Accountancy Europe issues position paper on sustainable finance

05 Mar 2018

In the context of the EU’s transition to a low-carbon, resource-efficient and sustainable economy, Accountancy Europe has published a position paper that notes that the financial system has a critical role to play in this process and that professional accountants are crucial in building a comprehensive sustainable financial system.

In January 2018, the High-Level Expert Group (HLEG) on Sustainable Finance, established by the European Commission, published its final report setting out strategic recommendations for a financial system that supports sustainable investments. Accountancy Europe now adds to the HLEG recommendations by noting the three areas where the profession can contribute most. The position paper cites:

  • corporate reporting to accommodate long-term horizons;
  • disclosure requirements to address investors’ needs; and
  • accounting frameworks to be in line with long-term investments.

As regards IFRSs, the paper notes:

IFRS are not designed to encourage or discourage long-term investments or any type of investments. The financial reporting purpose is to provide for users of financial statements information on what is currently happening.

Therefore, the position paper warns against two recommendations of the HLEG:

  1. To authorise the EU to change specific aspects of IFRSs before adopting them as setting European standards would isolate Europe from the global capital market, hinder investment, create confusion, increase the cost of capital, and diminish Europe's influence on the standard-setter.
  2. To only adopt IFRSs if they consider sustainability and long-term investment objectives as at this early point of time this would not focus on improving non-financial reporting but rather hinder transparency that is currently in the process of developing.

Please click to access the position paper on the Accountancy Europe website.

Agenda and pre-meeting summaries for the March 2018 IFRS Interpretations Committee meeting

05 Mar 2018

The IFRS Interpretations Committee meets in London on Tuesday 13 March 2018. The Committee will discuss ten issues, including five new interpretation requests.

Finalisation of draft agenda decisions

The staff are recommending that the Committee finalise four tentative agenda decisions.

Three of those decisions relate to IFRS 15 Revenue for Contracts with Customers (Revenue recognition in a real estate contract; Revenue recognition in a real estate contract that includes the transfer of land; and Right to payment for performance completed to date). As well as considering the specific issues, the Committee received more general comments about these agenda decisions, including the appropriateness of considering specific fact patterns. 

The fourth item is the presentation of interest revenue for particular financial instruments.

Continuing discussions

The Committee is continuing its discussions of whether or how to clarify the meaning of the term ‘unavoidable costs’, which is used in the definition of an onerous contract in IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The staff are recommending that ‘cost of fulfilling’ a contract should include both the incremental costs of fulfilling the contract and an allocation of overhead costs incurred for activities required to fulfil the contract—the costs that relate directly to the contract. They are also recommending that this be in the form of an amendment to IAS 37, rather than an Interpretation.

New issues

There are five new issues.

  • IAS 12 Income Taxes Deferred tax – tax base of assets and liabilities (Agenda Paper 4). How should the exemption (in IAS 12.15 and IAS 12.24) to recognising a deferred tax asset or a deferred tax liability be applied?
  • IAS 7 Statement of Cash Flows - classification of short-term loans and credit facilities (Agenda Paper 6). Whether a short-term bank arrangement that is always overdrawn and does not fluctuate from being in to out of funds can qualify as a component of cash and cash equivalents.
  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets - payments relating to taxes other than income tax (Agenda Paper 7). What is the appropriate accounting when an entity makes a voluntarily payment to a tax authority that will either be returned or used to settle the tax liability (which the entity has determined is not probable and therefore not recognised).
  • IFRS 9 Financial Instruments - classification of a particular type of dual currency bonds (Agenda Paper 8). How to assess whether a financial instrument has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding when a bond has a par amount denominated in one currency and fixed interest coupon payments denominated in another currency.
  • IFRS 9 Financial Instruments hedge accounting with load following swaps (Agenda Paper 9). How should the term “highly probable” be applied, as it is used in IAS 39.88 and IFRS, to assess whether a hedging relationship qualifies for hedge accounting?

The Staff are recommending that the Committee not add any of these items to its agenda, either on the grounds that there is insufficient evidence that the matter has widespread effect or is expected to have a material effect on those affected or because they think the requirements in the relevant Standard provide an adequate basis for an entity to determine the appropriate accounting.

Work in progress

There are no new or ongoing matters that have yet to be presented to the Committee.

