IFAC states that there is growing recognition that in addition to capturing the financial information organisations prepare and use in managing and directing their business, it is important to capture and report other, largely non-financial, information. Financial reporting cannot satisfy all information needs and stakeholders continue to seek more and different information that they find relevant to their decision making. This includes, but is not limited to, information pertaining to an organisation’s strategy, governance, risk management, human resources, and approach to broader sustainability issues, including environmental and social issues.

However, IFAC recognises that there are a range of different organisational reporting frameworks and regulations available and being developed (among them IIRC, GRI, UN Global Compact, CDSB, IPSASB, SASB, and OECD Guidelines for Multinational Enterprises), and considers it important to examine the relationship between these frameworks and promote global consistency and convergence:

IFAC considers it vital that regulators, standard setters, and others involved in the development of reporting frameworks recognize and promote not just the need for enhancing organizational reporting, but also the need for globally consistent and convergent practices and arrangements. The challenges associated with convergence of financial reporting arrangements in the last decade provides a sound reason for all parties to aim to agree on a consensus, or at least the identification of the relationships and consistency between the different frameworks, at the earliest possible time.

Please click for the following information on the IFAC website:

• IFAC press release
• Enhancing Organizational Reporting - two page overview
• Enhancing Organizational Reporting - full Policy Position Paper

After its January 2013 public discussion forum on disclosure, the IASB issued a feedback statement that consisted of the forum's discussions, the IASB's response, a summary of work already undertaken on disclosure, and the outcomes of the IASB's survey issued in December 2012. In June 2013, Chairman Hans Hoogervorst announced a 10-point plan as the first step to this initiative.

The Disclosure Initiative group consists of members of the IASB standard-setting team and its eXtensible Business Reporting Language (XBRL) team. By including the XBRL team in the standard-setting process, the group can also improve how electronic filing of financial information is presented. The group will also be assist by the German national standard-setter, the DRSC.

The integration of the XBRL team into the IASB’s work programme is a component of the XBRL strategic review performed by IFRS Foundation Trustees.

Please click for:

• Press release (link to IASB website).
• IAS Plus project page on the Disclosure Initiative.

The working group opens its comment letter on the IASB's ED/2013/6 Leases by expressly stating that the concepts developed fit well into the world of Islamic accounting and prominent Sharia'a scholars commend the IASB for the proposals.

However, the working group also stresses that not less but even more guidance is needed for distinguishing between a lease and a sale. The 2010 Exposure Draft ED/2010/9 Leases contained some guidance which was particularly important for ijarah muntahia bittamleek (lease contracts followed by a legally separate contract to transfer ownership of the underlying asset) and which would have clearly resulted in many (if not most) ijarah muntahia bittamleek being treated as a sale. The elimination of that guidance is from an Islamic viewpoint not clarifying but may instead lead to confusion and may result in disparate reporting of ijarah muntahia bittamleek that are economically similar.

The working group also points out that superseding SIC-27 Evaluating the Substance of Transactions in the Legal Form of a Lease is problematic from an Islamic viewpoint in connection with sukuk ijarah where an entity transfers an asset to a special purpose entity which will 'sell' proportionate ownership of the asset to investors/financiers. The investors/financiers then lease the asset to the original transferor entity.

The principles in SIC 27 are currently crucial in assessing whether a sukuk ijarah should be accounted as a financial instrument under IAS 39/IFRS 9 or as a sale and leaseback under IAS 17. The loss of SIC 27 may have negative repercussions, especially since sukuk ijarah structures form a substantial portion of the Islamic capital market in many jurisdictions.

The comment letter also contains references to several implementation issues that may not necessarily require amendments to the exposure draft.

Please click for more information in the comment letter from the AOSSG Islamic Finance Working Group which is attached as Appendix B to the general comment letter on the AOSSG website.

The Initiative's Framework-based teaching project is designed to help educators train the next generation of accountants in how to make sound judgements in the preparation of financial reports in accordance with principle-based accounting standards.

