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EFRAG draft comment letter on the materiality exposure draft

27 Nov 2015

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on IASB exposure draft ED/2015/8 'IFRS Practice Statement - Application of Materiality to Financial Statements'.

In its draft comment letter, EFRAG expresses the view that the proposed guidance could be helpful, in particular in the context of disclosures, in order to provide a common ground for applying judgement in deciding which information is relevant for users and fostering thinking on how materiality is applied. EFRAG also believes that it is appropriate that the guidance takes the form of a practice statement as the essence of the proposed guidance is to foster the exercise of judgement, i.e. work on a mindset. Nevertheless, EFRAG believes that the draft practice statement should be drafted in a more concise and practical way and focus on the key steps of the process necessary to make decisions and exercise judgement on materiality.

Comments are requested by 15 February 2016. For more information, see the press release and the draft comment letter on the EFRAG website.

Recent sustainability and integrated reporting developments

27 Nov 2015

A summary of recent developments at the IIRC, the ACCA, the CFA Institute, and the Natural Capital Coalition.

The International Integrated Reporting Council (IIRC) announces that it will be launching the <IR> Academic Network on Wednesday, 16 December 2015 via a webinar. The session will include a welcome from the IIRC, an overview of current research on, opportunities for further research, and an introduction to the features of the Academic Network – including how to join. Please click to access the press release on the IIRC website.

The Association of Chartered Certified Accountants (ACCA) has published a report into the challenges to providing independent assurance over an integrated report. The report notes that "the big question is not how <IR> can develop to accommodate assurance, but how assurance models can be adapted to incorporate integrated reporting". Please click for the press release on the ACCA website.

The CFA Institute, a global association of investment professionals, has added Environmental Social & Governance Issues in Investments: A Guide for Investment Professionals to its portfolio of environment, social and governance (ESG) resources. The guide was developed in response to growing interest among investment professionals to better incorporate ESG issues in investment analysis, and serves as a comprehensive introduction to ESG considerations. Please click to access the press release on the CFA Institute's website.

The draft Natural Capital Protocol and Sector Guides have been launched for consultation at the World Forum on Natural Capital. The draft protocol and sector guides have been developed by the Natural Capital Coalition as a standardised framework for business to measure and value its impacts and dependencies on natural capital and to help them integrate this into their decision making. For more information, see the press release on the organisation's website.

IFRS Foundation releases training material for IFRS 9 and IFRS 15

27 Nov 2015

The IFRS Foundation's education initiative has releases slide decks to support those teaching IFRSs. The material provided now is for IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from Contracts with Customers'. Both standards are effective for annual reporting periods beginning on or after 1 January 2018 with early application permitted.

The material for IFRS 9 is four parts: (1) Objective, scope, recognition and derecognition; (2) Classification and measurement; (3) Impairment; and (4) Hedging. For IFRS 15, a synopsis that highlights the main requirements of the standard accompanies the slide presentation. All materials provided as part of the education initiative can be used free of charge. It can be accessed through the press release on the IASB website.

18th ESMA enforcement decisions report released

25 Nov 2015

The European Securities and Markets Authority (ESMA) has published further extracts from its confidential database of enforcement decisions taken by European national enforcers. This batch deals with decisions in relation to IAS 1, IAS 19, IAS 27, IAS 34, IAS 36, IFRS 5, IFRS 10, and IFRS 13.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from February 2014 to May 2015, include:


Standard Topic

IFRS 5Non-current Assets Held for Sale and Discontinued Operations

Presentation of licensed activities as discontinued operations

IAS 34 Interim Financial Reporting

Disclosures in interim financial statements

IAS 19Employee Benefits

Disclosures on post-employment benefit plans

IAS 34 Interim Financial Reporting
IAS 1 Presentation of Financial Statements

Going Concern disclosures

IFRS 10Consolidated Financial Statements

Control of an entity without holding any equity interest

IFRS 10Consolidated Financial Statements

De facto control

IAS 36Impairment of Assets

Impairment of goodwill

IFRS 13 Fair Value Measurement

Fair value measurement for fixed-rate loans

IAS 36Impairment of Assets

Carrying amounts of a cash-generating unit to be tested for impairment

IFRS 5Non-current Assets Held for Sale and Discontinued Operations
IAS 27
Separate Financial Statements

Presentation and disclosure of discontinued operations in separate financial statements

Click for access to the full report (link to ESMA website). The ESMA has also published an updated overview of all enforcement decisions ever published.

