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Agenda for the March 2014 IFRS Interpretations Committee meeting

18 Mar, 2014

The IFRS Interpretations Committee is meeting at the IASB's offices in London on Tuesday, 25 March 2014. The agenda for the one day meeting is now available.

The Committee will:

  • Continue discussions on issues related to IAS 1, IAS 12, IAS 34 and IFRS 11
  • Consider the finalisation of tentative agenda decisions on IAS 8, IAS 17, IAS 39, IFRS 10 and IFRIC 21
  • Consider new issues on IAS 16, IAS 19 and IFRIC 17.

The full agenda for the meeting, as of 17 March 2014, can be found here.  We will update this page for any changes to the agenda, and our Deloitte observer notes from the meeting as they become available.

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We comment on the FRC's FRED 53 Draft Amendments to FRS 101

17 Mar, 2014

We have published our comment letter on the Financial Reporting Council’s (FRC) Exposure Draft of updates to FRS 101 in the light of recent amendments and changes to EU-adopted IFRS (FRED 53). We agree with the majority of the proposals in FRED 53, although we do not support the proposed amendments in relation to IFRS 10 because we believe that they are unnecessary.

When FRS 101 was issued, the Accounting Council advised the FRC to update FRS 101 at regular intervals to ensure that it maintains consistency with EU-adopted IFRS. FRED 53 Draft Amendments to FRS 101 Reduced Disclosure Framework (2013/14) is the first such proposed update.

Our key comments include:

  • We agree with the proposed introduction of paragraph 4A, which clarifies that FRS 101 accounts are Companies Act accounts and not IAS Accounts into the standard; the proposed changes to paragraph 6, which clarify the disclosures required by the Companies Act when a company recognises certain financial instruments at fair value, and the proposed changes to paragraph 8(l), which provide relief for qualifying entities from certain new requirements of IAS 36 Impairment of Assets
  • Although the issue raised by the proposed addition of paragraphs AG1(gA) and AG1(gB) regarding when an entity preparing Companies Act consolidated accounts may exclude a subsidiary from consolidation is a valid one, we do not believe that it is necessary to amend IFRS 10 in the manner proposed.  In our view the appropriate way to deal with it is to add a paragraph to the scope section of FRS 101 highlighting this issue to users of the standard. This is due to the fact that an entity may not apply FRS 101 to any consolidated financial statements that it is required to or chooses to prepare, and so this issue is only indirectly relevant to preparers of FRS 101 financial statements.

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

FRC Draft Plan and Budget and Levy Proposals 2014 Image

We comment on the FRC’s draft plan and budget and levy proposals 2014/15

14 Mar, 2014

We have published our comment letter on the Financial Reporting Council’s (FRC's) draft plan and budget and levy proposals 2014/15. We support the FRC’s publication of its draft plan and budget and levy proposals and welcome the opportunity to comment.

The draft plan and budget and levy proposals which were issued for consultation in December 2013 identify a number of priority areas for the FRC to focus on in 2014/15. 

We welcome the inclusion of key effectiveness indicators with regard to the FRC’s 2014/15 priorities – a request that we flagged last year – and the plan to conduct thematic reviews on narrative reporting and cutting clutter. 

However we make a number of recommendations including:

  • That the draft plan and budget should explicitly show a direct comparison between what the FRC hoped to achieve and what they actually achieved over the last year.
  • That the draft plan and budget should include some reference to FRC proposed actions/next steps in furthering the ‘prudence debate’ with the International Accounting Standards Board (IASB) and others.
  • That work on an XBRL taxonomy for areas of the annual report other than the financial statements (for instance narrative reporting) should be on a longer-term horizon of the FRC.  We suggest that a project on how to ‘tag’ such information in a way that does not stifle innovation in reporting would be a good project for the Financial Reporting Lab
  • That the FRC should consider setting a target for smaller companies in line with the 80% target on reporting for FTSE 350 companies regarding the latest Corporate Governance Code changes.
  • That in seeking evidence for improvement in the clarity of explanations, the FRC should consider both smaller as well as FTSE 350 companies.

