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2017

PIR of IFRS 13 to be substantiated by a literature review

24 May 2017

The IASB will launch the public phase of the post-implementation review (PIR) of IFRS 13 'Fair Value Measurement' either later this week or early next week (in "May" according to the IASB's work plan). The IASB is now also calling for applications to undertake a literature review on the effect on IFRS 13.

The call for research seeks applications to undertake a literature review, bringing together the existing academic literature on the effect of implementation of IFRS 13 Fair Value Measurement. The IASB expects to receive a full literature review and a summary, which highlight findings in the existing literature as they relate to the areas of focus in the Board’s PIR of IFRS 13.

Please click to access the call for applications on the IASB website.

The Bruce Column — How to ensure that finance takes you into the future

23 May 2017

In a wide-ranging video interview about the Finance for the Future Awards with our regular, resident, columnist, Robert Bruce, Jessica Fries, Executive Chairman of the Prince’s Accounting for Sustainability Project and Alan Stewart, one of the lead judges of the awards, and CFO at Tesco, looked at the achievements and growing value of the programme.

The Finance for the Future awards, which recognise and celebrate the role that finance and finance teams can play in creating sustainable businesses and in turn a sustainable economy, are back and open for entries.

Over half a decade of achievement in many types of business, small and large, not-for-profit and public sector, has created a formidable series of case studies of examples to inspire organisations all around the world.

The addition of Deloitte as the awards’ major sponsor widened the scope to include the recognition of the importance of communicating the use of integrated thinking and investing and financing. But overall: ‘The key word is finance’, said Jessica Fries. ‘Whether it is large businesses and the role that the CFOs and finance teams can play, through to small businesses, the public sector and indeed how do you actually finance a sustainable business’.

‘Finance is changing, the role of finance is changing’, said Alan Stewart. ‘The forward looking element, the linkage into the businesses, and particularly in the field of sustainability as companies and customers become more focused on the need for sustainable businesses and sustainable practices. These awards really help put the focus on that’, he said. And they also provide, through the gradual creation of case studies from winners and entrants, a mass of examples. ‘And that counters the view that we sometimes got that felt finance was a blocker rather than making a positive contribution’, he said. ‘The awards really highlight those case studies and bring the stories to life’, said Fries. And it all helps the communication of the integrated thinking which brings much of this about by helping explain how ‘environmental and the social issues and indeed economic issues are at the heart of the decision-making process’, she said. ‘That for me is the key of integration. What are you thinking on a day-to-day basis, how can those types of issues really enhance the outcomes which are achieved?’

Fries talks about some of the entries that stood out for her in the large business, not for profit, and smaller business category. ‘Some examples where an organisation has embedded and developed a new sustainability strategy that the finance team has been part and parcel of creating and often really heavily involved in’, she said, ‘and how do you monitor and measure success both in the development stage of setting the targets and the outcomes you are trying to achieve, and then driving an integrated strategy.’ She went on to say that there were examples of specific projects or case studies that embedded sustainability, for example through innovative ways of thinking about capital expenditure, or ways of measuring the outcomes achieved.

Of the public sector and not for profit sectors, Stewart comments that ‘they sometimes have longer horizons and that is also helpful for businesses which have shorter horizons to help them to see how a longer horizon can change your analysis and how it is important to recognise that long term impact’.

They thought communicating integrated thinking was the area which brought forward the most competitive and most international elements last year. Fries was enthusiastic. ‘It was very interesting to see the different approaches’, she said. ‘How could you really capture that essence of what you were doing internally within the organisation, and find a way to engage that wider audience on how you were really embedding it. How can you do that in a way that is credible, that is consistent year-on-year, and that is consistent across different types of communication. It’s really about how you are communicating an integrated approach across every form of communication’, she said. In the words of Alan Stewart: ‘I think that the communication part is where the integrated reporting really touches the accounting for sustainability and the awards most directly and in that sense it is important to have the differentiation between integrated reporting, which is very well established and very well known, and bringing it back into finance’. The global reach of the awards ‘proves that sustainability is something which is important no matter where you are in the world’, said Stewart, ‘and no matter what sort of business you are in. Sustainability is important for everybody and that importance is felt by finance functions wherever they are’.

They also talked of the benefits which the awards, and ‘integrated thinking’ had brought to companies. Fries said that ‘the evidence is that it costs you less to really be demonstrating to your investors a sustainable approach to investing. And many investors would say the same. Companies that are managing these issues well and in a strategic way, they are a much sounder investment.’

And Stewart adds ‘The benefit is in the thinking that comes from involving the finance function in it. And you don’t know what you are going to get when you set out on this’, said Stewart. ‘The winners are the ones which have started from a genuine business issue which they are trying to resolve which then translates into a project or a piece of work which the finance function has led and then there is a business benefit. It has to come from the ground up’.

