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Meeting notes from joint IFRS Foundation Trustees and Monitoring Board meeting

27 Jan, 2014

The IFRS Foundation Trustees held a joint meeting with the Monitoring Board on 27 January 2014 in Milan. The meeting received updates on the activities of the Monitoring Board, IFRS Foundation, International Accounting Standards Board and Due Process Oversight Committee, and received an update on the use of IFRS around the world. We have posted Deloitte observer notes from the meeting.

Click through for direct access to the notes for each session:

Joint IFRS Foundation Trustees and Monitoring Board meeting (11:30-13:00)

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January 2014 IASB meeting notes — Part 1

27 Jan, 2014

The IASB's meeting was held in London on 21-23 January 2014, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Wednesday's joint session on insurance contracts and Thursday's sessions on IFRS Interpretations Committee issues, amendments to IAS 1, and leases (together with the FASB).

Click through for direct access to the notes:

Wednesday, 22 January 2014

Thursday, 23 January 2014

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting. Notes from the remaining sessions will be posted in due course.

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CCAB publishes guidance on developing and implementing a code of ethical conduct

27 Jan, 2014

The Consultative Committee of Accountancy Bodies (CCAB) has today published guidance on developing and implementing a code of ethical conduct. The guidance is aimed at professional accountants intending to develop or enhance codes of conduct within their organisations but CCAB believe that it can also be applied to a wider range of organisations within the private, public and not for profit sectors.

CCAB comprises of; The Institute of Chartered Accountants in England and Wales (ICAEW), The Institute of Chartered Accountants of Scotland (ICAS), The Institute of Chartered Accountants in Ireland (ICAI), The Association of Chartered Certified Accountants (ACCA) and The Chartered Institute of Public Finance and Accountancy (CIPFA).  

The guidance outlines that “an organisation’s code of ethical conduct provides guidance and support to individuals for making decisions and carrying out their work in ways that are compatible with the organisation’s values”.  It further highlights that the code of ethical conduct “sets out expected values and behaviours”, should be supported by those at the very top of the organisation, must be embedded within an organisation’s values and “must be owned by everyone”. 

The guidance ‘Developing and implementing a Code of ethical conduct: A guide for businesses and other organisations’, is not intended to be prescriptive and does not provide templates as it recognises that “each organisation is different”.  The guidance covers: 

  • Scope and objectives of a code of ethical conduct;
  • Elements of a code of ethical conduct including a mission statement, high-level values, ethical principles and specific behaviours;
  • Constructing an effective code of ethical conduct;
  • Embedding and supporting a code of ethical conduct within an organisation including training and whistle-blowing procedures;
  • Monitoring and review of the code of ethical conduct; and
  • An appendix example of the structure of a code of ethical conduct. 

The press release and full guidance can be obtained from the CCAB website.

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FEE factsheet on the new European Accounting Directive

27 Jan, 2014

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has published a factsheet on the new European Union Accounting Directive (Directive 2013/34/EU) replacing the current 4th and 7th Directives and covering both single company and consolidated accounts.

The factsheet highlights any significant changes between the 2013 Directive and the 4th and 7th Directives and also reiterates significant requirements contained in the Directive even if there has not been a significant change from the previous Directives. FEE has also prepared a document summarising the options available to Member States under the new Directive.

The 2013 Directive must be transposed into the national legislation of each Member State by 20 July 2015 at the latest and the provisions within the Directive will first apply to financial statements for financial years commencing on or after 1 January 2016.

Please click for access to the following documents on the FEE website:

Deloitte Response CP 13 15 Feedback Image

We comment on FCA proposals to strengthen minority shareholder influence in premium listed companies.

26 Jan, 2014

We have published our comment letter on the Financial Conduct Authority’s (FCA’s) consultation paper ‘CP13/15: Feedback on CP12/25 – Enhancing the effectiveness of the Listing Regime and further consultation' (“the consultation paper”).

The consultation paper sets out a package of measures designed to protect minority shareholders in premium listed companies by giving them additional voting rights and greater influence over key decisions.

We agree with the FCA’s proposals to change the protections for minority shareholders where there is a ‘controlling shareholder’ (who together, or with associates, controls at least 30% of a premium listed company) with some minor suggestions on transition to the new regime, as well as a suggestion that a different term for such shareholders may be helpful to avoid giving the impression that these rules only apply when someone exercises actual control in an accounting sense.

We welcome the FCA’s other proposals to extend some of the Listing Principles to companies with a standard listing.