Report from autumn 2015 IFASS meeting

25 Nov 2015

A report has been issued summarising the discussions at the meeting of the International Forum of Accounting Standard Setters (IFASS) held in London on 29 and 30 September 2015.

Highlights from the meeting included:

Global IFRS issues

Michel Prada, Chairman of the Trustees, IFRS Foundation, delivered the opening remarks. He spoke on the main strategic challenges to IFRS,the current structure and effectiveness review of the IFRS Foundation, and the role and responsibilities of accounting standard-setters in an IFRS world. After his speech when answering questions he spoke at some length about percieved U.S. influence on IFRS standard-setting.

Reports from regional groups

Representatives from the Asian-Oceanian Standard-Setters Group (AOSSG), the European Financial Reporting Advisory Group (EFRAG), the Group of Latin-American Accounting Standard Setters (GLASS), and Pan-African Federation of Accountants (PAFA) explained recent developments in each of the groups.

IPSASB matters

Participants were updated on IPSASB developments since March 2015. One focus of attention was the IPSASB’s social benefits project.

Administrative matters

The next IFASS meeting will be held in Toronto on 4 and 5 April 2016.

The IFASS Chairman confirmed that she will step down after the Toronto IFASS meeting in 2016. She summarised the nomination and appointment process of the next IFASS Chairman, including a proposed timetable. A representative from the German standard-setter advised that his jurisdiction would be nominating Liesel Knorr, Past President of the Accounting Standards Committee of Germany, as a candidate for the position of IFASS Chairman.

IASB work and research programmes

IASB staff representatives rprovided an update on the IASB’s current agenda projects and identified activities that representatives could undertake to support the IASB’s project activities and the development of IFRSs. They also noted that the IASB is aware that, while its standards are principles based, many of them are very long. The staff is thinking how to simplify the IASB’s guidance and is examining FASB’s simplification project. Participants noted that simplification is harder for the IASB to accomplish versus the FASB, because of the translation problem.

Report back on IFASS member projects

Representatives from Japan and EFRAG provided an update on the goodwill project being conducted by EFRAG, the Italian standard-setter and the Japanese standard-setter. They also asked for input on the next steps to be undertaken. On an informal show of hands most participants appeared to prefer the amortisation approach.

IFRS implementation issues

The IASB Director of Implementation Activities initiated a discussion on ways of improving the IASB’s knowledge of application issues at the local-jurisdiction level. Participants were doubtful that completely consistent application is possible on each and every issue. Differing tax and other legislation would be a hindrance. The Chairman suggested that helpful hints on contentious issues emanating from local jurisdictions should be shared with IFRIC and the IASB staff. She also added that local jurisdictions could hold education and discussion sessions on issues and send those on which there is no consensus to IASB and IFRIC.

FASB Proposals to Revise Financial Statement Presentation of Not-for-Profit Organisations (NFPO)

FASB representatives provided an overview of the FASB’s April 2015 Exposure Draft proposing several improvements to the financial statement presentation requirements for not-for-profit organisations. On an informal show of hands, participants appeared to indicate that there is a need for international standards for reporting by NFPOs. Many indicated that they favoured customisation of international standards to deal with local situations. The IPSASB incoming Chair said that IPSASB would consider this issue further and report back to the group.

Topical Issues

Participants then discussed three topical issues:

  • Core inventories (presented by India)
  • U.K. GAAP: Adapting IFRS for domestic needs (presented by the UK)
  • Types of reporting frameworks used by entities raising capital in non-traditional markets (presented by Canada)

New IFASS member projects

Three new projects were introduced during this meeting, all undertaken by EFRAG:

  • Reporting income and expense in profit or loss or OCI
  • The statement of cash flows – Issues for financial institutions
  • Use of financial information by investors

Please click for the full report from the meeting.

UK FRC believes Conceptual Framework must 'embrace asymmetric prudence'

25 Nov 2015

The United Kingdom Financial Reporting Council (FRC) has commented on the IASB's exposure draft ED/2015/3 'Conceptual Framework for Financial Reporting'.

The FRC calls on the IASB to reconsider its proposed Conceptual Framework so that it properly reflects the importance of stewardship, prudence and reliability, which it considers to be fundamental to financial reporting. The FRC stresses that prudence is more than taking a cautious approach to accounting. Rather prudence requires a greater readiness to recognise losses than profits:

The reintroduction to the Conceptual Framework of a specific reference to prudence is very welcome. However, the treatment of it in the Exposure Draft — as support for the idea of neutrality — is wholly inadequate. The essence of prudence is the idea referred to in the Basis for Conclusions as ‘asymmetric prudence’ — a lower threshold for the recognition of liabilities and losses than for assets and gains — which is absent from the text of the draft Conceptual Framework itself.