Our full comment letter can be obtained here.

EFRAG (European Financial Reporting Advisory Group) (dk green) Image

EFRAG issues feedback statement on the IASB’s Discussion Paper DP/2013/1 ‘A Review of the Conceptual Framework for Financial Reporting’

13 Mar, 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) Discussion Paper DP/2013/1 ‘A Review of the Conceptual Framework for Financial Reporting’.

The IASB’s Conceptual Framework sets out the concepts that underlie the preparation and presentation of financial statements.  The Conceptual Framework identifies the principles for the IASB to use when it develops and revises International Financial Reporting standards (IFRSs).  The DP was published in July 2013 and contained proposals for topical areas where it considered that amendments to the existing Conceptual Framework were necessary. Included in the DP were proposals to revise the definitions of an asset and a liability, to introduce guidance on derecognition, to clarify the objective and purpose of other comprehensive income and to set a framework for presentation and disclosure. 

EFRAG published their draft comment letter in September 2013 and the final comment letter was published in February 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 DP set out in their final comment letter to the International Accounting Standards Board (IASB).  The feedback statement also provides an overview of the outreach events conducted by EFRAG together with the National Standard Setters of Germany, The Netherlands, Denmark, Austria, Lithuania, Poland and Luxembourg.

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European Parliament votes to back financing of IFRS Foundation, EFRAG, and PIOB

13 Mar, 2014

The European Parliament has voted in its plenary session in Strasbourg today to back the EU co-financing of the International Financial Reporting Standards (IFRS) Foundation, the European Financial Reporting Advisory Group (EFRAG), and the Public Interest Oversight Board (PIOB).

The vote follows a trilogue agreement of the European Parliament, the Council and the Commission reached in early December 2013.

The regulation passed by the Parliament today will form the legal basis for the continuation of financing the IFRS Foundation and PIOB for the period 2014-2020 and of EFRAG for the period 2014-2016. The agreement limits the financing period of EFRAG to three years in view of prospective reforms that might arise from the Maystadt Report.

In financial terms, the regulation proposes to contribute annually approximately the following sums:

  • 4.3 million euro to the IFRS Foundation (17% of its budget),
  • 3.4 million euro to EFRAG (43% of its budget), and
  • 0.3 million euro to PIOB (22% of its budget).

Internal Market and Services Commissioner Michel Barnier welcomed the vote in a press release:

The support of the European Parliament to renew the financing programme of the IFRS Foundation, EFRAG and the PIOB is an important step towards ensuring that these organisations continue to play a key role in the development of accounting and auditing standards and that the EU’s interests are properly taken into account in that process.

As far as EFRAG is concerned, I am particularly keen that, following last year's recommendation by Philippe Maystadt, its governance reforms are implemented adequately and without delay. I will also make sure that Parliament is properly informed on the progress achieved by EFRAG in this respect.

Please click for access to the full press release on the European Commission website. The full text adopted by the Parliament today is available on the Parliament's website (please refer to Part 2, pp 146-177).

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ACCA publishes research paper exploring the impact of Integrated Reporting on the finance profession

13 Mar, 2014

The Association of Chartered Certified Accountants (ACCA) has published a research paper that explores the possible impacts that Integrated Reporting (<IR>) may have on the role of the finance professional.

Exploring a number of possible scenarios, the research paper, ‘Accountants and Strategic Leadership’, indicates that <IR> “has the potential to bring about transformational changes” and highlights that the future role of the finance professional will be dependent upon how the profession responds to <IR>. 