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

IFRS Foundation reappoints two IFRS Interpretations Committee members

02 Mar 2018

The Trustees of the IFRS Foundation have announced the reappointment of two IFRS Interpretations Committee members, one of them Robert Uhl, Head of Deloitte's IFRS Centre of Excellence for the United States.

Robert Uhl is US National Director of Accounting Standards. He is also the US leader on Deloitte’s Global IFRS Leadership Team and a member of the Financial Accounting Standard Board’s Emerging Issues Task Force.

The other reappointed member, Jongsoo Han, is a Member of the Korea Accounting Standards Board (KASB) and Chairman of the Korea Institute of CPAs’ Accounting Research Committee.

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

IASB issues 'Investor Update' newsletter

02 Mar 2018

The IASB has issued the fifteenth edition of its newsletter 'Investor Update', which provides investors with quick access to information about current accounting and financial reporting topics.

This issue features:

  • Spotlight — Timing and amount of revenue recognition
  • IFRS 15 In Profile
  • Project updates
  • Information on investor materials and current events

The Investor Update newsletter is available on the IASB’s website.

EFRAG publishes discussion paper on the impairment and recycling of equity instruments

01 Mar 2018

The European Financial Reporting Advisory Group (EFRAG) has published a discussion paper 'Equity Instruments - Impairment and Recycling' to gather constituents' views on recycling and impairment of equity instruments designated at fair value through other comprehensive income to develop its technical advice to the European Commission.

In the first phase of the project, the European Commission asked EFRAG to collect quantitative data on the current holdings of equity instruments and their accounting treatment and investigate if entities expect that the new accounting requirements will affect their decisions in relation to investment in equity instruments. EFRAG reported its findings from this first phase in January 2018.

In the second phase of the project, the Commission asked EFRAG to provide advice on whether and how the requirements in IFRS 9 on accounting for holdings of equity instruments could be improved. As part of its due process, EFRAG has now published the discussion paper to gather constituents' views on recycling and impairment of equity instruments designated at fair value through other comprehensive income.

EFRAG has not included a preliminary view on the issues explored. Rather, the paper analyses the relevance of recycling in the context of a long-term investment business model and presents arguments on the conceptual relationship between recycling gains and losses on derecognition and impairment. The paper considers how the application problems identified with IAS 39's impairment model for available-for-sale equity instruments could be addressed. It illustrates an impairment model and a revaluation model but does not express a preliminary view as to which, if either, of these two models is preferable.

​Comments on the discussion paper are expected by 25 May 2018. It can be downloaded from the EFRAG website.

EFRAG has also produced a short video explaining why EFRAG is working on equity instruments, what has chnaged with IFRS 9, and what questions EFRAG will address in its research. The five minute video is available on YouTube.

Recent sustainability and integrated reporting developments

01 Mar 2018

A summary of recent developments at the IIRC, WBCSD/CDSB, and the Reporting Exchange.

The International Integrated Reporting Council (IIRC) has released the results of a survey of executives from across the globe that seeks to understand trends and challenges in measuring, disclosing and understanding the value that companies create. 96% of those surveyed agree that bringing financial and non-financial information together provides a more forward-looking, longer-term view of performance. Purpose Beyond Profit: The Value of Value – Board-level Insights is available on the IIRC website.

The IIRC also intends to set up an oversight body for its <IR> Academic Network and is, therefore, seeking a small consortium of academic institutions to manage the Network’s strategy, plans and progress. The tender offer can be accessed here.

The World Business Council for Sustainable Development (WBCSD) and the Climate Disclosure Standards Board (CDSB) have released a new report that maps global and regional environmental, social and governance (ESG) reporting trends. The report that is intended to help business navigate global sustainability reporting trends is available on the CDSB website.

The WBCSD and the CDSB have also published a case study that sheds light on the corporate reporting requirements and resources across China. With new legislation on mandatory environmental disclosure being developed in China, the case study provides an important baseline to understand how the reporting landscape will evolve in the next few years, and how Chinese businesses will embrace the latest developments in mainstream sustainability reporting. The case study is available on the CDSB website.

The WBCSD also announces that the Reporting Exchange is now also available in simplified Chinese. To date, the platform includes over 1780 reporting provisions from 60 countries and continues to grow. The Chinese language version of the Reporting Exchange can be accessed by using the language selector in the top right hand corner.


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