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News

CMAC (Capital Markets Advisory Committee) (mid blue) Image

CMAC seeks members

17 Jan 2020

The Capital Markets Advisory Committee (CMAC) is seeking new members and welcomes applications from analysts and investors from all over the world.

New members will start on 1 January 2021 for a term of three years, renewable once for a further three years. For more information, see the press release on the IASB website.

FRC Image

FRC amends eight ISAs to reflect conforming amendments arising from the revision of ISA (UK) 540 (Revised)

16 Jan 2020

The FRC has released eight updated ISAs (UK), amended to include conforming amendments arising from the revision of ISA (UK) 540 (Revised) – Auditing Accounting Estimates and Related Disclosures.

All of the conforming amendments have an effective date of 15 December 2019, and were approved by the FRC Board in December 2018. The conforming changes were included as an Annexure to ISA (UK) 540, and have now been added to the text of each standard.
 
The revised ISAs (UK) are:  200, 230, 240, 260, 500, 580, 700 and 701.

A link to the updated ISAs is available on the FRC website here.

A link the eight updated standards is available on the FRC website here.

FRC Image

FRC calls for better governance reporting as companies adopt the 2018 UK Corporate Governance Code

16 Jan 2020

The Financial Reporting Council (FRC) has published its annual review of the UK Corporate Governance Code.

The report includes commentary on the quality of reporting against the 2016 UK Corporate Governance Code but it is the comments on ‘early adoption’ of the 2018 Code where the FRC is setting out its clear expectations for companies about to report on the new Code.

Issuing the report, the FRC’s Chief Executive, Sir Jon Thompson said:

While there are examples of high-quality governance reporting from ‘early adopters’, looking ahead we expect to see much greater insight into governance practices and outcomes reporting on a range of key issues from diversity to climate change.  Concentrating on achieving box-ticking compliance, at the expense of effective governance and reporting, is paying lip service to the spirit of the Code and does a disservice to the interests of shareholders and wider stakeholders, including the public.

The FRC makes clear that they wish to see a much greater focus on the practical activities and outcomes of implementing the Principles of the 2018 Code. It is felt that many governance reports lack information on the outcomes of governance policies and practices, including any areas for future development.

Specific expectations set out in the report:

  • Purpose – the FRC has observed that too many companies substituted what appeared to be a slogan or marketing line for their purpose or restricted it to achieving shareholder returns and profit. This approach is not acceptable for the 2018 Code. The FRC recommends that companies consider the guidance provided in the Financial Reporting Lab’s report Business model reporting; Risk and viability reporting – Where are we now? which considered company purpose and provided some good practice examples of purpose statements.
  • Culture – there is an expectation that companies have progressed their work on assessing and monitoring culture during 2019 and that more detail will be provided on the value and effectiveness of chosen practices, the range of metrics used and the role of internal audit in assessing and/or monitoring of culture.
  • Workforce engagement – 2020 annual reports should make it clear how the workforce engagement mechanisms used have achieved the objective of Provision 5 of the 2018 Code and include details or real examples of what a company has done to consider and, if appropriate, take forward matters raised by the workforce.
  • Section 172 reporting – disclosures must include the concerns raised by stakeholders, how companies have understood the issues, and how they have thought carefully about how these impact on the long-term success of the company.
  • Chair tenure – where a chair has been on the board for nine years or more, the FRC expects these companies to set out their rationale for this situation and their proposals for the future composition of their boards.
  • Succession planning – there should be more focus on providing information on how the company plans for the various types of succession that exist rather than on the appointment process.
  • Director re-election – AGM notices should make clear the reasons for an individual’s re-election, specifically linking their contributions to company strategy, risks or similar key issues referenced in the annual report.
  • Diversity and inclusion – there should be more detailed commentary on all aspects of diversity in future disclosures rather than just gender. In addition, companies need to report against their objectives as set out in the company’s policy on diversity and inclusion.
  • Remuneration – companies are encouraged to use more non-financial metrics to measure their annual bonus and LTIP awards. Future reporting will also need to provide insight into both how workforce pay influences pay policy, and how any new pay policies are communicated to the workforce. Malus and clawback provisions are vital for remuneration committees in terms of exercising their oversight duties and full details of these arrangements should be provided. Finally on remuneration, there is an expectation that companies should explain how will they align executive pension contribution rates with their workforce.
  • Viability reporting – companies should take time to consider the Financial Reporting Lab report on Risk and Viability Reporting to improve future disclosures. The FRC also signals that it intends to consult and issue updated guidance on Guidance on Risk Management, Internal Controls and Related Financial and Business Reporting, taking into account the Kingman and Brydon reviews.
  • Explanations – these should be sufficiently clear to be convincing and understandable to all shareholders without the need to contact the company.
  • Relations with shareholders – all types of vote (including abstentions) should be taken into account when considering whether there has been any significant minority dissent to a resolution.

