The agenda for the meeting is summarised below:

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

For lessees, the Exposure Draft ED/2013/6 Leases proposes the recognition of a liability and a right-of-use asset for all leases with a profit or loss impact dependent on the classification of a lease. The lessor model in the ED is similar to current lease accounting with some nuances for the recognition of revenue and discounting of the residual asset. The proposals are only applicable for leases with a lease term of more than 12 months.  

ESMA agrees that IAS 17 Leases, which does not require a lessee to recognise assets and liabilities arising from operating leases, “fails to provide complete and useful information regarding the financial position of lessees”.  They also agree with the improvements in lessor accounting proposed by the IASB. 

ESMA comment: 

By requiring the recognition of assets and liabilities arising from all lease contracts except for short term leases, we believe that financial statements will serve as a better basis for determining financial ratios, thus contributing to increased transparency for users of financial statements 

Commenting on the proposed dual model, ESMA feel that this “better reflects the significant differences in the economics of leases depending on the substance of the contract” and is an improvement on the 2010 ED. 

However, there are a number of areas where ESMA feels that the IASB should make improvements to the ED.  Their key concerns are: 

• Additional guidance should be provided to “assist preparers in assessing whether they have the right to control the use of an identified asset” and “for determining when protective rights are deemed to be substantive and prevent a lessee from controlling the use of the asset”.  ESMA feel that this will “promote consistent application and limit the potential issues of enforceability that may arise”.
• Additional clarification and guidance should be provided on “how to determine whether variable lease payments are “in-substance fixed payments”” as ESMA are of the view that the guidance in the ED may not cover all types of variable lease payments that might qualify as “in-substance fixed payments” and lack of guidance may lead to inconsistent application.
• Clarification should be provided as to the meaning of the concepts of “substantially all”, “major part” and “insignificant” used in the ED.
• That the application of paragraph 23(c) of the ED may “result in accounting for a contract as a lease when the lease component in the contract is significant”.
• That “structuring opportunities and issues of enforceability may occur in relation to leases of non-property assets”.  ESMA are concerned that companies may structure contracts to benefit from the different presentation requirements between Type A and Type B leases.

The full comment letter, including detailed responses can be found here (link to ESMA website).

The Financial Institutions IFRS Conference will feature a keynote address by IASB Chairman Hans Hoogervorst and consist of panel discussions and technical break-out sessions held by IASB members, senior IASB technical staff, and other IFRS experts on IFRS 9, IFRS 10, IFRS 12, and current IASB projects (classification and measurement, impairment, macro hedge accounting, leases, and insurance contracts).

More information on the conference is available on the ICAEW website.

Section 409 of the Companies Act 2006 requires that companies disclose a complete list of their subsidiaries in the notes to their financial statements which are submitted to Companies House.  Where the number of subsidiaries is too extensive, Section 410 of the Companies Act 2006 permits a company to list the ‘principal’ information in their financial statements and then provide the full listing within their next annual return. 

Companies House have written to those companies where disclosure was incomplete and will continue to monitor full compliance by FTSE 350 companies on a permanent basis.   

At a time when corporate transparency is coming under increasing scrutiny, not least with the recent endorsement by G20 finance ministers on a new global standard, it is important that all companies comply with the Companies Act requirements. 

Click for (all links to BIS website):

• Press release
• Companies House report on FTSE 350 companies and the disclosure of their subsidiaries.

‘Micro companies’ are defined as those not exceeding two out of three of the following thresholds:

• Balance sheet total: £316,000
• Net turnover: £632,000; and
• Average number of employees during the financial year: 10 (or fewer).

(The sterling equivalent figures are based on the exchange rate ruling when the directive came into force on 19 July 2013).

EU Directive

The “Micros Directive” (link to EU website), published by the EU, provides a number of reduced disclosures and certain recognition exemptions for ‘micro companies’, although these are Member State options (see below for BIS’s proposals for the UK).  Under the “Micros Directive” 'micro companies' need only prepare an abridged balance sheet and abridged profit and loss account and very limited disclosure notes. 'Micro companies' do not need to present prepayments and accrued income and accruals and deferred income.  They are also not required to recognise certain prepayments and accrued income and accruals and deferred income. The resulting accounts ‘shall be regarded as giving a true and fair view’ notwithstanding the omission of many disclosures which would generally be regarded as necessary to give such a view.

UK Implementation

In February 2013, BIS consulted on the implementation of the “Micros Directive” in the UK. The consultation stated that the Government was minded to implement changes to legislation to enable UK companies to take advantage of the exemptions contained within the directive. Views were sought on each separate exemption with a view to determining the correct approach to implementation in the UK.  Whilst many supported the application of the “Micros Directive” in the UK a number of respondents did express concern over certain areas such as:

• The impact of the changes on the “true and fair” principle, most notably the relationship between accounting standards and the exemptions for 'micro companies';
• The proposed exemption from the requirement to present certain prepayments and accrued income and accruals and deferred income and partial exemption from the requirement to recognise prepayments and accruals; and
• The impact of the changes on the accruals accounting framework.

BIS has now prepared their final proposals entitled ‘Simpler Financial Reporting for Micro-entities: The UK’s proposal to implement the “Micros Directive”’ which takes all of the responses into account.