And then there is the value of the case studies. ‘It is those case studies, that story-telling, those examples, that people really want to see’, said Fries. And that brings the finance for the future element into it says Stewart. ‘It is that building of the knowledge and thinking. Some people will learn from it, some will adopt exactly what’s there from it. The finance for the future is the essence of what we are looking for’. When entering the awards ‘make sure it is finance led’, said Fries. ‘Make sure the finance team is front and centre absolutely, and within a partnership across the business’.

The video interview is available here.

We comment on seven IFRS Interpretations Committee tentative agenda decisions

23 May 2017

We have published our comment letters on IFRS Interpretations Committee tentative agenda decisions on IAS 12, IAS 19, IAS 32, IAS 33, IAS 41, IFRS 1, and IFRS 9, as published in the March 2017 IFRIC Update.

More information about the issues is set out below:

Issue Agenda decision supported? More information
IAS 12 Income Taxes — Interest and penalties related to income taxes Yes.
IAS 19 Employee Benefits — Discount rate in a country that has adopted another country’s currency Yes, however we suggest several amendments that we think could help make the tentative agenda decision clearer.
IAS 32 Financial Instruments: Presentation — Centrally cleared client derivatives Yes.
IAS 33 Earnings Per Share — Tax arising from payments on participating equity instruments Yes.
IAS 41 Agriculture — Biological assets growing on bearer plants Yes, however we recommend the Board consider a number of related conceptual issues as part of the Post-implementation Review of IFRS 13.
IFRS 1 First-time Adoption of International Financial Reporting Standards — Subsidiary as a first-time adopter Yes.
IFRS 9 Financial Instruments — Modifications or exchanges of financial liabilities that do not result in derecognition Yes, however we recommend that this issue would be better addressed via a formal Interpretation rather than an agenda decision.

Click to access all our comment letters to the IASB, IFRS Foundation, and IFRS Interpretations Committee.

IASB launches IFRS 17 implementation support page

23 May 2017

After the issuance of IFRS 17 'Insurance Contracts' on 18 May, the IASB has set up an implementation support page for IFRS 17.

In addition to material issued alongside IFRS 17 on 18 May, the page also offers contact details and submission information for technical enquiries and implementation issues.

The IASB will keep the implementation support page available through the whole implementation process for IFRS 17 and will continue to add additional information that becomes available.

Please click to access the new page here.

IASB announces new website

23 May 2017

The IFRS Foundation announces the launch of a redesigned and easier to navigate next month.

Since IAS Plus follows the work of the IASB very closely and traditionally offers many links to IASB content, we watch the development of the new website very closely and will make sure - around the time of the launch - that our links to the IASB website continue to work for you.

Please click to access the press release on the IASB website.

European stakeholders come strongly down in favour of the current endorsement process

22 May 2017

On 21 March 2017, the European Commission launched a public consultation on the operation of the European Supervisory Authorities (ESAs), one of which is the European Securities and Markets Authority (ESMA). The consultation document suggested that the review of the ESAs' operation might also be used to "streamline" the endorsement process in the EU by giving ESMA an "advisory role".

The publicly available reactions to the consultation across standard-setters, trade associations, banking and insurance federations as well as accounting and auditing associations all seem to be asking the same question: How does the presumption come about that the current endorsement process needs to be improved after the European Commission has just conducted a comprehensive review of the functioning of the IAS Regulation with a favourable result and after the recent reform of European Financial Reporting Advisory Group (EFRAG) was welcomed as a success by all stakeholders?

Below is an overview of the publicly available comments that illustrate the reactions across Europe. All links are external links to the submissions on the websites of the organisations cited.

Among the large standard-setters, Germany's ASCG notes: "[W]e are taken by surprise seeing the Commission re-opening the chapter and raising the questions – noting that less than two years ago the Commission finished a comprehensive review of the functioning of the IAS Regulation (including the endorsement process)." The French ANC adds: "In terms of reform momentum, it is worth noting that EFRAG’s reform has been implemented a little more than two years ago following extensive dialogue with all stakeholders and reflects a carefully considered balance of responsibilities."

The smaller standard-setters, including the ones from Austria, Croatia, Cyprus, Denmark, Estonia, Lithuania, the Netherlands, Norway, Portugal, Slovakia, Slovenia, and Sweden, worked together to develop and submit a response to the European Commission. The publicly available submission of the Dutch RJ notes: "The question appears to start from the presumption that the current endorsement process needs to be made more effective and efficient. We see no arguments being presented in the consultation that motivate why this process is currently not sufficiently effective and efficient." The point of the Danish FSR that "it is important for us that national Standard setters and institutes of auditors and accountants from small countries or with smaller resources are directly involved in EFRAG and may contribute to EFRAG’s due process" is also supported by the Danish Accounting Standards Committee and the Danish National Funding Mechanism who note: "We are convinced that the present model is working well in the public interest and it would not be appropriate to risk a good and tested process for a new and untested process. Do not change what is not broken."

