News

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

ACCA publishes guidance on Audit Committee reporting

11 Mar, 2014

The Association of Chartered Certified Accountants (ACCA) has published a report which provides guidance on Audit Committee reporting using practical examples drawn from a small number of companies within the FTSE 100.

The 2012 UK Corporate Governance (CG) Code (“the Code”) and associated Financial Reporting Council (FRC) Guidance on Audit Committees specify the issues the Audit Committee should consider and the way in which they should report these to the outside world in the annual report. 

The ACCA highlight in their report, 'Enhancing the value of the Audit Committee report', that “the examples are not necessarily best practice but should be seen as illustrative of the way in which Audit Committees are trying to fulfil their responsibilities under the 2012 edition of the UK CG Code”.  Examples are provided in the following areas of Audit Committee disclosure required by the Code: 

  • the significant issues that the committee considered in relation to the financial statements, and how these issues were addressed;
  • an explanation of how the Audit Committee has assessed the effectiveness of the external audit process;
  • information on the approach taken to the appointment or reappointment of the external auditor;
  • information on the length of tenure of the current audit firm and information on when a tender was last conducted; and
  • if the external auditor provides non-audit services, an explanation of how auditor objectivity and independence is safeguarded. 

The report also looked at additional disclosures that companies made which were not specifically required by the Code such as information on lead partner rotation and outsourcing of internal audit.  A checklist is also provided to guide audit committee reporting in the above areas. 

Additionally, a short analysis is provided comparing current UK practice with the requirements of the United States Securities and Exchange Commission and the Australian Securities Exchange.  The ACCA comment that “it can certainly be argued that UK requirements for audit committee public disclosures appear to be more advanced and more formalised than almost anywhere else in the world.” 

The ACCA will be publishing a follow up paper later in the year examining compliance with the Competition Commission's final decision on remedies for the audit market. This decision includes a recommendation to the FRC that shareholders should be given a vote at the AGM as to whether the Audit Committee Report within the annual report is satisfactory.

The ACCA report follows a project into effective approaches to Audit Committee reporting undertaken by the FRC's Financial Reporting Lab which identified six key themes for Audit Committee chairman to consider in fulfilling their disclosure responsibilities under the Code.

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

EFRAG Update detailing its February developments

10 Mar, 2014

The European Financial Reporting Advisory Group (EFRAG) has released a new issue of its EFRAG Update newsletter, summarising the discussions held on the EFRAG TEG conference calls of 7 and 18 February 2014, the EFRAG CFSS meeting on 26–27 February 2014, and at the EFRAG TEG meeting of 26–28 February 2014.

Highlights were the publication of:

  • Final comment letters on IASB EDs Equity Method in Separate Financial Statements and IFRS for SMEs
  • EFRAG TEG approval of a comment letter on IASB ED Annual Improvements to IFRSs 2012–2014 Cycle and feedback statement on the IASB DP A Review of the Conceptual Framework for Financial Reporting
  • Feedback statement on the IASB ED Equity Method in Separate Financial Statements
  • Letter to the IASB on the EFRAG Project Accounting for Interests in Joint Operations structured through a separate vehicle in separate financial statements

Additional topics discussed in the newsletter are:

Click for the EFRAG Update (link to EFRAG website).

Deloitte Comment Letter Image

We comment on the proposals for amendments under the IASB's annual improvements project (cycle 2012-2014)

10 Mar, 2014

We have published our comment letter on the IASB's Exposure Draft ED/2013/11 'Annual Improvements to IFRSs 2012–2014 Cycle' published in December 2013. We continue to believe that the Annual Improvement Project is an efficient and effective means of dealing with isolated issues within IFRSs that are leading to divergent practice. However, in respect of the 2012-2014 cycle of annual improvements, we are concerned by the proposed amendments to three of the four standards concerned.

We question whether disclosure of market rate servicing contracts is consistent with the purpose of the 2010 amendments to IFRS 7 Financial Instruments: Disclosures and whether it will provide valuable information to users. We also believe that the issue of discount rates on defined benefit obligations should be considered more thoroughly; the proposed amendment to IAS 19 Employee Benefits may not be appropriate for all jurisdictions. Lastly, we recommend that the Board liaise with the IAASB before finalising the amendment to IAS 34 Interim Financial Reporting to ensure that no conflict between accounting and assurance standards arises.

