The update reflects the fact that EFRAG has issued a draft endorsement advice regarding the Improvements to IFRSs issued on 17 May 2012. Currently, final endorsement of the improvements might be expected in the first quarter of 2013.

You can find all past endorsement status report here.

Spanish translations of the three Q&As issued in 2011 were published in May 2012 which means that all seven Q&As published by SMEIG are now available in Spanish.

Q&As are non-mandatory guidance for implementing the IFRS for SMEs developed by SMEIG in the form of questions and answers (Q&As) and made publicly available to interested parties on a timely basis.

Currently, no new Q&As are being developed as the IASB has taken up a comprehensive review of the IFRS for SMEs that was formally launched at the June 2012 IASB meeting. This review will also consider whether the Q&As published so far will be integrated into the standard.

All Q&As can be accessed online (link to IASB website).

The Invitation to Comments asserts, on the basis of research and feedback the IAASB has received on its May 2011 Consultation Paper, that there is clear demand for auditors to provide greater transparency about significant matters in the financial statements, as well as the conduct of the individual audit. Further, the IAASB considers that meaningful change now, rather than incremental change over time, is seen as necessary in order to better meet the information needs of users of audited financial statements.

The Invitation to Comment includes the following key proposals:

• Auditor commentary.  Additional information would be included in the auditor’s report to highlight matters that, in the auditor’s judgement, are likely to be most important to users’ understanding of the audited financial statements or the audit. This information would be required for public interest entities (PIEs) – which includes, at a minimum, listed entities – and could be provided at the discretion of the auditor for other entities.  In the IAASB's view, this new concept of Auditor Commentary is consistent with, and builds upon, the existing concepts of Emphasis of Matter and Other Matter paragraphs included in some audit reports.  It also responds to calls for similar reforms from the US Public Company Accounting Oversight Board (PCAOB), the European Commission (EC)
• Going concern. The auditor's report would contain the auditor's conclusion on the appropriateness of management’s use of the going concern assumption in preparing the financial statements and an explicit statement as to whether material uncertainties in relation to going concern have been identified.  The report would also include a description of management’s responsibilities with respect to going concern
• Other information included with the financial statements. The report would have an auditor statement as to whether any material inconsistencies between the audited financial statements and other information have been identified based on the auditor’s reading of other information, and specific identification of the information considered by the auditor
• Other matters. Further suggestions to provide clarity and transparency about audits performed in accordance with ISAs - including the ordering of the items in the auditor's report (prominently displaying the auditor's opinion), disclosure of the engagement partner’s name in the auditor’s report, an explicit statement of compliance with relevant ethical requirements, disclosure about the involvement of other auditors in the audit, enhancements to the description of the auditor’s responsibility to explain more fully the concept of a risk-based audit and address fraud, internal control and other matters.

The Invitation to Comment includes a section illustrating an example auditor's report prepared in accordance with the proposals.

The Invitation to Comment is open for comment until 8 October 2012.  The IAASB will continue deliberations during 2012 and 2013, including holding roundtables on the proposals, and the next consultative document will be an exposure draft.

Click for IAASB press release (link to IFAC website).

As reported in our earlier story on the precursor Rio+20 Corporate Sustainability Forum, the final outcome document is quite different from the original 'zero draft' proposals which called for a "global policy framework" effectively requiring sustainability reporting.

Instead, the final outcome document reads as follows (with only slight wording changes from the pre-meeting final draft text):

We acknowledge the importance of corporate sustainability reporting and encourage companies, where appropriate, especially publicly listed and large companies, to consider integrating sustainability information into their reporting cycle. We encourage industry, interested governments and relevant stakeholders with the support of the United Nations system, as appropriate, to develop models for best practice and facilitate action for the integration of sustainability reporting, taking into account experiences from already existing frameworks and paying particular attention to the needs of developing countries, including for capacity-building.

Prior to the release of the outcome document, the governments of Brazil, Denmark, France and South Africa announced at the Rio+20 conference the formation of a group of "friends of paragraph 47".  The group's vision is that corporate transparency and accountability are key elements to enhancing the private sector’s contribution to sustainable development and that making sustainability reporting standard practice among companies will contribute to monitor the impacts on and the contribution to sustainable development by the corporate sector.

