The event will cover:

• The aspects of reliability and the challenge they pose for auditor.
• Research insights from the Financial Reporting Council (FRC) and the largest accounting firms.
• Views from leading users and stakeholders in corporate reporting. 

More information, including how to attend the outreach event can be found on the ICAEW website.

The compendium contains the FRC’s audit and assurance standards in issue at 1 February 2014.  Accordingly the compendium includes:

• International Standards on Auditing (ISAs) (UK and Ireland) (including ISA 315 ‘Identifying and assessing the risks of material misstatement through understanding the entity and its environment’, ISA 610 ‘Using the work of internal auditors’, and ISA 700 ‘The independent auditor’s report on financial statements’ that were issued in 2013);
• International Standard on Quality Control (ISQC) (UK and Ireland) 1;
• International Standard on Review Engagements (ISRE) (UK and Ireland) 2410;
• Standards for Investment Reporting (SIRs);
• Ethical Standards for Auditors;
• Ethical Standard for Reporting Accountants.

Selected Practice Notes and Bulletins are also included including Practice Note 23 ‘Special considerations in auditing financial instruments’ issued in July 2013. 

The compendium is priced at £60 and is available on the FRC’s website.

The press release can be accessed from the FRC website. 

The guidance has been published in response to the recent financial crisis which highlighted the need to improve the quality of external audits of banks.  The Committee highlight that auditors have a key role in contributing to financial stability by delivering “quality bank audits which foster market confidence in banks’ financial statements.  The Committee comment:

This document aims to enhance the quality of external audits of banks and the effectiveness of prudential supervision, which contribute to financial stability.

The guidelines cover:

• The audit committee’s responsibilities in overseeing the external audit function.  The Committee highlight that “a bank’s audit committee has a key role in fostering a quality bank audit through the effective exercise of its responsibilities with respect to the external auditor and the statutory audit”.  The guidelines “promote an effective two-way communication between the audit committee and the external auditor to enable the audit committee to carry out its oversight responsibilities and to contribute to the effectiveness of the audit process”.  This also provides a framework for the supervisor to assess the effectiveness of the audit committee’s oversight of the bank’s external audit.
• The prudential supervisor’s relationships with external auditors of banks and the audit oversight body.  Guidance is included with respect to the relationship between prudential supervisors and the external auditor and between prudential supervisors and audit oversight bodies in order to emphasise the need for effective relationships that can contribute to enhanced banking supervision.

The guidance also includes “supervisory expectations and recommendations relevant to external audits of banks that the Committee believes will enhance the quality of these audits”.  These expectations include the Committee’s expectations with respect to the external auditor’s knowledge and competence, objectivity and independence, professional scepticism and quality control over the bank’s audit. 

The guidelines apply to all banks that are subject to a statutory audit (including those within a banking group) and holding companies whose subsidiaries are predominantly banks.  The Committee highlights that supervisors should seek to “fully implement” the guidelines but should consider implementation on a proportionate basis taking into account the “size, complexity, structure, economic significance, risk profile and other facts and circumstances of the bank and the group (if any) to which it belongs”.  The Committee also recognises that the guidelines and, expectations and recommendations “should be applied in accordance with national legislation and corporate governance structures applicable in each country”.

The press release and the guidance can be obtained from the Bank for International Settlements website.

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

Items for continuing consideration

• IAS 12 – Recognition of deferred tax assets for unrealised losses
• IAS 12 – Recognition of deferred tax for a single asset in a corporate wrapper
• IAS 34 – Condensed statement of cash flows
• IFRS 11 – Analysis of implementation issues
• IAS 1 – Disclosures about going concern

Finalisation of tentative agenda decisions

• IFRIC 21 – Identification of a present obligation to pay a levy that is subject to a pro rata activity threshold as well as an annual activity threshold
• IAS 17 – Meaning of 'incremental costs'
• IAS 8 – Distinction between a change in accounting policy and a change in accounting estimate
• IFRS 10 – Definition of investment related services or activities
• IAS 39 – Accounting for repo transactions

New issues

• IFRIC 14 – Availability of refunds from a defined benefit plan managed by an independent trustee
• IAS 19 – Remeasurement at a plan amendment or curtailment
• IAS 16 – Whether 'core inventories’ held in an entity’s own facilities are accounted for as inventories or as property, plant and equipment
• IAS 39 – Classification of a hybrid financial instrument by the holder

Administrative session

Click here to go to the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

GISR is a joint project of Ceres, an investor-founded coalition of investors, companies, policy makers and others, and the Tellus Institute, a not-for-profit research and policy organisation in the field of sustainable development. GISR seeks to design a global sustainability ratings standard that measures sustainability performance and can be applied in other sustainability ratings, rankings and indices on an accredited basis. Accordingly, GISR will not rate companies in its own right.

