MINUTES

MINUTES
MEETING:
ICAEW Financial Reporting Committee
DATE:
12 March 2015
LOCATION:
Board Room, Chartered Accountants’ Hall
CHAIRMAN:
Kathryn Cearns
SECRETARY:
Nigel Sleigh-Johnson
ATTENDEES:
Phil Barden, Alex Brougham, Jo Clube, Jake Green, Peter Hogarth, Liz Murrall,
Lynn Pearcy, Ken Rigelsford, Danielle Stewart, Sondra Tarshis
STAFF:
Sarah Dunn, Brian Singleton-Green, Eddy James
GUESTS:
Patrina Buchanan, Technical Principal with Kathryn Donkersley, IASB
APOLOGIES:
Matt Blake, Martin Cavey, Rajan Kapoor, Chris Nobes, Trevor Pitman; Pamela
Taylor-100 Group observer
ITEM
DETAILS
1
Apologies
Apologies were noted from members unable to attend the meeting.
2
Minutes
The draft minutes of the meeting held on 18 December 2014 were approved.
3
FRC Membership
It was reported that James Dean had resigned from FRC for personal reasons. The major
contribution that James had made to the deliberations of the Committee over many years
was noted.
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Guests
Patrina Buchanan, Technical Principal at the IASB, joined the meeting to discuss the
IASB’s leasing project.
It was confirmed that the board had considered all outstanding technical issues and were
almost at the end of their re-deliberations. A final standard was expected by the end of
the year. A decision had yet to be taken about the standard’s effective date.
Members discussed the key decisions taken, including on lessor accounting, the US
position and simplifications made to previous proposals in response to concerns about
costs and complexity. There was some debate about what a ‘small’ asset is and how this
would interact with the portfolio approach under the standard. Committee members
raised some concerns about how this would work in practice.
Reference was made to the IASB’s recent document on the definition of a lease and a
similar document on applying the new lessee model to be issued the following week. It
was explained that such documents were part of the IASB’s new approach to
communicating with stakeholders about long-running projects.
MATTERS FOR CONSIDERATION AND DRAFT REPRESENTATIONS
5
Representations - Key Issues
IASB, ED/2014/5, Classification and Measurement of Share-based Payment
Transactions – proposed amendments to IFRS 2
A draft representation letter was discussed which offered support for the proposals but
suggested some minor drafting amendments.
The Committee also offered their support for the proposals, noting that the proposed
changes would require what many entities already do in practice. It was agreed that the
representation letter could be submitted without further changes.
FRC, FRED 57, Draft amendments to FRS 101 Reduced Disclosure Framework (2014/15
Cycle)
The Committee were supportive of the proposals. However, it was noted that it was
unclear when they would come into effect and that it would be better if the effective date
of these changes were decoupled from those proposed by FRED 60.
It was agreed that the draft representation letter should be updated to reflect this position.
However, it was also agreed that the letter should make it clear that decoupling the two
sets of changes should not be seen a license to delay the publication date of the changes
proposed in FRED 60.
6
New Consultations
EFRAG, Draft Endorsement Advice on Disclosure Initiative - Amendments to IAS 1
It was agreed that ICAEW should recommend that EFRAG endorse these amendments.
EFRAG’s feedback form would be completed, keeping the responses as simple as
possible.
IASB, ED/2014/6, Disclosure Initiative – proposed amendments to IAS 7
A working party had been set up to discuss these proposals, chaired by Peter Hogarth.
Concerns were raised that this issue was seen as a ‘UK thing’ and that there wasn’t wide
international support. In particular, it was noted that support in North America was
particularly thin on the ground. Questions had been raised about whether it is really
something investors want or whether it is just more clutter.
Committee members were encouraged to email Sarah Dunn if they knew of anyone in
North America who might offer their support.
It was also noted that the ICAEW response should press for consistency between the
proposed disclosures and those that already exist in other standards.
2
It was agreed that ICAEW should not respond to the questions relating to taxonomies.
FRC, FRED 58 Draft FRS 105 The Financial Reporting Standard applicable to the MicroEntities Regime, FRED 59 Draft amendments to FRS 102 – Small entities and other
minor amendments, FRED 60 Draft amendments to FRS 100 and FRS 101
It was noted that the first – and possibly only – working party meeting would take place
the following week. This would look at FREDs 58 and 59. Members were asked if they
had any major points to feedback to the working party.
It was agreed that FRED 60 would be dealt with separately. Comments from Committee
members will be sought via email. A working party meeting would only be held if any
significant disagreements emerge.