Brazil, Denmark, France and South Africa are considered pioneers in sustainability reporting practice and policy, having various degrees of sustainability reporting requirements in place.   In the press release announcing the group, it is noted that these countries are now "taking the opportunity provided by the global political agreement at Rio+20 to share their experience with the rest of the world and contribute to making corporate sustainability reporting standard practice".  The Global Reporting Initiative (GRI) and the United Nations Environment Programme
(UNEP) have been invited  to support them, and other governments have been invited to join the group.

Other governments have also announced related initiatives, such as the United Kingdom government's announcement of the introduction of mandatory carbon footprint reporting for FTSE main market listed companies.

Click for:

• Access to the Rio+20 outcome document (link to UN website, available in various languages)
• Press release "Brazil, Denmark, France & South Africa Join in Commitment to Sustainability Reporting" (link to UN website).

Mr. Kroeker came to the SEC in 2007 as Deputy Chief Accountant and has been the agency's Chief Accountant since January 2009. He guided the SEC’s efforts in its consideration of convergence of US GAAP and IFRSs.

A decision about a possible IFRS adoption in the United States is eagerly awaited internationally and any indications of what this decision might look like, what it would entail or even just when it might take place is much noticed. Mr Kroeker's remarks at the February 2012 IFRS Advisory Council meeting that "condorsement" was no longer used to characterise a possible move to IFRS in the US were seen as an encouraging message. The "few months" until the publication of final report under the Work Plan mentioned by Mr. Kroeker at the same meeting have since been updated to a "matter of weeks" in a speech given by SEC Commissioner Elisse B. Walter at the end of May. However, Julie Erhardt of the SEC Staff clarified at the June 2012 IFRS Advisory Council meeting (please click for audio recordings on the IASB website) that the report will only respond to the Commissioners' request for evidence, not contain a suggested course of action.

Whether Mr. Koeker's leaving the SEC will have an impact on the SEC's activities around IFRSs remains to be seen. This will certainly also depend on the question of who is to replace him. So far the SEC has made no announcement regarding a successor candidate.

Please click for the press release "SEC Chief Accountant James Kroeker to Leave the Commission" on the SEC website.

The Corporate Sustainability Forum was designed to provide a launching ground for greater private sector and investor involvement in sustainable development, and to call on governments to take steps that would support corporate sustainability globally.  The forum involved nearly 3,000 participants, approximately half from the business and investor community and half from civil society, academia, cities, government and the United Nations.

Some goals relevant to sustainability reporting and related topics included:

• Demonstrating the critical influence of other stakeholders – including investors, stock exchanges, business schools and universities, and cities – in stimulating corporate sustainability
• Motivating a rising number of companies to commit to universal sustainability principles and report on performance.

At the forum, the following sustainability reporting initiatives were announced:

• A commitment by five stock exchanges - NASDAQ OMX, BM&FBOVESPA, the Johannesburg Stock Exchange (JSE), the Istanbul Stock Exchange (ISE) and The Egyptian Exchange (EGX) - collectively listing over 4,600 companies - to promote sustainable investment.  This is considered a first step towards a larger global call by stock exchanges for sustainability disclosure and performance by listed companies as part of the Sustainable Stock Exchanges initiative (link to press release)*
• Chief executives of 37 banks, investment funds, and insurance companies submitted a Natural Capital Declaration (NCD) aimed towards integrating natural capital considerations into their products and services - including a call for "requiring companies to disclose the nature of their dependence and impact on Natural Capital through transparent qualitative and quantitative reporting" (details, link to NCD website)
• The release of a Declaration for Higher Education Institutions, endorsed by over 60 major business schools and universities around the world committed to incorporating sustainability issues into teaching, research, and their own management and organisational activities (details, link to initiative-specific website).

*Separately, the United Kingdom Deputy Prime Minister announced at the Rio+20 conference that all businesses listed on the Main Market of the London Stock Exchange will have to report their levels of greenhouse gas emissions from the start of the next financial year (April 2013).   The UK is the first country to make it compulsory for companies to include emissions data for their entire organisation in their annual reports (see our separate story).

Various individual organisations also pledged specific actions.

The executive summary also notes a call by investors for integration of sustainability issues within annual reports of all listed and large private companies.  To this end, the outcome document from the main Rio+20 conference contains the following updated text:

We acknowledge the importance of corporate sustainability reporting and encourage companies, where appropriate, especially publicly listed and large companies, to consider integrating sustainability information into their reporting cycle. We encourage industry, interested governments as well as relevant stakeholders with the support of the UN system, as appropriate, to develop models for best practice and facilitate action for the integration of sustainability reporting, taking into account the experiences of already existing frameworks, and paying particular attention to the needs of developing countries, including for capacity building.