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

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Consultation paper on IPSASB governance

24 Jan, 2014

The Review Group for the governance and oversight arrangements of the International Public Sector Accounting Standards Board (IPSASB) has issued a public consultation paper on the future governance and oversight of the IPSASB and IPSASs as earlier consultations found that concerns about the governance and oversight of the IPSASB are some of the reasons cited by national authorities for not adopting IPSASs. One of the possibilities mentioned is giving monitoring and oversight of the IPSASB to the IFRS Foundation's Monitoring Board and Trustees.

The consultation paper focuses on governance and oversight processes in the setting of accounting standards for the public sector and proposes changes to strengthen the position of the IPSASB and IPSASs. The consultation paper includes:

  • Background of the IPSASB.
  • Existing standard setting models.
  • The oversight and governance of the IPSASB.
  • Proposal for strengthening the IPSASB’s governance.
  • Specific questions to consider.

Among the specific questions is the following:

Question 1: Do you agree there is a need to strengthen the monitoring and oversight of the IPSASB? If so, do you favor:
  • Monitoring and oversight of the IPSASB by the IFRS Foundation’s Monitoring Board and Trustees?
  • Separate monitoring and oversight boards for the IPSASB, while it remains under the auspices of the IFAC?
  • Reestablishing the IPSASB outside of IFAC with its own monitoring and oversight bodies?
  • Another approach, including some combination or sequenced implementation (e.g., short-term/long-term approaches) of the above options?

The Governance Review Group consists of members from the World Bank, International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD), Financial Stability Board (FSB), the International Organization of Securities Commissions (IOSCO) and the International Organization of Supreme Audit Institutions (INTOSAI). 

Comments are due by 30 April 2014. The Review Group will meet in spring of 2014 to discuss the feedback received and will finalise the recommendations by the end of 2014.

For more information, see the press release and consultation paper on the OECD website.

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Agendas for January 2014 IFRS Foundation Trustees meetings

24 Jan, 2014

Agendas have been released for the upcoming meeting of the IFRS Foundation Trustees and the joint meeting of the IFRS Foundation Trustees and Monitoring Board, which are to be held in Milan on 27–28 January 2014.

The agendas for the meetings are reproduced below:

MONDAY, 27 JANUARY 2014

Joint IFRS Foundation Trustees and Monitoring Board meeting (11:30-13:00)

  • Joint update from the Chairs of the IFRS Foundation Trustees and Monitoring Board
  • Report of the Chair of the Trustees: Implementation of the strategy and governance reviews
  • Use of IFRS around the world - Learning to date
  • Report of IASB Chair - Technical activities
  • Activities of the Due Process Oversight Committee (DPOC)

TUESDAY, 28 JANUARY 2014

IFRS Foundation Trustees meeting (15:00-15:30)

  • Report of the Chair of the IFRS Foundation
  • Report of the Chair of the Due Process Oversight Committee (DPOC)

 

Agenda papers for the meetings are available on the IASB's website.

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HMRC publishes papers on the tax implications of FRS 101 and FRS 102

23 Jan, 2014

HM Revenue and Customs has published two papers which provide an overview of the key accounting changes and the key tax considerations of moving from ‘old’ UK GAAP to either FRS 101 or FRS 102.

The papers are split into two sections: 

  • The first section provides a comparison of the accounting and tax differences between ‘old’ UK GAAP and either FRS 101 ’Reduced disclosure framework’ or FRS 102 ‘The financial reporting standard applicable in the UK and the Republic of Ireland’.
  • The second section provides a summary of the key accounting and tax considerations upon transition. 

The papers highlight that the transition to either FRS 101 or FRS 102 “will impact upon the accounts in two key ways”: 

Assets and liabilities at the accounting transition date will be identified, recognised and measured in line with the requirements of the new standards; and 

Thereafter profits and losses will be recognised in accordance with the new standards. These may differ from those profits and losses that would have been reported had Current UK GAAP been retained. 

The papers include the requirements of the law as they stood at the date of the publication.  HMRC intend to update the papers “as further information is available and as new accounting standards and tax law develop”.   

FRS 101 and FRS 102 are two of the three main standards that were introduced as a package to replace 'old' UK GAAP.  They must be applied for accounting periods beginning on or after 1 January 2015, with early adoption available, subject to certain conditions.  

Click for:

Resources on UK Accounting Plus on UK GAAP:

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FRC appoint new Chairman and Deputy Chairman

23 Jan, 2014

The Financial Reporting Council (FRC) has today announced the appointment of Sir Win Bischoff as its new Chairman and Gay Huey Evans as its new Deputy Chairman.

Sir Win Bischoff will replace the current Chairman, Baroness Hogg and Gay Huey Evans, a Director since April 2012 will replace the current Deputy Chairman, Glenn Moreno.  Both begin their new roles on 1 May 2014. 

The press release can be obtained from the FRC website, here.