They propose:

• To incorporate all parts of the “Micros Directive” with the exception of the parts which would remove the obligation to
  • (i) present prepayments and accrued income and accruals and deferred income; and
  • (ii) recognise only certain prepayments and accrued income and accruals and deferred income.
• To exclude charities from the scope of the exemptions.

BIS have stated that they are “exploring how best to ensure that the directive’s requirement that “Micros” accounts are true and fair can best be reflected in the implementation”.  The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that 'micro companies' will need to weigh up the risks involved in providing reduced financial information to finance providers and other stakeholders before deciding whether to take up the reduced disclosure options. 

BIS intend to lay regulations, based on these proposals, before parliament shortly.  Once approved it is likely that amendments will be required to the FRSSE, at least to disapply those disclosure requirements which go further than the very limited disclosures which will be required by law.

Click for (link to BIS website):

• Press release
• Simpler Financial Reporting for Micro-entities: The UK’s proposal to implement the “Micros Directive” – Government response
• Simpler Financial Reporting for Micro-entities: The UK’s proposal to implement the “Micros Directive” - Consultation

The beta version of this web app provides eIFRS Subscribers online and offline access to the Standards. Other related information—including news, the IASB Work Plan, project pages and meeting details—is available to non-subscribers.

More information and a link to the app are available on the IASB website.

In May 2013, EFRAG published a draft comment letter on ED/2013/5 and asked for its constituents to comment. EFRAG's final comment letter to the IASB contained constituent feedback, and officially disagreed with the interim project.

EFRAG notes in its comment letter that if the IASB proceeds to issue an interim standard based on the ED, that the standard must be strictly limited to an option for first-time adopters.

Please click for access to the final comment letter on the EFRAG website.

At the end of this month a whole range of changes in UK corporate reporting comes into force. The part of the directors’ report that used to be known as the business review will become the strategic report. The Financial Reporting Council describes the changes in law as ‘relatively modest’ but they herald a new era of corporate communication.

There is a long history of efforts to encourage greater narrative explanation of what a company has done, is doing, and where it is going. Operating and financial reviews and similar initiatives have come and gone. They have tended to arrive with fanfares and then expire through a lack of commitment and regulatory interest.

But now we have a different approach. It is collaborative and gentler. But the aim is, if anything, more ambitious. This time the aim is to spark change rather than impose it. And also to pass the means of doing so to companies themselves.

The hope is that this will result in much clearer corporate reporting with a greater emphasis on narrative and non-financial measures. And the current tranche of changes deal with everything from directors’ remuneration to carbon footprints and diversity. But the FRC wants the ‘modest’ changes to bring about far-reaching change. ‘They should’, it says, ‘act as a catalyst for entities to prepare more concise and relevant narrative reports’. Hence its recently-released exposure draft on ‘Guidance on the Strategic Report’. The accent is on encouraging innovation and experimentation. It is about companies taking more responsibility themselves over what they put into their narrative, where they put it, and how they go about explaining what they are doing. It is intended to improve their communications.

And the guidance has been produced alongside the current momentum towards integrated reporting. The FRC has ‘met and shared ideas with the International Integrated Reporting Council, (IIRC), throughout the development of this guidance’, it says. For his part the CEO of the IIRC, Paul Druckman, points out that the new draft guidance supports ‘a shift in the mind-set of a business away from rigid compliance, and towards the better communication of its individual value creation story for its providers of financial capital’.

That is where the difference lies. What we are talking about now is not slotting pedantic detail into pre-ordained places. This is about broad frameworks and the onus moving to companies to choose the best ways to get their story across.

And this is also what this new website is about. It is about providing a huge range of information and comment in an easy form to help directors and companies refine their strategic and decision-making processes.

Click for:

• Our project page on narrative reporting
• Our resource page on integrated reporting

UK Accounting Plus will give users a comprehensive free source for all UK accounting, reporting and corporate governance news and information. It provides latest news and commentary backed up by a vast archive of background information and insight to set current events in context. Formats of updates include news stories, commentary, think-pieces, videos and podcasts  As with the global IAS Plus site, users can personalise the site by selecting particular topics of interest and viewing news and publications about them. They can also subscribe to various financial reporting and corporate governance related communications and publications that interest them.

Access to the new UK Accounting Plus as well as the global IAS Plus site will continue to be free of charge for all users. The two sites remain connected, and switching between the UK site and the global site is easy using the pull-down menu in the upper right corner from anywhere on the site.

You can take a tour of UK Accounting Plus and its main features by watching our video

The proposed interim release contains additional taxonomy concepts that reflect new IFRSs and improvements to IFRSs published by the IASB and technical updates and corrections. It includes (1) amendments reflecting the recent IAS 36 narrow-scope amendments; (2) a structural update of taxonomy modularisation changes; and (3) a new documentation linkbase.

This interim release is part of an accelerated timeline for the release of the IFRS Taxonomy 2014. The final version is expected to be published in early 2014. 

The Exposure Draft IFRS Taxonomy 2013 Interim Release Package is open for comment until 11 November 2013.

The press release is available on the IASB website.