A press release and the full report is available on the FRC website. 

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European Union formally adopts IBOR amendments

16 Jan 2020

The European Union has published a Commission Regulation endorsing 'Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)'.

The amendments are a first reaction to the potential effects the IBOR reform could have on financial reporting and deal with pre-replacement issues (issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark); the IASB has already begun work on a second phase of the project that deals with replacement issues (issues that might affect financial reporting when an existing interest rate benchmark is replaced).

The European Union effective date is the same as the IASB effective date (1 January 2020).

The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 16 January 2020.

GPF (Global Preparers Forum) (mid blue) Image

GPF seeks members

15 Jan 2020

The Global Preparers Forum (GPF) is seeking new members with an emphasis for candidates from Africa, Asia-Oceania, and European regions with a background in technology and/or retail.

New members will start on 1 March 2020 for a term lasting between two-to-five years. For more in­for­ma­tion, see the press release on the IASB’s website.

AcSB (Accounting Standards Board - Canada) Image
ASBJ (Accounting Standards Board of Japan) Image

AcSB and ASBJ hold joint meeting

14 Jan 2020

On 13 January 2020, the Canadian Accounting Standards Board (AcSB) and the Accounting Standards Board of Japan (ASBJ) held a joint meeting in Toronto. The meeting was the first bilateral meeting between the two standard-setters.

At the meeting, the AcSB and the ASBJ both introduced their respective financial reporting frameworks and activities, and exchanged views on the opportunities for cooperation. They also discussed specific technical topics in which both Boards have interest, including insurance, revenue recognition and leases. The two standard-setters plan to continue to exchange views.

For more information about the meeting, see the press release on the ASBJ website.

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Summary of the December 2019 MCCG meeting

13 Jan 2020

The IASB has published a summary of the Management Commentary Consultative Group (MCCG) meeting held on 13 December 2019.

The meeting focused on topics for further input, an overview of the staff’s current proposals, and supporting the adoption of the Practice Statement.

The topics for further input were:

  • information on intangibles and ESG matters in management commentary;
  • the meaning of ‘management’s view’;
  • the entity’s purpose; and
  • guidance on narrative coherence.

For more information, see the summary on the IASB website.

ICAS (Institute of Chartered Accountants of Scotland) (lt green) Image

ICAS report on fair value measurement of financial instruments

13 Jan 2020

The Institute of Chartered Accountants of Scotland (ICAS) has released a report examining the preparation and evaluation of fair value measurements for financial instruments reported in the financial statements.

ICAS joined forces with the International Association of Accounting Education and Research (IAAER) and the International Audit and Assurance Standard Board (IAASB) to commission qualitative research on the valuation of financial instruments. Previous research had been done from the perspective of auditors, but this research focuses on the perspective of the valuation specialist.

While the report notes no distinct differences across geographical regions, it analyses pressure points and potential conflicts in the four phases of the production of fair value measurements reported in financial statements: 1) project acquisition and planning; 2) scoping, valuation approach, and methodology; 3) estimate preparation and relationship management; and 4) negotiations and final estimate reporting.

The report does include some policy recommendations for regulators, standard-setters, and other stakeholders:

  • Auditors and regulators should consider the relative advantages and disadvantages of adopting the independent estimate approach as best practice when evaluating clients’ fair value measurements;
  • Standard-setters should consider strengthening auditor awareness of the effects of budget and timeline pressures, and scope constraints, and encourage a more collaborative team-based approach between auditors and specialists;
  • Regulators should consider incorporating an evaluation of management’s competence related to fair value measurements as a component of the auditors’ risk assessment process; and
  • Standard-setters should consider enhancing corporate governance by promoting understanding of the subjectivity inherent in fair value measurements among the board and audit committees.

Please click to access the full report on the ICAS website.

 

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Agenda and pre-meeting summaries for the January 2020 IFRS Interpretations Committee meeting

09 Jan 2020

The IFRS Interpretations Committee will hold a video meeting on Tuesday 21 January 2020 to finalise one agenda decision.

The whole meeting is scheduled to last only 30 minutes.

The full agenda and our pre-meeting summaries for the meeting can be found here. We will update this page for any changes to the agenda and our meeting notes as they become available.

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

EFRAG publishes December 2019 issue of 'EFRAG Update'

08 Jan 2020

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during December 2019.

The update reports on the EFRAG conference call on 11 December, the EFRAG Board meeting on 18 December, the EFRAG Technical Expert Group meeting on 4 to 5 December, the meeting of the EFRAG CFSS and EFRAG TEG on 4 December and the meeting of the European Lab Steering Group on 3 December.

The update also lists EFRAG publications issued in December:

Please click to download the December EFRAG Update from the EFRAG website.

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