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FRC publishes report of its Audit Quality Thematic Review

23 Jan, 2014

The Financial Reporting Council (FRC) has today published the results of their thematic review in respect of the auditor’s identification of and response to fraud risks and the auditor’s consideration of laws and regulations. The report includes good practice observations, an overview of findings and key messages for both auditors and Audit Committees. The FRC comment that the report “should promote a better understanding of the role of auditors in these important areas and should also assist Audit Committees in discharging their oversight responsibilities”.

The FRC’s Audit Quality Review team visited the six largest audit firms to review their audit methodology, guidance and training in respect of fraud risks and consideration of laws and regulations. They also reviewed relevant aspects of the audit procedures performed on 26 audits during those visits. 

The review follows the first thematic review on auditors’ materiality judgments published by the FRC in December 2013.  Thematic reviews analyse further aspects of auditing which are not considered in detail during the FRC’s routine audit inspections of individual firms.  Thematic reviews seek to “identify both good practice and areas of common weakness” among audit firms. 

During their review, the FRC identified a number of “good practice observations” which audit firms should continue: 

Good practice observations in respect of fraud: 

Requiring specific audit procedures to be performed for listed entities, including reviewing analysts’ reports, to identify fraud risk factors.

Using forensic specialists in fraud risk discussions and in running computer assisted audit techniques (CAATs) for journal testing.

Using CAATs on all audits to test journal entries, with exceptions expected to be rare.

In relation to the risk of management override of controls, requiring completion of a final conclusions document summarising the results of all audit procedures performed and reaching an overall conclusion.

Requiring audit teams to review the results of audit work performed for all accounting estimates in one place to assess whether there are any indications of management bias. 

Good practice observations in respect of laws and regulations: 

Using a proforma document identifying the applicable laws and regulations; how they might affect the financial statements; and assessing the design and implementation of relevant controls.

Providing appropriate training and guidance to audit teams on how they should respond to the UK Bribery Act in conducting audits. 

However, alongside these good practices there were also “a number of areas where auditors should improve the quality and effectiveness of the audit procedures”.  The report identifies areas where improvement is required and provides a number of key messages for auditors to address these:  

Key messages in relation to fraud: 

  • Auditors should increase their focus on identifying fraud risk factors in both planning and conducting the audit.  This would include ensuring that fraud risk discussions during planning are partner led and focus on identifying fraud risk factors as well as those risks of misstatement in the financial statements due to fraud.
  • Auditors should reassess fraud risk factors that arise during the course of the audit at the end of the audit and form a conclusion as to whether fraud risks have been reduced to an acceptable level.
  • Auditors should ensure that their approach is tailored to the entity they are auditing.
  • Auditors should always evaluate the design and implementation of the entity’s internal controls to detect and prevent fraud risks.
  • Once auditors have considered all relevant audit evidence obtained during the audit they should form an overall conclusion relating to the risks of material misstatement due to fraud.
  • Audit quality in this area will be increased with more frequent and up to date training. 

Key messages in relation to laws and regulations: 

  • Auditors should have a greater understanding of the laws and regulations that affect the entity they are auditing including those that have a direct or indirect impact on the financial statements.
  • Discussions with management should include management responsible for compliance matters and should concentrate on identifying laws and regulations that have a direct impact on the financial statements and whether the company is in compliance.
  • Auditors should perform design and implementation testing to evaluate compliance with laws and regulations and should exercise greater professional skepticism in relation to possible breaches.
  • Audit quality in this area will be increased with more frequent and up to date training. 

The report recognises that Audit Committees “play an essential role in ensuring the quality of financial reporting”.  To assist them, the report summarises a number of areas to enhance Audit Committees’ oversight of the audit process in relation to fraud risks and laws and regulations: 

Key messages in relation to fraud: 

Audit Committees should expect to discuss fraud risk factors with their auditors.

Audit Committees should ensure they have reviewed the key controls in place to mitigate the risk of material misstatement in the financial statements due to fraud and discuss these with their auditors.

Audit Committees should discuss with their auditors how they have concluded on their audit procedures to respond to the risks of material misstatement due to fraud. 

Key messages in relation to laws and regulations: 

Audit Committees should discuss with their auditors the relevant laws and regulations affecting the business that have, or may have, a material impact on the financial statements.

Audit Committees should ensure they have reviewed the key controls in place to mitigate the risk of material misstatement due to non-compliance with laws and regulations and discuss these with their auditors.

Audit Committees should ensure that the entity has appropriate processes and controls in place in response to the UK Bribery Act 2010 and enquire as to the steps that their auditors are taking to address this risk.

Audit Committees should seek to understand how compliance with relevant laws and regulations has been addressed by their auditors during the audit. 

The FRC “will expect to see improvements in the areas identified” in future inspections of individual firms. 

The press release and full report can be obtained from the FRC website.

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