It was agreed that ICAEW would not submit the responses to the FREDs until after the
event on 27 April, which Committee members were encouraged to attend.
Finally, it was agreed that a separate strategy for dealing with RMCs needs to be
developed.
Basel Committee on Banking Supervision, Consultative document: guidance on
accounting for expected credit losses
It was reported that the banking committee would lead on this. Sondra Tarshis will keep
FRC informed on progress.
Sondra raised concerns about the quality of what is being proposed and suggested that a
lot of work was needed to get things into shape.
It was agreed that a draft of at least major points would be brought back to the next
meeting.
European Commission, Green paper: Building a Capital Markets Union
It was noted that while FRC’s main focus is Question 8, the Committee would also have
to feed into ICAEW’s responses to some other points.
Concerns were raised about the scope of the paper, which many members believed was
unclear ie, is it talking about small companies on regulated markets or small companies
on unregulated markets? There was also concern that there was some confusion in the
paper about the difference between bank finance and equity finance.
The general view was that if an entity is raising equity finance and taking money from the
public, it should comply with the highest financial reporting standards as transparency is
key ie, they should use full IFRS. There was no support for developing separate
European standards for small listed companies.
It was agreed that a working party should discuss the issues further.
IASB, ED/2015/1 Classification of Liabilities – proposed amendments to IAS 1
It was agreed that ICAEW should respond to these proposals. Comments from
Committee members would be sought via email. A working party meeting will only be
convened if any significant disagreements emerge.
3
7
Projects, Presentations and Policy
Faculty developments and recent events
It was noted that faculty renewals were excellent so far. It was also noted that the focus
in 2015 is likely to be new UK GAAP and that a lot of questions are being received on
how to put the standard into practice.
It was also noted that the event in Brussels on 28 January on IFRS was a success.
IFRS in the EU – Some Lessons Learned; and The Effects of Mandatory IFRS Adoption
in the EU - A Review of Empirical Research.
It was reported that an updated version of the research report would be available in April
and that the separate report on lessons learned is progressing well. All Committee
members had received the latest draft of the latter report and were encouraged to submit
comments.
Other proposed actions regarding guests, projects and discussion events
Roger Marshall would be the FRC’s guest at April’s meeting.
The joint event with the FRC on 27 April looking at FREDs 58-60 was mentioned. It was
reported that a joint event with the FRC on the IASB’s conceptual framework ED had also
been mooted, possibly to be held in September.
8
Other Current Financial Reporting Developments
EFRAG Board paper Assessing prudence in the context of endorsement.
This paper was discussed briefly. Significant concerns were raised and it was agreed that
it should be discussed with Roger Marshall when he attends April’s meeting.
ICAEW Social Housing Sub-Committee’s comments on the classification of financial
instruments under FRS 102
It was noted that UK technical partners generally agreed that loans with so-called
‘cancellable embedded fixes’ should be classified as basic instruments. This view has
also been supported by Helen Shaw, Deloitte’s expert on accounting for financial
instruments under FRS 102.
It was agreed that it was very unlikely that the FRC would change FRS 102 on this issue
before the first triennial review of the standard. Moreover, there was a strong view among
Committee members that the social housing sub-committee should exercise caution as
pursuing this matter might result in such instruments being classified as ‘other’ when
most people taking a common sense approach believe that the right answer is to classify
them as ‘basic’.
It was also noted that the paper presented by the sub-committee would need to be
significantly rewritten if it were to be formally submitted to the FRC seeking a response.
4
Other significant financial reporting developments in Brussels, including CBCR
There was some discussion about country by country reporting. There was little support
for including the proposed ‘tax transparency’ information in the financial statements. It
was felt that it was important that the right information is disclosed in the right place and
that the current plans do not achieve this.
Developments with the UK implementation of the EU Accounting Directive
It was noted that the relevant legislation has now been laid before Parliament.
It was also noted that the requirement to disclose a list of all subsidiaries in the financial
statements would become effective in July but this had not been widely publicised.
Any current financial reporting developments, risks and issues
There was a brief discussion about the recent exchange of letters in the FT about true
and fair.
MATTERS TO NOTE
9
FRC Meeting Arrangements
No changes in FRC meeting arrangements were reported.
OTHER MATTERS
10
TAC and other ICAEW Groups
It was noted that at the recent TAC meeting concerns were raised about the level of
simplification in the proposed micro-entity standard, especially with regard to deferred
tax.
11
Any Other Business
There was no other business.
12
Future Meetings
It was noted that the next meeting was scheduled to take place on 15 April 2015 with
Roger Marshall joining as a guest.
5