Among the (pan-European) industry organisations, the French ACTEO & MEDEF stress: "We note that the possibility of transferring the responsibilities of EFRAG to ESMA was already assessed and dismissed in the Maystadt Report published in October 2013. This option encountered “a massive opposition” from stakeholders, for several reasons, all of which remain valid today." The European Banking Federation notes: "The EBF considers the current endorsement process of the international accounting standards into EU legislation to work effectively and efficiently. It is important to preserve the efficiency of the endorsement process to ensure all standards are endorsed before their mandatory effective date." Insurance Europe declares that it "does not see valid reasons for modifying the current endorsement of IFRS in Europe, the organisation or mandate of EFRAG", and the position of the German insurance industry is summed up quite bluntly by the GDV: "Involving ESMA in the endorsement process would be neither necessary nor helpful."

Accountancy Europe finally notes: "EFRAG plays a key role in the endorsement for use in the EU of the IFRS issued by the International Accounting Standards Board (IASB) and has a track record of high quality output in this area".

ESMA's Securities and Markets Stakeholder Group also responded to the consultation but notes "the limited time available to produce a response to this consultation", which meant that the group "has not prepared responses to all of the questions put forward in the consultation". Among the questions not answered is the one regarding the endorsement process.

Recent sustainability and integrated reporting developments

22 May 2017

A summary of recent developments at We Mean Business, WBCSD and SASB.

The We Mean Business coalition has released a statement and key recommendations to the G20 leaders expressing support for the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) convened by the Financial Stability Board (FSB).

The World Business Council for Sustainable Development (WBCSD) announces that a dozen companies – most of which are WBCSD members – have come together as an informal group called the “Impact Valuation Roundtable” (IVR). Their goal is to build on and operationalize existing frameworks like the Natural and Social Capital Protocols.

The Sustainability Accounting Standards Board (SASB) has announced the SASB Alliance, a new membership program for organisations and individuals that support the need for more decision-useful, cost-effective sustainability disclosure.

Agenda for the May 2017 DPOC meeting

22 May 2017

The Trustees of the IFRS Foundation will be meeting in Tokyo from 23 to 25 May 2017. However, only the meeting of the Due Process Oversight Committee (DPOC) on 23 May will be held in public.

The agenda for the DPOC meeting is summarised below.

Tuesday, 23 May 2017 (15:50–16:45)

  • Introduction and actions from the first public DPOC meeting, held on 31 January 2017
  • Technical activities: Key issues and update
  • Implementation activities for the insurance contracts standard
  • Conceptual Framework life cycle review
  • Correspondence: update
  • Summary

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

Updated IASB work plan — Analysis

19 May 2017

Following its May 2017 meeting, the IASB has updated its work plan. There were no major changes with the exception of the insurance contracts project being removed from the active projects due to the issuance of IFRS 17 yesterday.

Below is an analysis of all changes made to the work plan since the last update in April 2017.

Research projects

  • no changes

Major projects

Nar­row-scope amend­ments

  • a new project on long-term interests in associates and joint ventures has been split off from the Annual improvements 2015–2017 — final amendments to IAS 28 are expected within six months
  • a new project vaguely called "Annual improvements (next cycle)" has been added to the agenda — an exposure draft is expected after six months

IFRS Taxonomy

  • proposed taxonomy update on insurance contracts (published together with IFRS 17 yesterday) — a final updated is expected within six months

The revised IASB work plan is available on the IASB's website.

May 2017 IASB meeting notes posted

18 May 2017

The IASB met at its offices in London on 16–17 May 2017. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting. The meeting had only one decision making session, on implementation issues. All of the other sessions were non-decision making education sessions.

The meeting started with a session on dynamic risk management. The staff explained to the Board how net interest margin is managed, and the related financial reporting implications.

This was followed by a session on rate-regulated activities, focusing on the characteristics of the supplementary rights and obligations created by rate adjustment mechanisms.

The afternoon session focused on implementation issues. The IASB ratified an Interpretation Uncertainty over Income Tax Treatments. The Board also decided to proceed with amendments to IAS 28 Investments in Associates and Joint Ventures to clarify that IFRS 9 applies to long-term interests in such investments. The proposal was included in the Exposure Draft Annual Improvements to IFRS Standards 2015–2017 Cycle published in January 2017.

They completed the day with updates on the implementation of IFRS 16 Leases and the research programme.

On Wednesday, the Board discussed goodwill and impairment and ways to simplify the impairment test.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

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.