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.

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:

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.

The agendas for the meetings are reproduced below:

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

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:

• FRS 101 Overview Paper: Tax implications (link to HMRC website)
• FRS 102 Overview Paper: Tax implications (link to HMRC website)

Resources on UK Accounting Plus on UK GAAP:

• Choosing your GAAP
• UK GAAP 2014: UK GAAP in your pocket 

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.

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.

The possible need for International Financial Reporting Standards to include a disclosure requirement for a net debt reconciliation arose from the feedback from the disclosure forum and had earlier been considered in the financial statement presentation project. In the Feedback Statement from the disclosure forum, the IASB noted the following:

Over the last five years investors have consistently asked the IASB to introduce a requirement that entities must disclose and explain their net debt reconciliation. This is an example where users think that adding a requirement might reduce clutter by specifying about how debt information should be disclosed.

At its October 2013 meeting, the IASB discussed the possibility of including disclosures about 'net debt' as part of possible short term amendments to IAS 1 Presentation of Financial Statements. The IASB decided not to include any proposals on net debt in the short-term amendments to IAS 1, but instead consider this matter separately within another part of the IASB's overall disclosure initiative project. As this meeting, IASB members also noted a possible need for transparency about cash, any restrictions on cash, and tax effects on cash.

Following on from these discussions, the publication survey responds to constituent feedback from investors and analysts "that they would like more information about period-on-period changes in debt to be included in audited financial statements" and is designed to assist the IASB in identifying specific information needs and how the information is used.

The survey explores topics such as:

• Whether investors and analysts consider debt in the analysis of an entity and how such information is used
• Whether understanding the reasons for period-on-period movements in debt is important, and if so, whether analysis is undertaken on total debt, key components, or both, and whether non-cash movements are considered
• Feedback on the adequacy of information currently provided by entities and where information about debt should be provided (e.g. management commentary, financial statements, presentations)
• Whether debt should be defined in IFRS, even if this increased the complexity and timeline of any possible IASB project
• Experience with significant restrictions and/or cost to an entity from an ability to access or move cash, where such information is currently derived if available, and whether this aspect should be considered in any project

The survey includes a table illustrating a possible period-on-period movement in debt (noting that this is not currently specifically required by IFRS), which is reproduced below:

The survey closes on 21 February 2014 and can be accessed on the Investor resources page on the IASB's website.

The EHRC comment that the focus of the project will be on: 

recruitment practices of corporate companies at board level including the use of head hunters in supporting FTSE 350 companies in filling board level appointments, open advertising of positions and the role of Chairs in ensuring more equal, transparent and open practices.  

The project follows calls from the government for companies to “seize the opportunity and increase the number of women in their boardrooms".  Despite latest figures highlighting that the proportion of women on boards continues to increase, there is still a requirement for further appointments in order to achieve 25 per-cent female representation by 2015 as set by Lord Davies in his report in February 2011 (link to the Department for Business, Innovation and Skills website). 

Amendments to the UK Corporate Governance Code in 2012 require companies to set out clear disclosures on diversity, including gender, any measurable objectives that they have set for implementing the policy, and progress on achieving the objectives.  

Click for:

• EHRC press release (link to EHRC website).
• UK Accounting Plus January news item on women on boards

More information about the issues is set out below:

You can access all our comment letters to the International Accounting Standards Board, IFRS Foundation, and IFRS Interpretations Committee here.

This publication reflects recent changes to reporting requirements. The front half provides guidance on the application of the new requirements for a strategic report which replace the business review within the directors’ report.  This includes new requirements on the company’s strategy, business model, human rights and gender diversity.  The directors’ report illustrates the new requirements on greenhouse gas emissions. 

The front half also illustrates the new form of directors’ remuneration report including the ‘single figure’ for each director.  The disclosure requirements of the now effective 2012 UK Corporate Governance Code have also been illustrated.

The back half of the publication illustrates the mandatory adoption of IAS 19 Employee benefits (revised) and IFRS 13 Fair value measurement.  Also illustrated is the adoption of the 'suite of five' issued in May 2011— IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, and the revised versions of IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures.  Although companies reporting under IFRSs as adopted by the EU have been given an extra year to comply (1 January 2014), the early adoption of these new standards has been illustrated.  From the perspective of the model annual report, the key change is a lot of extra disclosures, particularly around non-controlling interests.  

An overview of the UK regulatory framework is provided at the start of the publication.  This is followed by the narrative statements that are typically found in the front half of annual reports.  The back half of the publication contains model financial statements.  Detailed commentary is provided throughout outlining the disclosure requirements with cross references, inter alia, to the requirements of International Financial Reporting Standards, the 2006 Companies Act, the Listing Rules, the Disclosure and Transparency Rules and the UK Corporate Governance Code.   

This publication is based on legislation (the Companies Act 2006) and regulation in issue as at 15 October 2013 which is effective for years beginning on or after 1 January 2013 (including the new requirements of company law for periods ending on or after 30 September 2013). There may be changes to the law or accounting standards subsequent to that date.  In addition, the interpretation of IFRSs will continue to evolve over time.

Orders for Deloitte’s GAAP publication may be placed via the LexisNexis website.