This is substantially changed from the 'zero draft' version which referred to a "global policy framework" effectively requiring sustainability reporting.

The final version of the Rio+20 outcome document will be issued at the completion of the conference, being held on 20-22 June 2012.

Click for Rio+20 Corporate Sustainability Forum executive summary (link to UN Global Compact website).

Mr Goldschmid was the Commissioner of the US Securities and Exchange Commission (SEC) from 2002–2005. Currently, he is Dwight Professor of Law at Columbia University.

Please click the press release for more information.

The IASB Chairman started his speech by declaring that accounting must not be taken as an exact science - the fact that it is often regarded a bean-counting and the expectation that it can, as Sir David Tweedie, Hans Hoogervorst's predecessor, said, "keep capitalism honest" and prevent through transparency crises such as the financial crises have put accounting under a lot of pressure.

However, as Hoogervorst pointed out, accounting is full of judgments and decisions. In his speech, he cited measurement techniques, business models and intangible assets as examples. At some length he discussed the problem of the other comprehensive income ("There is a vague notion that OCI serves for recording unrealised gains or losses, but a clear definition of its purpose and meaning is lacking.") and admitted that the IASB needs to address it as there is much important information in OCI about what gains or losses are ‘sitting’ in the balance sheet. He promised a thorough review of OCI and net income in the upcoming revision of the Conceptual Framework.

After giving reasons for accounting not being an exact science, Hoogervorst turned to the question of what accounting can achieve. He stressed that IFRSs as global standards have already contributed a great deal to transparency and international comparability. He illustrated his point by comparing private sector accounting with the "anarchy" of public sector accounting. Hoogervorst left no doubt that there will always be room for improving the standards but he also stressed that this improvement should follow sensible lines that take into account what accounting can do and what it can't. To his mind, any attempt at improving the standards should be governed by three terms:

• Principles
• Pragmatism
• Persistence.

Principles to avoid rules reflecting pseudo-exactness, pragmatism in accepting that there will not always be a precise answer to every question, and persistence vis-à-vis the pressure that the IASB is continually facing in form of special interests.

Please click for the full text of the speech on the IASB's website.

Much of the focus of the Leaders Declaration is on economic growth and jobs in the context of the current economic climate in order to "work collectively to strengthen demand and restore confidence with a view to support growth and foster financial stability".

In referencing financial sector reform and fostering financial reform,  the declaration states:

We support continuing work to achieve convergence to a single set of high-quality accounting standards.

Within the broader topic of sustainable development, the declaration states the following:

We commit to continue to help developing countries sustain and strengthen their development through appropriate measures, including those that encourage inclusive green growth. We will reaffirm our commitment to sustainable development at the 2012 United Nations Conference on Sustainable Development (Rio+20). We commit to maintaining a focus on inclusive green growth as part of our G20 agenda and in the light of agreements reached at Rio+20 and the United Nations Framework Convention on Climate Change (UNFCCC).

The Rio+20 conference is being held on 13-22 June 2012 and as we have previously reported, is considering a call for mandatory sustainability or integrated reporting by the world's largest companies.

Consistent with the theme of fostering financial stability, the declaration supports various initiatives in response to the global financial crisis, including the Basel capital and liquidity framework; the framework for global systemically important financial institutions (G-SIFIs), resolution regimes, over-the-counter (OTC) derivatives reforms, shadow banking, and compensation practices.  The declaration also endorses the recommendations and the revised Financial Stability Board (FSB) Charter for placing the FSB on an enduring organisational footing, with legal personality, strengthened governance, greater financial autonomy and enhanced capacity to coordinate the development and implementation of financial regulatory policies.

Click for Leaders Declaration — Los Cabos (link to the G20 website).

This Update aims to provide UK listed companies with issues that may occur when responding to the heightened economic uncertainty when preparing their interim financial reports. The Update notes the following issues to consider:

Click for:

• FRC report: An Update for Directors of Listed Companies: Responding to heightened country and currency risk in interim financial reports (PDF 201 KB, link to FRC website)

• Our earlier story on the January 2012 FRC Update