provided clear evidence on why the existing CESR Recommendation is no longer considered to provide adequate guidance and is in need of replacement". In some cases EFRAG even believes that the proposed guidelines could have negative effects. EFRAG states for example that the 'prominence' requirement regarding the presentation of APMs as currently drafted in the guidelines could “result in imposing a form of 'ceiling' on the amount of voluntary information that an entity is allowed to disclose regardless of whether such information is beneficial to user”. EFRAG also believes that ESMA is partly in danger of introducing requirements that may inadvertently result in clutter and “boilerplate disclosures”.  Additionally, EFRAG “believes that the guidelines should not be overly prescriptive as to where the disclosures on APMs should be presented”.

The comments of EFRAG are largely consistent with those of the Association of British Insurers (ABI) who comment that the guidelines are “unnecessarily prescriptive” and would be inconsistent with initiatives such as those aiming to cut clutter and those which aim to “reduce the use of non-entity specific, generic corporate reporting”.  The ABI would like ESMA to “reissue CESR’s recommendation on alternative performance measures rather than issue new guidelines”.

Click for:

• EFRAG press release (link to EFRAG website).
• EFRAG comment letter (link to EFRAG website).
• ABI comment letter (link to ABI website).
• Our UK Accounting Plus news item on ESMA APMs.