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Hans Hoogervorst (50x80) Image

'Convergence can never be a substitute for adoption of IFRS'

08 Mar, 2014

At the 8th IFRS Regional Policy Forum currently hosted by the Institute of Chartered Accountants of India (ICAI) in New Delhi, IASB Chairman Hans Hoogervorst gave a speech entitled 'Closing the accounting chapter of the financial crisis' in which he detailed the IASB's reaction to the financial crisis and concluded that convergence was an unstable means to achieve a single set of global accounting standards.

In his speech, Mr Hoogervorst concentrated on looking back on financial reporting and the financial crisis. As the G20 and the Financial Crisis Advisory Group (FCAG), which was formed in 2009 to advise the IASB and the FASB, had called on the boards to come to converged solutions and achieve a single set of high quality global accounting standards, the IASB and FASB had agreed to work together on this issue.

In November 2009, the IASB had issued IFRS 9 Financial Instruments introducing new requirements for classifying and measuring financial assets. This was followed in October 2010 by the requirements on accounting for financial liabilities, which had been largely carried over from IAS 39 Financial Instruments: Recognition and Measurement together with the recognition requirements for financial assets and financial liabilities. The one important change made vis-à-vis IAS 39 was addressing the own credit risk problem. This concluded the first phase of its comprehensive financial instruments project. In November 2013, the IASB completed the third phase by publishing requirements that introduced a new general hedge accounting model into IFRS 9.

The second project phase on impairment was conducted jointly with the FASB. Current IFRSs as well as US GAAP are based upon the incurred loss impairment model. As Mr Hoogervorst explained, during the financial crisis, this model was accused of resulting in recognising 'too little (impairment), too late.' Therefore, the two boards worked towards introducing a single impairment model that would result in any financial instruments subject to impairment accounting having impairment measured in the same way. This led to the development of the so-called expected credit loss model.

Furthermore, in January 2012 the IASB and FASB agreed to work together to improve the alignment of their respective requirements for classifying and measuring financial instruments. To this end, the IASB added a project to its agenda that would introduce limited amendments to the requirements issued in 2009 and 2010 that could help address the FASB's concerns with those requirements.

However, as Mr Hoogervorst stressed, the convergence attempts – although seeming promising in-between – did not lead to success:

We did not succeed in one central recommendation of the FCAG and G20, and that is in the area of convergence in the IASB's and the FASB's Standard for financial instruments. On Classification and Measurement, Offsetting and also Impairment, we had at some point reached converged positions with the FASB. With regard to Offsetting and most likely with Classification and Measurement the FASB in the end reverted to existing practice in the United States. We also did not manage to stay converged on Impairment, which was one of the main recommendations of the FCAG.

The disappointment regarding lack of success on convergence led Mr Hoogervorst, who, at the beginning of his speech, had invited India to move to IFRSs soon, to express the belief that only adoption of IFRSs can lead to a single set of high quality global accounting standards:

This inability to deliver compatible outcomes with the FASB clearly demonstrates the inherent instability of convergence as a means to achieve a single set of global accounting standards. For this reason, our Trustees wisely concluded that convergence can never be a substitute for adoption of IFRS. Thankfully, throughout the financial crisis, the momentum towards adoption has continued unabated in many countries.

Please click for the full text of Mr Hoogervorst's speech on the IASB website.

2014mar Image

Agenda for March 2014 IASB meeting

07 Mar, 2014

The International Accounting Standards Board (IASB) will hold its next meeting on 13–21 March 2014. The meeting is segmented into three parts: (1) IASB education sessions on insurance contracts and leases; as well as an IASB-only meeting on conceptual framework will be held in London on 13–14 March 2014, (2) Joint meeting with the Financial Accounting Standards Board (FASB) to discuss the leases project and an IASB-only meeting on insurance contracts will be held in Norwalk on 18–19 March 2014, and (3) IASB-only meeting to discuss various topics from the Interpretations Committee, sweep issues on bearer plants, amendments to IAS 1, and issues related to its disclosure initiative will be held in London on 21 March 2014.