To help explore the range of possible outcomes, the research paper develops two grids with four generic scenarios based upon the role of the finance professional (either entrepreneurs or gatekeepers) and the scope of the accountant’s role within their organisation (the finance function contributes to <IR> or the finance function owns and leads <IR>).  The four possible scenarios identified for the future role of the finance professional are: 

Changemaker.  In this scenario, many in the profession have succeeded in balancing the ownership and lead of their business’s <IR> and taking a more entrepreneurial stance within the firm. The need to ensure sound and ethical practice has been maintained in the gradual assumption of a wider remit by the CFO and accountancy function. There is widespread acknowledgement among stakeholders that the profession has succeeded in providing rigorous integrated reports while enabling the entrepreneurial spirit to flourish. Finance professionals are able, therefore, to build on their reputation as a trusted pair of hands to develop greater influence across their organisations and external stakeholders.

Embedded accountant.  Here finance is seen as a business partner and spends a lot of time ‘in the business’. A close alignment exists with the business’s strategy function to ensure that financial resources are optimally aligned with strategic priorities. Accountants are keen to own corporate reporting while acquiring new skills that enhance their report-writing capability to ‘tell a story’. Accountants build key relationships and partnerships in their business to ensure appropriate content can be identified for corporate reporting. At the same time, accountants are leading the debate at executive-level on the developments in corporate reporting.

Coerced accountant.  Here many accountants deliberately maintain a focus on the largely technical elements of the role while seeking to ensure compliance with regulatory requirements of the law, but are ‘coerced’ to play a more central role. In this scenario, accountants are the ‘fallback’ option when there is no one in the organisation to take the lead and they are obliged to take this role.   

Reluctant accountant.  In this scenario accountants are ‘followers’. Change is not embraced and the accountant is devoted to provide outputs according to prescriptive guidelines/requirements. In this approach, accountants make the minimum change necessary to meet the new requirements. Accountants have no qualms for <IR> to be owned outside of finance and only want to contribute ‘their bit’ to the report. Accountants in this situation are only making the necessary adjustments to meet the financial capital aspects of <IR> and they take a passive role while other parts of their business take the lead in their organisation’s <IR> efforts. 

The ACCA believe that the finance profession “needs to realign itself and that accountants should aspire to be changemakers”.  Although recognising that there is a risk that the finance function may lose its influence over corporate reporting “as a consequence of the increased role of other actors in the production of financial statements compliant with <IR> guidelines”, the ACCA consider that <IR> is an opportunity for the profession to lead the initiative and show strategic leadership in corporate reporting. 

Further impacts of <IR>, such as the changing role of internal auditors and how the provision of assurance may need to develop are also highlighted in the research paper.     

The full research paper can be obtained from the ACCA website.

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IASB working group invites papers on the application of IFRS 9 principles to Islamic products

13 Mar, 2014

The IASB's Consultative Group for Shariah-Compliant Instruments and Transactions has issued a request for papers on challenges that may arise in the application of IFRS 9 classification and measurement principles to instruments and transactions commonly referred to as Islamic finance.

The request for papers states that the group does not judge whether products are compliant with the requirements of Shariah law as this is beyond the group's remit. Rather, the members of the group intend to focus on challenges that may arise in applying IASB pronouncements to Islamic products and to make recommendations to the Board about steps that it might take.

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 and invite papers on. These areas are identified in the request for papers as follows:

  • 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 equalization reserves (PER) because of significant differences in practice.

The request for papers published today addresses the first of the four issues. Respondents are asked to answer whether some or all of the Islamic products typically owned by Islamic banks qualify for amortized-cost classification.  If they believe the answer is "yes," they are asked to provide the basis for their conclusion. If they believe the answer is "no," they are asked to explain what steps, if any, the Board should take to either clarify the classification of these contracts or to amend IFRS 9 Financial Instruments. Papers should be submitted by 1 August 2014.

Additional information available on the IASB's website:

Please see also our UK Accounting Plus page with general information on Islamic accounting.

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EFRAG final comment letter on the IASB's Exposure Draft ED/2013/11 Annual Improvements to IFRSs 2012— 2014 Cycle

13 Mar, 2014

The European Financial Reporting Advisory Group (EFRAG) has issued their final comment letter on the IASB's Exposure Draft ED/2013/11 'Annual Improvements to IFRSs 2012–2014 Cycle' which was published on 11 December 2013. EFRAG agrees with most of the proposals in the Exposure Draft (ED) but has expressed concern about the proposed amendment to IAS 19 Employee Benefits and comments that the amendments in respect of IFRS 5 “should be applied retrospectively”.