GISR is developing a three-part standard with three components: principles, issues, and indicators. The first component on principles has recently been finalised after a consultation process, and identifies 12 core principles across two categories, process and content.

The MoU between the IIRC and GISR acknowledges the role of each party in the broader development of corporate reporting frameworks and standards, and contains various contains commitments, including:

• supporting and profiling the work of the other to the extent reasonable and practicable
• striving to align corporate reporting, guidelines and standards to achieve complementary and comparable outcomes between the IIRC's <IR> Framework (and other corporate reporting frameworks) and other guidelines and standards
• achieving optimal alignment between the IIRC's <IR> Framework and GISR standard so that disclosed information is useful to GISR accredited ratings
• working cooperatively on the concept of "integrated ratings" which would reflect human, intellectual, natural, social and financial capital
• working together towards appropriate long-term institutional and governance arrangements.

The agreement is effective until 31 December 2015 and may be extended by agreement. Click for :

• Press release (link to GISR website)
• Full text of the MoU (link to IIRC website).

The consultation document, entitled Strategy Consultation, identifies a number of key influences on the future direction of the IPSASB, including an increased focus on public sector financial management resulting from the sovereign debt crisis, increased interest in International Public Sector Accounting Standards (IPSASs), and an expectation that the IPSASB's work on the Public Sector Conceptual Framework will be completed, freeing up a significant amount of IPSASB resources.

It is also acknowledged that the final recommendations from the IPSASB Governance Review Group review of the governance and oversight of the IPSASB, which are expected later in 2014, will impact the IPSASB's operations. It also provides an overview of the IPSASB's operations, and focuses on the impacts of the existing resource constraints the IPSASB faces, noting the following:

The IPSASB continues to monitor the outputs of the IASB with a view to maintaining convergence. Since the IASB is a fully compensated board with significantly higher staff resources it is challenging to keep pace with their outputs. Also, there have been calls for a mechanism to address urgent or emerging accounting issues and provide interpretations of IPSASs. This would require a significant increase in staff capacity.

Strategic objective

The consultation document proposes the following strategic objective for the IPSASB:

The strategic objective gives rise to two key outcomes the IPSASB wishes to achieve:

• Improved ability of public sector entities to reflect the full economic reality of their finances as well as of stakeholders to understand
• Increased awareness of IPSASs and their public finance management benefits in order to influence their adoption.

Work programme 2015-2019

The consultation paper acknowledges that the IPSASB needs to balance many factors in developing its work plan for the 2015-2019 period. The consultation paper identifies a number of potential projects for constituents to consider, grouped into four broad categories:

• Public sector specific projects- this includes biological assets, heritage assets, infrastructure assets, public sector specific measurement issues, military assets, natural resources, non-exchange expenses, government as owner rather than government, impact of sovereign powers on financial reporting and trust funds
• Maintaining existing IPSASs- including borrowing costs, construction contracts, disclosures about the general government sector, employee benefits, non-exchange revenues, presentation of financial statements, related party transactions, revenue and segment reporting
• Convergence with IFRS- extractive industries, insurance contracts, non-current assets held for sale and discontinued operations, and rate regulated industries
• Other- differential reporting, integrated reporting and interim financial reporting.

In addition, the consultation paper notes that a number of existing projects will continue into the 2015-2019 period, including on public sector combinations, government business enterprises, financial instruments (updating existing standards for the impacts of the IASB's work on IFRS 9 Financial Instruments and separate consideration of public sector financial instruments), IPSASs and Government Finance Statistics (GFS), emissions trading schemes and social benefits.

Future of the Cash Basis IPSAS

The IPSASB had previously commenced a project on its existing Cash Basis IPSAS, with a view to identifying major difficulties in its application. A task force at the time reported that the the Cash Basis IPSAS is not widely adopted and identified a number of obstacles to adopters. The consultation paper asks for feedback on whether the Cash Basis IPSAS is a valuable resource in strengthening public finance management and knowledge globally by increasing the adoption of accrual-based IPSASs, identifying three possible approaches:

• Retain the Cash Basis IPSAS and complete the review project using existing IPSASB resources
• Retain the Cash Basis IPSAS unchanged, suspending the review project
• Withdraw the Cash Basis IPSAS from the IPSASB Handbook.

The consultation paper is open for comment until 31 July 2014, and the IPSASB intends to finalise its strategy and work programme at its December 2014 meeting. Click for (links to IFAC website):

• Press release
• Full text of the consultation document.

