February

FRC consults on the reporting of intangibles

06 Feb 2019

The UK Financial Reporting Council (FRC) has launched a consultation into possible improvements to the reporting of factors that are important to a business’ generation of value.

The FRC notes that there are frequent calls to reform the accounting for intangible assets, partly in response to the move to a knowledge-based economy. Therefore, the FRC paper published today considers the case for radical change to the accounting for intangible assets and the likelihood of such change being made in the near future.

It suggests that:

  • relevant and useful information could be provided without the need to recognise more intangible assets in companies’ balance sheets;
  • such information could cover a range of factors, broader than the definition of intangible assets in accounting standards, that are relevant to the generation of value;
  • improvements could be made on a voluntary basis within current reporting frameworks (such as the strategic report); and
  • participants in the reporting supply chain could collaborate to bring about improvements.

The paper is structured into five sections:

  • Section 1 introduces the subject and notes the objectives of the paper.
  • Section 2 discusses the implications of the IASB's Conceptual Framework for the reporting of intangibles. It relates its conclusions to the economic features of intangibles that are identified in the literature.
  • Section 3 considers possible improvements to the reporting of expenses incurred to develop intangibles that cannot be capitalised in financial statements but are expected to benefit future periods.
  • Section 4 discusses how narrative reporting, including the use of metrics, might be used to provide better information for investors on intangibles.
  • Section 5 notes that further consideration is required of the implementation of the suggestions made in the paper and the role of preparers, investors, and standard-setters in that process.

Please click to access the consultation paper on the FRC website. Comments are requested by 30 April 2019.

Accountancy Europe responds to EC expert group report on disclosure of climate-related information

06 Feb 2019

Accountancy Europe has responded to the report on companies' disclosure of climate-related information issued by the Technical Expert Group on Sustainable Finance set up by the European Commission (EC). While the response notes that the initiative brings a great opportunity to link financial and non-financial information, improving integration of corporate reporting, Accountancy Europe also voices some concerns.

The response to the report stresses that it is important to clarify the two directions of impacts: the Non-Financial Reporting Directive (NFRD) addresses the impact of the company’s activities on the environment and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) the physical impact of the environment on the company. Accountancy Europe notes that the report is not entirely clear which approach is applied in which instance.

The response also notes that while the concept of materiality is an element of both the TCFD and the NFRD, they may be seen as differing in their interpretation. Accountancy Europe suggests clarifying both concepts and how they can be aligned to each other - which will also help to avoid boilerplate disclosures.

While the Accountancy Europe response expresses understanding for the urgency to focus firstly on climate change related issues, it also stresses the importance of addressing social aspects. Climate-related matters should not be treated in isolation as this could have a negative impact elsewhere.

Finally, the response notes that more and more stakeholders including investors want to know whether or not they can trust reported information by companies and therefore ask for independent assurance over the reported information. Therefore, Accountancy Europe believes that it may be necessary to discuss assurance over non-financial information.

Please click to download the full response from the Accountancy Europe website.

2019 required and annotated required IFRS Standards now available

04 Feb 2019

The IFRS Foundation announces that the annual publication formerly known as the 'Blue Book' is now available.

The IFRS Standards Required 1 January 2019 pub­li­ca­tion contains all official pro­nounce­ments that are mandatory on 1 January 2019. It does not include IFRSs with an effective date after 1 January 2019. The Annotated IFRS Standards Required 2019 includes the same content as IFRS Standards Required 1 January 2019 but with ad­di­tional an­no­ta­tions containing extensive cross-references, explanatory notes and IFRS Interpretations Committee agenda decisions.

In addition, the IFRS Foundation has released a video describing the differences in the four volumes it publishes each year.

For more information, see the press release on the IASB’s website.

Additional educational module on the IFRS for SMEs on leases

04 Feb 2019

The IFRS Foundation has issued an additional new stand-alone educational module, which supports the learning, application, and reading of financial statements prepared with the IFRS for SMEs Standard.

The module focuses on the accounting of leases applying Section 20 Leases of the IFRS for SMEs.

Please click to access all 33 IFRS for SMEs modules available so far (free registration required).

IPSASB publishes final guidance on accounting for social benefits and exposure draft on collective and individual services and emergency relief

01 Feb 2019

The International Public Sector Accounting Standards Board (IPSASB) has released International Public Sector Accounting Standard (IPSAS) 42 'Social Benefits' and an related Exposure Draft (ED) 67 'Collective and Individual Services and Emergency Relief (Amendments to IPSAS 19)' to address a wide range of significant government expenditures.

IPSAS 42 Social Benefits provides guidance on accounting for social benefits expenditure. It defines social benefits as cash transfers paid to specific individuals and/or households to mitigate the effect of social risk. The standard requires an entity to recognise an expense and a liability for the next social benefit payment. IPSAS 42 establishes principles and requirements for:

  • Recognising expenses and liabilities for social benefits;
  • Measuring expenses and liabilities for social benefits;
  • Presenting information about social benefits in the financial statements; and
  • Determining what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the social benefits provided by the reporting entity.

In order to extend IPSASB’s guidance to public services as well as cash transfers, ED 67 Collective and Individual Services and Emergency Relief proposes new requirements for accounting for collective services (such as defense at national-levels), individual services (such as healthcare) and emergency relief. For collective and individual services, ED 67 proposes that an expense is recognised at the point of service delivery. ED 67 also proposes that an expense and liability is recognised for some emergency relief, but not where emergency relief is delivered as an ongoing activity of government. The IPSASB notes that the distinction between social benefits and collective and individual services is important, but the accounting treatment of these transactions should be conceptually consistent. Comments on the ED are requested by 31 May 2019.

The following additional information is available on the IPSASB website:

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