October 2013

Breaking News UK − UK and international financial reporting developments

Welcome to Breaking News UK, a monthly bulletin from KPMG in the UK that brings you the latest need-to-know information on UK and international standards in the accounting and regulatory space. This bulletin is based on articles from KPMG IFRG Limited's Breaking News, which are available on the Global IFRS Institute site.

There are quick links above, giving you easy access to KPMG's Global IFRS Institute and past editions of Breaking News UK.

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Directors' remuneration report - new requirements

A number of changes affecting executive remuneration have recently been made by the Government. The main change is the replacement of the current Schedule 81 Quoted companies: Directors' remuneration report with a new Schedule 8, which will be effective for financial years ending on or after 30 September 2013.

Furthermore, the Companies Act 2006 changes with effect from 1 October 2013 to require a mandatory vote, at least every three years, on a company's directors' remuneration policies at its annual general meeting.

Our forthcoming September/October edition of Financial Reporting Update will cover these new requirements in more detail but in the meantime, the new requirements are available to download here.

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Electronic filing to be made available for new UK GAAP

The FRC has announced a project to improve the quality of electronic "tagging" of accounts.

The XBRL tagging convention - taxonomies - will be updated to reflect the new financial reporting standards (FRSs 100, 101 and 102). The FRC aims to update the taxonomies such that they will be available from 1 January 2015 to coincide with the effective date of the new UK financial reporting standards.

Refer to the FRC's press release for more information.

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KPMG's latest thinking on IFRS

KPMG IFRG Limited has issued its tenth edition of Insights into IFRS. Organised by topic and reflecting IFRSs in issue at 1 August 2013, Insights into IFRS emphasises the application of IFRS in practice and explains the conclusions reached on many interpretative issues.

The new tenth edition includes guidance on the consolidation relief for investment entities, enhanced guidance on fair value measurement and revised guidance on employee benefits. It also includes a new appendix with a list of examples.

KPMG IFRG Limited has also published Insights into IFRS: An overview, which is optimised for use on both desktop and mobile devices and provides a high-level briefing for audit committees and boards.

Please speak to your usual KPMG contact to request a hard copy of these publications. Insights into IFRS: An overview is also available to download here.

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Counting the cost of the lease proposals

When the IASB and FASB issued their latest proposals for a major shake-up of lease accounting in May, KPMG questioned the cost of bringing leases on-balance sheet. Now, as the comment period closes, we have expressed our concerns to the Boards in our comment letter.

We continue to support the Boards' objective to develop a single, less complex approach to lease accounting and the broad principle that assets and liabilities arising under leases be recognised on a lessee's balance sheet.

We consider that the Boards' extensive work on this project has identified diverse perspectives on what a lease represents and how it ought to be reflected for financial reporting purposes.

However, we do not believe that they should finalise a standard based on the current proposals. Bringing leases on-balance sheet should not be seen as an end in itself, to be pursued at any cost. We feel that the current proposals do not represent an improvement over current GAAP, will not satisfy users, and will not justify the costs of implementation and ongoing application. Change for the sake of change does not necessarily equate to progress.

KPMG IFRG Limited's In the Headlines sets out at a high level what the proposals could mean for your business. In addition, KPMG IFRG Limited's New on the Horizon: Leases brings you KPMG's insight, helping you to better understand the proposals.

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Going forward – progress made in financial instruments projects

The September meetings proved productive for the IASB's and the FASB's financial instruments projects, as the Boards reached a number of decisions on the classification, measurement and impairment of financial assets.

The IASB made progress in refining the contractual cash flows assessment for financial assets, although some differences of view with the FASB emerged. The Boards reached tentative decisions on the meanings of 'principal' and 'interest', contingent features, and prepayment and extension features.

The IASB also moved forward with clarifications to its proposed impairment model, reaching tentative decisions on assessing increases in credit risk and the definition of 'default'. It then agreed to look at future possibilities for convergence with the FASB.

Read KPMG IFRG Limited's IFRS Newsletter: Financial Instruments to find out what these developments could mean for your business.

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Shaping the future of IFRS – the IASB's Conceptual Framework

Recently, there has been much discussion about whether global accounting standards are still fit for purpose. The IASB's commitment to revise its Conceptual Framework is therefore well-timed to address concerns about IFRS, including the growing complexity in financial reporting.

Although the IASB's consultation on the Conceptual Framework may not affect businesses immediately, it could significantly affect IFRS in the future. The consultation seeks input on a number of topics, including the following key areas:

  • how the balance sheet may change;
  • how the performance statement(s) may change; and
  • how disclosures may change.

Once finalised, the revised Conceptual Framework would help the IASB in developing less complex and more internally consistent accounting standards.

This is a welcome opportunity for stakeholders from every part of the financial reporting chain to offer their views to the IASB, which should not be missed. Comments are due to the IASB by 14 January 2014.

Download a copy of KPMG IFRG Limited's In the Headlines to find out more.

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