The article covers two key issues from the discussion paper that investors should take note:

1. “the reporting of performance, including what should be reported in profit or loss and what should be reported outside profit or loss in other comprehensive income”; and
2. “the accounting for items classified as equity and the dilutive effects of some financing instruments on common shareholders.”

Click to view:

• Investor Perspectives Framework rethink will shape the landscape for investors (link to IASB website).
• IAS Plus article on the Discussion Paper for a new Conceptual Framework.
• Archive of the Investor Perspectives series on the IASB's website.

One of the panelists was Hans Hoogervorst, chairman of the IASB. In his contributions to the discussion, he admitted that Africa might not have been that clearly on the IASB's radar yet, but with four IASB Board members from emerging economies the focus is shifting and he promised to keep Africa on hos personal and the IASB's radar more prominently.

He also cited instances where the IASB had paid careful attention to the needs of emerging economies. Most obvious, he said, were the discussions around impairment where the IASB's and the FASB's position differ. The FASB's proposal to recognise a charge equalling the present value of lifetime expected credit losses at initial recognition would be a clear disincentive in African markets where the upward trend in the markets is coupled with greater innovation and higher risk taking.

However, he also admitted voting against the wishes of emerging economies in cases where the brand of IFRSs might be endangered. He pointed at calls for making the IFRS for SMEs available for application by certain listed companies. Especially emerging economies feel that the more easily grasped IFRS for SMEs might be easier to adopt and might do more justice to their specific economic circumstances. The IASB chairman said that there was no way the IASB could prohibit jurisdictions from requiring the IFRS for SMEs for certain listed companies, however, he added, these jurisdictions could no longer call the standard applied thus the "IFRS for SMEs" and would have to call it something else - for example "South African GAAP".

The IASB chairman also touched on some general topics such as disclosures (where he explained his 10-point plan and the aspect of materiality), the IASB's view on integrated reporting ('it is not clear where this is going yet, but our standards don't bite each other') and the IASB's project on going concern.

Returning once more to impairment, he mentioned that the reactions to the IASB's proposals had been very encouraging. The IASB expects to finalise its re-deliberations by the end of 2013. It would take another two years, however, until a final standard would be effective.

Please click for access to the video on the IASB's website.

The TEG is the arm EFRAG operates through. Its 12 voting members are selected from a range of professional and geographical backgrounds from throughout Europe and EFRAG is looking for corresponding applications. The full text of the call for EFRAG TEG applicants available through the press release on the EFRAG website details the requirements regarding technical competence, background, experience and geographical spread.

Our comment letter includes the following points:

• We agree that Integrated Reporting responds to a demand from market participants for better information, but note that it is not clear what role an integrated report plays in relation to existing financial, sustainability, and corporate governance reports, and that it would not replace these reports
• We agree that an integrated report should aim to become a primary communication document, telling the value creation story, rather than being compliance-focused. We think that flexibility in Integrated Reporting is critical to foster innovation
• We agree that the primary audience for integrated reports should be providers of financial capital in order to support their financial capital allocation assessments, but note it would be useful for the Framework to acknowledge explicitly that providers of financial capital are rarely a homogeneous group, allowing companies flexibility to meet the information needs of various types of providers of financial capital
• We believe a better and clearer articulation is required in the Framework on how materiality for an integrated report is distinct from materiality for other reports such as financial reports, and how to handle the tension between application of materiality and achieving conciseness
• We are of the view that the Framework should contain only the objectives, concepts and principles and minimum content elements for an integrated report in order to allow for experimentation and believe it would be premature to portray it as a reporting standard at this stage
• We agree that the ability to obtain independent third party assurance on the information presented will be of utmost importance to the integrity and credibility of an integrated report, and believe that an international standard or applicable assurance guidance specific to Integrated Reporting will be required.

Click for the full comment letter.

Some of the key results from the PIR of IFRS 8 were:

• Management and investors communicated more efficiently with the use of the management perspective.
• Low incremental costs of implementing IFRS 8.
• Achieves convergence with the FASB's guidance.
• General consensus by preparers was that the Standard works well and was supported by the accounting community (auditors, accounting firms, standard-setters and regulators). 
• Many considered the requirement to report revenue by customer's attributed country to be useful.

