Nick Topazio ACMA, CGMA, CIMA’s head of corporate reporting, outlines this month’s updates in the financial reporting world.
This month's headlines:
1. FRC considers increased country and currency risk in financial reports
2. IAASB provides feedback from its disclosure consultation
3. IFRS 2012 XBRL taxonomy exposure draft published
4. Federation of European Accountants (FEE) focuses on integrated reporting
1. FRC considers increased country and currency risk in financial reports
The UK Financial Reporting Council (FRC) has issued an update to directors of listed companies: responding to increased country and currency risk in financial reports.
The update was prompted by the current economic uncertainties in numerous countries. It aims to draw together a number of the more significant issues directors may face when considering how best to provide a balanced and understandable assessment of a company’s position and prospects in the context of increased country and currency risk, including, where relevant:
- the company’s exposure to country risk, direct or to the extent practical indirect, through financial instruments but also in terms of exposure to trading counterparties (customers and suppliers)
- the impact of austerity measures being adopted in a number of countries on the company’s forecasts, impairment testing, going concern considerations, etc.
- possible consequences of currency events that are not factored into forecasts but may impact reported exposures and sensitivity testing of impairment or going concern considerations
- a post balance sheet date event requiring enhanced disclosures to avoid misleading investors.
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2. IAASB provides feedback from its disclosure consultation
The International Auditing and Assurance Standards Board (IAASB) has published a feedback statement on the responses to its January 2011 discussion paper, 'The evolving nature of financial reporting: disclosure and its audit implications'. The discussion paper solicited views and perspectives of different stakeholder groups on the challenges arising as financial reporting continues to evolve to meet the changing needs of users.
The feedback statement presents a summary of the range of views on some of the more significant challenges faced by participants across the entire financial reporting supply chain, including the impact of trends in financial reporting, applying materiality to disclosures, evaluating misstatements generated by disclosures, the availability of audit evidence to support disclosures, and work effort.
To address some of the issues identified respondents have called for more auditing guidance in certain identified areas. However, the majority of the respondents were of the view that some of the more important issues could not be addressed by the IAASB on its own, but would require international collaboration and cooperation, particularly with both the accounting standard setters – including the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) – and regulators.
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3. IFRS 2012 XBRL taxonomy exposure draft published
The IFRS Foundation has published an exposure draft of the IFRS taxonomy 2012. The proposed taxonomy is consistent with IFRSs, including IASs and the IFRS for SMEs. The IFRS taxonomy 2012 is a translation of IFRSs as issued at 1 January 2012 into eXtensible business reporting language (XBRL).
The proposed taxonomy is open for comment until 17 March 2012. CIMA is keen to hear your views via CIMAsphere.
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4. Federation of European Accountants (FEE) focuses on integrated reporting
Like CIMA, FEE sees integrated reporting as a major development in corporate reporting. Integrated reporting brings together the material information about an organisation’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates.
It provides a clear and concise representation of how an organisation creates value, now and in the future. The International Integrated Reporting Council is the driving force behind this movement and CIMA is playing an active role both within the council itself (as a constituent of the pilot programme trialling integrated reporting) and as a promoter of improved ways of reporting.
Recently FEE has produced a factsheet on integrated reporting which contains a useful summary of developments to date and the concept of integrated reporting. For those of you wanting to know more about integrated reporting this update makes excellent reading.
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