The full agenda for the meeting, dated 7 March 2014, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

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

Public meeting of the EFRAG Planning and Resource Committee (EFRAG PRC)

06 Mar, 2014

On March 19, 2014, the Planning and Resource Committee of the European Financial Reporting Advisory Group, (EFRAG) will hold a public meeting in Brussels.

In order to register for the meeting please follow details within the press release on the EFRAG website.  The full agenda can also be obtained from the EFRAG website.

IFRS Foundation (blue) Image
IVSC (International Valuation Standards Council) (lt green) Image

Collaboration planned between IVSC and IFRS Foundation

06 Mar, 2014

The International Valuation Standards Council (IVSC) and the IFRS Foundation announced that the two organisations will deepen their co-operation in the development of International Financial Reporting Standards (IFRS) and International Valuation Standards (IVS). Main focus of the statement of protocols announced today is the co-ordination on fair value measurement.

The statement of protocols notes that the IVSC and the IFRS Foundation are independent bodies that share an interest in the consistent measurement of fair value for financial reporting and have a common interest in ensuring that standards and guidance developed by the IVSC on how to measure fair value are consistent with IFRS (especially with IFRS 13 Fair Value Measurement) and well-developed.

Therefore the following commitments are object of the statement of protocols:

  • IVSC:
    • Provide input to the IASB on proposed amendments to IFRS and developments in financial reporting that are relevant to fair value;
    • consider the IASB's comments in developing IVSs and valuation requirements for financial reporting in general;
    • provide the IASB with the opportunity to be included in IVSC consultative groups, committees and task forces on fair value measurement;
    • inform the IASB when the IVSC becomes aware of diversity in practice concerning fair value measurement.
  • IASB:
    • Provide input to the IVSC on proposed amendments to standards and developments in valuation that are relevant to financial reporting;
    • consider the IVSC's comments in developing IFRSs;
    • provide the IVSC with the opportunity to be included in the IASB's advisory and consultative groups, committees and task forces;
    • inform the IVSC when the IASB becomes aware of diversity in practice concerning fair value measurement in financial reports.

Both parties also commit to keeping abreast of developments and informing each other about emerging and divergent practice issues and research in determining fair value and to organising when necessary discussion sessions of both parties in order to highlight any relevant issues that may impact upon their work and the standards they publish.

The statement of protocols and a corresponding press release are available on the IASB website.

FRC Image

New appointment to the FRC

05 Mar, 2014

The Financial Reporting Council (FRC) has appointed David Styles as Director of Corporate Governance.

David will join the FRC on 6 May 2014 and joins from the Department for Business, Innovation and Skills where he has worked in the Corporate Law and Governance Directorate and led implementation of departmental policy on directors' remuneration, shareholders' rights and corporate governance.

The press release can be found on the FRC website, here.

XBRL (eXtensible Business Reporting Language) (mid blue) Image

IFRS XBRL taxonomy for 2014 is available

05 Mar, 2014

The IFRS Foundation has published the IFRS Taxonomy 2014. The IFRS Taxonomy is a translation of IFRSs (International Financial Reporting Standards) into XBRL (eXtensible Business Reporting Language).

The 2014 taxonomy is consistent with IFRSs as issued by the IASB at 1 January 2014 and IFRS for Small and Medium-sized Entities as issued on 9 July 2009. The IFRS Taxonomy 2014 consolidates the two IFRS Taxonomy Proposed Interim Releases issued September 2013 and January 2014.

Please note that the IFRS Taxonomy 2014 follows a different architecture to the IFRS Taxonomy 2013, with separated modules for full Standards, IFRS for SMEs and IFRS Practice Statement Management Commentary.

Click here to access the IFRS Taxonomy files and accompanying materials on the IFRS Foundation's website.

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

Public Conference of the EFRAG technical group (EFRAG TEG)

04 Mar, 2014

On March 11, 2014, the Technical Expert Group (TEG) of the European Financial Reporting Advisory Group, (EFRAG) will hold a public conference call.

Interested listeners have the ability to dial into the conference call.  Please click link for details of the registration on the EFRAG website. 

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