Further, the investor community's view of IFRS 8 were mixed. Some believed that the information about how management views the business to be useful information, while others investors felt that management's intentions could "obscure the entity's true management structure (often as a result of concerns about commercial sensitivity) or to mask loss-making activities within individual segments."

Any issues found in the PIR that are warranted will be discussed with the FASB to ensure that convergence with US GAAP is achieved.

Additional information

• Press release on the IASB website.
• Report and Feedback Statement of the review of IFRS 8 Operating Segments (link to IASB website).
• IAS Plus project page on the Post-implementation Review of IFRS 8.

The joint working group of the Association française des entreprises privées (AFEP) and the Mouvement des entreprises de France (MEDEF) sought to develop ideas for enhancing the quality of IFRS development, strengthening the voice and contribution of Europe in the development of IFRSs and giving the ability, if need be, to recover some European sovereignty in standard-setting. The report, which received quite some attention in France, presents the working group's view only and is one of various contributions currently being brought to the debate opened up by the European Commission about the assessment of the use of IFRS in Europe since 2005 and the structures that should be in place in Europe so that Europe contributes more efficiently to the work of the IASB and the development of IFRS.

The working group is not questioning the use of IFRSs, however, it feels that they have weaknesses resulting a) from gaps in the conceptual framework and b) from the structure and governance of the European system used for the adoption of IFRS. The working group acknowledges that  the goal of international convergence of accounting standards remains relevant but also believes that the EU, judged by its economic weight and its level of involvement in the implementation of IFRS, should try to regain some sovereignty to create a level playing field with other major economic areas (such as USA, China, Japan, India) that have given themselves the authority to modify or adapt the IFRS to their economic environment. IFRSs as a whole, the working group claims, would benefit from a more balanced distribution of influence on the development of IFRSs among the major economic areas.

The proposals in the report therefore focus on three complementary pillars:

• reforming the conceptual framework of the IFRS, so that the standards produced better meet the needs of the European economy;
• reforming the structure and governance of the European system for adopting accounting standards;
• revising European regulations in order to give the EU the option of modifying a standard if it deems it necessary.

As regards the framework, the IASB has just published a discussion paper on certain aspects of the framework, however, in doing so it has concentrated on areas that seem problematic in practice and it has also excluded areas that are deemed to have been finalised satisfactorily. The working group suggests extending the consultation to the entire conceptual framework since it feels that the EU cannot be content with some elements that are now regarded as having been definitively adopted by the IASB.

The proposals regarding the reform of the structure and governance of the European system mainly concentrate on reforming the way the European Financial Reporting Advisory Group (EFRAG) is structured. The suggested reforms are far reaching (they are called “ambitious” in the report) and echo some of the ideas that were voiced in connection with the appointment of Philippe Maystadt as Special Adviser to enhance EU’s role in promoting accounting standards.

Reasserting European sovereignty, the working group believes, would be possible by broadening the EU’s choice from only being authorised to adopt or reject IFRSs as a whole to the legal authority to amend or replace a standard that it deems inappropriate to the needs of its economy. The working group claims that this is what most jurisdictions have chosen to do, and the EU could follow suit without jeopardising its commitment to IFRSs.

Please click for the following documents on the MEDEF website:

• press release announcing the report (French only)
• Renforcer le processus d'adoption des normes comptables internationales: un enjeu stratégique pour l'Union européenne
• Strengthening the process for adopting International Accounting Standards: A strategic challenge for the European Union

In the draft comment letter, EFRAG agrees with the IASB that bearer plants should be accounted for under the cost model or the revaluation model of IAS 16. However, the EFRAG suggests the following issues for reconsideration:

• The “IASB should consider broadening the scope of the amendments as this could improve the quality of financial reporting by better reflecting the business model of entities";
• The “growing phase of different bearer plants may differ significantly and therefore recommends, as a practical expedient, to define the maturity date as the date of the first harvest of commercial value"; and
• The “disclosures required by IAS 16 are appropriate for bearer plants and believes that disclosures of non-financial information should not be required in the financial statements.”

Comments on the draft letter are invited by 14 October 2013.

Click for:

• EFRAG press release with link to the draft comment letter (link to EFRAG website).
• Our previous story on the Exposure Draft ED/2013/8.

Click for the full comment letter.