Material on the different topics has been prepared in three separate sections to support Framework-based IFRS teaching students at three stages:

1. a student's first financial reporting course;
2. a financial reporting course mid-way to qualifying as a CA or CPA; and
3. a course immediately before qualifying as a CA or CPA.

(The stages are broadly defined to take into account the many different approaches to qualifying as accountants worldwide.)

Please click for the following information on the IASB's website:

• Press release
• Access to the Framework-based teaching material

On 31 October 2012, the IASB published Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), providing an exemption from consolidation of subsidiaries under IFRS 10 Consolidated Financial Statements for entities which meet the definition of an 'investment entity'.

The CSA believe the definition of 'investment entity' in IFRS 10 should capture, and therefore resolve the issue for, most investment funds and have announced that the deferral originally announced in October 2010 and later extended to 1 January 2013 will come to an end. Assuming Ministerial approvals, investment funds will therefore be required to transition to IFRS for financial years beginning on or after 1 January 2014.

The deferral of the mandatory IFRS changeover date for entities with qualifying rate-regulated activities remains in place and has recently been extended by an additional year to 1 January 2015.

Please click for:

• Press release on the CSA website
• Full text of the CSA Notice of Amendments on the Ontario Securities Commission website

The draft report, which went through its first reading, maintains that it is important to ensure that the interests of the European Union are respected and that global accounting standards are of high quality and compatible with Union law. Therefore, ECON believes the programme for supporting specific activities in the field of financial reporting should be used to ensure that public money contributed towards the functioning of international accounting and auditing standard-setting, "and in particular to the IFRS Foundation, EFRAG and the PIOB", is spent in accordance with the public interest and responding to European Union needs.

To this end the draft report contains the following suggested amendment:

Those funding arrangements depend on whether the IFRS Foundation and IASB implement the proposals of the Union regarding their governance; whether the Union accounting concepts, in particular with regard to 'prudence' and the requirement for the 'true and fair view' are appropriately considered in the revision of the Conceptual Framework; whether the IASB decides not to include those concepts in the revised Conceptual Framework; and whether the IASB provides reasons for its decision, including publishing the details of the jurisdictions, non-governmental organisations, undertakings or other stakeholders, which objected to those concepts.

Moreover, ECON suggests moving from giving six years of funding in one go to an annual assessment of whether certain criteria are fulfilled and releasing the money in stages:

Financing under the Programme shall be provided in the form of operating grants, shall be awarded on an annual basis, and shall be conditional on compliance with criteria relating to the objectives and content of the standards, and with criteria concerning developments in Union governance, namely regarding EFRAG, the IFRS Foundation and IASB.

The ECON proposed amendments will now go to official trialogue - tripartite meetings attended by representatives of the European Parliament, the Council and the Commission aimed at getting agreement on a package of amendments acceptable to the Council and the European Parliament.

Please click for access to the provisional version of the report on the European Parliament website.

In December 2012 the FASB published its proposed model on current expected credit losses, which was followed by the IASB's expected losses impairment model in March 2013. Despite global calls for a converged standard, the FASB model calls for more upfront recognition of expected credit losses than the IASB model.

In order to back its comment letter to the IASB and the FASB, the CFA Institute conducted a survey of its membership to ascertain investor preferences related to financial reporting for credit losses. More than 300 of its members responded to the survey. The key findings were:

• Respondents were almost evenly split on which proposed model they preferred (47% preferred the IASB's model, 44% backed the FASB's model).
• Respondents from the Americas preferred the FASB's proposed model (53%) to the IASB's model (41%), while the IASB's proposed model was preferred by Asia-Pacific respondents (49% to 42%) and Europe, Middle East and Africa participants (50% to 40%).
• Respondents supported fair value as a measurement method that is most decision-useful for measuring credit losses slightly more than an expected-loss model (46% to 41%). The current incurred-loss approach was supported by just 5% of respondents.
• Despite a lack of agreement regarding the model to use, 92% said the FASB and the IASB should arrive at a converged method of estimating credit losses.

Respondents also commented on which disclosures related to impairments of financial assets they felt were needed.