The FRC adds that the term 'neutrality' that is used in the framework might be misleading and suggests it should be replaced 'unbiased'.

Finally, the FRC notes that it is "particularly odd" that the IASB acknowledges that the concept of asymmetric prudence is reflected in current accounting standards (for example in IFRS 15), but has omitted it from its draft Framework.

Please click to access the full comment letter and a corresponsing press release on the FRC website.

We comment on the proposed changes to the Conceptual Framework

25 Nov 2015

We have published our comment letters on the IASB's EDs 2015/3 'Conceptual Framework for Financial Reporting' and 2015/4 'Updating References to the Conceptual Framework (Proposed amendments to IFRS 2, IFRS 3, IFRS 4, IFRS 6, IAS 1, IAS 8, IAS 34, SIC-27 and SIC-32)'.

In our comment letter on ED/2015/3, we note that we think further improvements are necessary before the revised Conceptual Framework is issued. Please click to access the full comment letter.

In our comment letter on ED/2015/4, we agree with the proposed amendments to reference to the Conceptual Framework and with the Board’s proposed means of transition. Please click to access the full comment letter.

CFA institute and IASB discuss agenda consultation

24 Nov 2015

The CFA Institute and IASB have posted a webcast which features IASB member Patrick Finnegan discussing the IASB’s 2015 Agenda Consultation.

Specifically, Mr Finnegan discussed:

  • “the IASB’s current Agenda Consultation;
  • where the IASB stands on previously identified investor priorities, such as financial statement presentation and disclosures; and
  • how other corporate reporting initiatives and technology are influencing the IASB’s strategy and agenda-setting process.”

The webcast is available on the CFA Institute’s website.

Study finds cultural background and translation influence the interpretation of IFRSs

24 Nov 2015

The Australian Accounting Standards Board (AASB) and the Korea Accounting Standards Board (KASB) will report on a joint research project on IFRS implementation at the seventh annual meeting of the AOSSG and the next ASAF meeting in December. The project explores how cultural background and translation affect the interpretation of the terms that are used in IFRS.

The project uses the different terms of 'likelihood' that are used in IFRSs to trace the influences of cultural background and translation. The key findings arrived at so far are:

  • There are differences in interpretation of the terms between Australian and Korean accounting professionals when used in context and not in context.
  • Some terms are interpreted differently in different contexts.
  • Some terms some terms are not interpreted differently from each other.
  • Some terms are interpreted differently in different languages by Korean accounting professionals indicating that there may be a translation issue that should be addressed.
  • Some terms cannot even be translated into Korean or are translated into a single Korean term even when the IASB uses different terms.

Based on these findings, the two standard-setters make several recommendations that would apply to the IASB as follows:

  • The IASB should give considerable attention to how terms might be interpreted and translated in different jurisdictions when developing a standard.
  • The IASB should narrow the number of different terms used in standards and consideration should be given to establishing a set of terms that can only be departed from in exceptional cases.
  • If a set of ‘accepted’ terms were to be developed, the process should include consulting with specialist linguists who have familiarity with IFRS.
  • Standard-setting outreach and consultative processes should explicitly seek to obtain input on translation and interpretation issues in different jurisdictions.

As reported earlier, translation issues are a recurring motif in connection with the use of IFRSs around the word. In 2011, the Institute of Chartered Accountants of Scotland (ICAS) published a study that arrived at the conclusion that translation is not impossible, but exact equivalence is - which is something every standard-setter and regulator needs to be aware of.

Please click to access the AASB/KASB study (which is still a work in progress) as submitted for the ASAF meeting on the IASB website.

ECON announces public hearing on IFRS 9

24 Nov 2015

The Committee on Economic and Monetary Affairs (ECON) of the European Parliament announces that it will hold a public hearing on IFRS 9 'Financial Instruments' on 1 December 2015.

The hearing (from 15:00 to 16:30) will see presentations by invited experts followed by a discussion between ECON members and the experts. The hearing will be webstreamed on

The ECON is currently paying close attention to IFRS 9 and its possible endorsement. Only recently, the Committee commissioned four studies on the standard.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.