The consultation paper outlines three key strategic objectives around financial statement audits, global developments and collaboration, and puts forward a work plan for 2015-2016 which prioritises the topics of quality control, professional scepticism and special audit considerations relevant to financial institutions. 

The FRC comment that the strategic objectives set by the IAASB appear to be “on-going operational objectives” and would like these to be revised to “present more clearly forward looking strategic objectives”.  A number of recommendations to revise the objectives are made in the comment letter. 

Regarding the proposed work plan for 2015-2016, the FRC comment that although they “support the projects that have been identified as priorities”, the IAASB should “look for ways of increasing the number of projects it can undertake in the public interest”.  A number of ways as how this may be achieved are put forward by the FRC. 

The views of the FRC are supported by the Association of Chartered Certified Accountants (ACCA) (link to ACCA website) who comment that although a "sensible approach has been taken to develop a work programme that focusses on fewer topics" they still saw a "need" to expand upon the projects included within the work programme.  The ACCA would have liked the work programme to include time devoted to "matters identified by the ISA Implementation project, particularly in relation to audits of group financial statements and identifying and assessing risks" and also the IAABs's other standards.

The full comment letter can be obtained from the FRC website.

The Charity Commission and the OSCR published the original ED in July 2013 with a comment period ending in November 2013.  The Exposure Draft set out proposals for accounting and reporting by charities in the context of the new accounting framework introduced by Financial Reporting Standard (FRS) 102 applicable in the UK and Republic of Ireland for financial years beginning on or after 1 January 2015. 

Responses to the ED were considered by the Charities SORP Committee at their meetings of 9 and 26 January and 12 February 2014.  As a result of this analysis a number of key decisions were made over the ED and changes to the SORP agreed.  Some of the key decisions and changes include: 

• Although many respondents “strongly supported” the retention of the columnar approach, the Charities SORP Committee agreed that charities may opt for a single column Statement of Financial Activities (SOFA) if only one class of funds is material and all other classes of funds are immaterial.
• Corporate entities are to be specifically excluded from the definition of a branch (as supported by 62% of respondents) and when these are controlled by a charity they should be treated as a subsidiary.
• All charities (as opposed to just larger charities as proposed in the ED) will be required to report staff salaries paid in bands of £10,000 for employees earning over £60,000.  It was also agreed that larger charities would need to disclose their remuneration policy for the pay of senior staff in their trustees’ annual report. 
• No requirement for separate disclosure of income from government sources.
• Incorporating into the SORP advice on combining the Strategic Report required of medium and large UK registered charitable companies and the trustees’ annual report.
• Changes to the text of the SORP to include greater clarity and more guidance on the recognition legacy income and the UK retail GIFT Aid scheme.
• The reinstatement of the disclosure of all ex-gratia payments at the request of funders as they considered that this is valuable information. 

Additionally, the Charity Commission and the OSCR have announced that there will be two SORPS; one based on FRS 102 and another based on the Financial Reporting Standard for Smaller Entities (FRSSE).  This decision was taken to ensure that when the current FRSSE framework is amended (in light of the new EU Accounting Directive), this would not disrupt non-FRSSE users (the majority of charities preparing accounts) who could continue to apply the separate FRS 102-based SORP.  A separate SORP based on the FRSSE would also allow the SORP to be specifically tailored for the requirements of the FRSSE and meets the demands of a minority of respondents who commented that the combined approach in the ED “gave insufficient attention to the FRSSE due to the inappropriate application of FRS 102 terminology and accounting treatments for issues specifically addressed by the FRSSE". 

Click for:

• Press release (link to the Charities Commission website).
• Consultation analysis (link to Charities Commission SORP micro-site)
• Our previous UK Accounting Plus news item on the new Charities SORP.

The Lab is inviting listed companies and investors / analysts to participate in the project, which will examine the reporting of information such as a company's track record of paying dividends and, where companies hold high levels of cash, how they plan to use it. These disclosures are seen as particularly relevant given developments around the strategic report and the reporting of solvency and liquidity risks. Communication by companies via their annual reports, their websites and their presentations to investors will all be considered.

Companies and investors / analysts that are interested in participating in the project should contact the Lab during April.

Please click for further information on the FRC website.

The article discusses the benefits of excluding the own-credit gain or loss adjustment from profit or loss. The early adoption allowance of IFRS 9 permits companies to move own-credit gain or loss into other comprehensive income.

Click to view Investor Perspectives — One fewer non-GAAP adjustment to worry about: Improvements to the accounting for changes in own credit (link to IASB website). All Investor Perspectives are archived on the IASB's website.