Please click for the following documents on the CFA Institute website:

• Credit loss and impairment survey
• Comment letter to the IASB and the FASB with a detailed analysis of the survey results

When UK entities prepare accounts, there is a legal requirement under the Companies Act (derived from EU accounting directives) that they show a true and fair view.  Observers had expressed the view that the use of IFRS will not enable this legal requirement to be achieved. 

Having sought independent legal opinion, the BIS has confirmed that “compliance with accounting standards will result in a true and fair view”.  Where this is not the case, IAS 1 Presentation of Financial Statements paragraph 19 and FRS 102 paragraph 3.4 allows that where compliance with an accounting standard may not achieve that objective, the standard may be overridden. The FRC has taken its own independent legal advice and has confirmed these findings.

The BIS and FRC believe that further improvements can be made to IFRSs and the Conceptual Framework for financial reporting, although these changes are not required to enable existing accounting standards to comply with UK company law.

In this connection, the FRC has also stated that it will continue to work towards the improvements of accounting standards and will be contributing to the comprehensive conceptual framework project of the IASB. 

Both, the FRC and the BIS believe that stewardship reporting should be included as a "primary objective of financial reporting" in the Conceptual Framework and prudence should be explicitly mentioned.  Both also believe that "clear principles are needed to describe when specific approaches to measurement, such as fair value, should be used". 

Please click for:

• BIS press release (link to BIS website)
• FRC press release (link to FRC website)
• IAS Plus project page on the IASB's Conceptual Framework project

Background

On 9 July 2009, the IASB had issued the International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs). This standard was meant to provide simplifications to the requirements in full IFRSs that reflect the needs of users of SMEs' financial statements and cost-benefit considerations. Compared with full IFRSs, it is less complex in that topics with no relevance to SMEs are omitted, policy choices are reduced, requirements in full IFRSs are simplified and disclosures are reduced.

In order to balance keeping the requirements of the IFRS for SMEs broadly in sync with those in full IFRSs on the one hand and reducing the burden stemming from regular changes to the literature on the other, the IASB had decided that the IFRS for SMEs should be subject to a review approximately once every three years. The Board had also decided that not necessarily all changes made to full IFRSs during that period would be copied to the IFRS for SMEs; rather, a change in full IFRSs would cause the Board to consider whether (and, if so, how) the current version should be amended.

The 2012-2014 review cycle

In conformity with its stated intent to review the IFRS for SMEs on a three years basis, the IASB commenced its first review in 2012. The review was initiated with the publication of a Request for Information (RfI) to solicit views from constituents as to which topics the IASB should consider for amendment. In parallel, the Board consulted its SME Implementation Group (SMEIG). The Board deliberated the feedback at its meetings in March to June 2013. When reviewing the feedback received the Board came to the conclusion not to suggest a major overhaul of the existing version, given that the Standard is still fairly new and has just been implemented by many entities. Therefore, the IASB suggested only limited amendments to the 2009 version IFRS for SMEs.

An overview of the suggested changes to the IFRS for SMEs

The vast majority of the proposed changes concern clarifications to the current text and, hence, will not constitute changes to the way entities account for certain transactions and events. A tabular overview of the sections suggested for amendments is reproduced below.

The one major exception to this general approach concerns section 29 on income taxes where the IASB had already anticipated finalisation of its proposed changes to IAS 12 Income Taxes. However, these changes were not finalised and the project was put on hold. To eliminate the difference between the key principles in accounting for income taxes in the IFRS for SMEs and IAS 12, the IASB now suggests to align the IFRS for SMEs with the current treatment in IAS 12.

Comment deadline and next steps

Comments on ED/2013/9 Proposed Amendments to the IFRS for SMEs close on 3 March 2014.

The IASB will consider the comments it receives on the proposals and will then decide whether to proceed with any of the suggested amendments to the IFRS for SMEs.

Additional Information

Please click for:

• IASB press release
• Access to the exposure draft on the IASB website
• Access to the basis for conclusion on the IASB website (requires registration in the eIFRS area)
  
• Snapshot of the proposals on the IASB website
  
• Full mark-up version of the proposals on the IASB website
  
• Our IAS Plus project page for the Comprehensive review 2012-2014 of the IFRS for SMEs