The IASB uses the annual improvements project to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.  The ED proposes amendments to 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

The proposed amendment to IAS 19 clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level). 

EFRAG “supports the IASB’s effort to develop short-term guidance dealing with countries where a high-quality corporate bond market does not exist and that use the same currency as other countries".  However EFRAG identify a number of “specific concerns” that they would like the IASB to consider before finalising the proposed amendment and comment that “in some circumstances it is unclear if the proposals would result in an outcome that is consistent with the IASB’s objectives”. 

Before finalising the IAS 19 proposals, EFRAG also comment that the IASB should “clarify the objectives and the rationale underlying the selection and use of a discount rate in measuring post-employment benefit obligations” to allow constituents to be able to use their judgment in applying the requirements of paragraph 83 of IAS 19.

EFRAG’s concerns regarding the proposed amendments to IAS 19 are also shared by the Financial Reporting Council in their comment letter.

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EFRAG issues final endorsement advice on amendments to IFRSs

12 Mar, 2014

The European Financial Reporting Advisory Group (EFRAG) has completed its due process for the IASB’s Annual Improvements to IFRSs (2010-2012 cycle) and (2011-2013 cycle). In both cases, the EFRAG has expressed their support of the amendments and has recommended their adoption to the European Commission.

The Annual Improvements to IFRSs 2010-2012 Cycle incorporate eight amendments to seven standards being IFRS 2 Share-based Payment, IFRS 3 Business Combinations, IFRS 8 Operating Segments, IFRS 13 Fair Value Measurement, IAS 16 Property, Plant and Equipment, IAS 24 Related Party Disclosures and IAS 38 Intangible Assets

The Annual Improvements to IFRSs 2011-2013 Cycle incorporate four amendments to four standards being IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 3 Business Combinations, IFRS 13 Fair Value Measurement and IAS 40 Investment Property

For more information, see (links to EFRAG website):

In addition, the EFRAG has updated its endorsement status report to reflect these final endorsements.

ACCA (UK Association of Chartered Certified Accountants) (lt green) Image

ACCA consults on corporate governance

12 Mar, 2014

The Association of Chartered Certified Accountants (ACCA) has published a consultation paper (“the consultation paper”) examining whether existing governance and risk management frameworks are “fit for purpose”.

The ACCA argue that corporate governance is about creating value and that “governance codes should be evaluated on how well they facilitate the creation of value”.  The consultation paper, ‘Creating value through governance – towards a new accountability’ considers whether corporate governance is actually helping businesses to create value and suggests that “reform” of the current approach to corporate governance and risk management is needed.  The ACCA comment: 

A fundamental rethink is required about how corporate governance and risk management contribute to creating value.  In losing its real purpose, governance has too often become about no more than compliance with structures and practices.   

The consultation paper proposes a new accountability framework based upon three components; ‘performing, informing and holding to account’; three complimentary components which can help companies perform in the interests of shareholders and wider society and which “are essential if a company is to create value sustainably”.  The consultation paper, which suggests that the three components are “not working well” highlights that the effectiveness of national governance codes and company approaches to governance in contributing to value creation can be assessed using this framework.           

The consultation seeks responses by 31 August 2014 and asks eight key questions including: 

  • Has corporate governance become too focused on form and compliance at the expense of the quality and integrity of decision making?
  • Should creating sustainable value be the overarching purpose of governance?
  • Do you find the framework likely to help to improve corporate governance and help focus companies on creating sustainable value?
  • Which of the three areas, performing, informing and holding to account, is the most problematic? 

The ACCA intends to publish a follow up paper on the subject of governance and value creation based upon the responses received. 

Click for:

  • Press release (link to ACCA website).
  • ACCA report Creating value through governance – towards a new accountability (link to ACCA website - including links to videos about the consultation and other related links).

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