mast image

Special Report

Impact investing


Accounting roundup: ESMA reduces pensions accounting focus

Related Categories

Pensions accounting has dropped down the list of 2017 enforcement priorities for the European Securities and Markets Authority (ESMA).

Instead, the EU markets watchdog said it planned to focus on disclosures about the impact of new standards on financial instruments (known as IFRS 9), revenue (IFRS 16) and leases (IFRS 17), as well as business combinations and cashflows.

Among ESMA’s other priorities for the 2017 year end were measurement and disclosure of non-performing loans by credit institutions, the fair presentation of financial performance and the effects of Brexit.

Last year, IAS 19 – the accounting standard for pension funds – was high on the list of ESMA’s priorities, with the regulator warning companies that they should not recycle defined benefit remeasurements through the “other comprehensive income” section of their accounts.

The 2017 year-end also marks the first year that some large businesses in the EU will have to disclose non-financial and diversity information under the amended accounting directive.

Meanwhile, ESMA has also released a study examining the quality of disclosure in 2016 and 2017 interim statements relating to the effects of new accounting standards.

The study found that “only a limited proportion of issuers provided both qualitative and quantitative disclosure on the expected impact of the new standards and that the quality of disclosure varied across the European Economic Area”.

Audit quality in the UK still behind target

Stephen Hadrill, chief executive of the UK’s Financial Reporting Council (FRC), has revealed 20% of audits in the UK were unsatisfactory last year.

In a speech on audit quality delivered on 25 October, Mr Hadrill said: “The average for those we regard as satisfactory has risen to 81%. Two of the six major firms exceeded 90% last year, but one remains, I’m afraid to say, at 65 per cent.”

The FRC has a target for 90% of audits of FTSE 350 companies to be judged satisfactory by 2019.

Elsewhere in his speech, the FRC chief said the regulator, in common with other regulators around the world, regretted the fact that “they did not do more to challenge group think”.

He added: “As a result, not until well into 2008 could the FRC have seen potential inadequacies in the audits. And by then the picture in the audit file was frankly out of date and irrelevant.”

Hadrill said the cost of shoring up the banking system during the financial crisis had hit £1trn (€1.1trn).

IASB conceptual framework latest

The International Accounting Standards Board’s (IASB) draft final version of its updated ‘conceptual framework’ has now completed a fatal flaw review ahead of its release, staff told the board’s 25 October meeting.

During the meeting, the board agreed to address concerns that the proposed words “no practical ability to avoid as a going concern” in the board’s draft definition of a liability could potentially capture future costs.

The board accepted the staff analysis that the issue was a drafting problem rather than an indication of any flaw in the board’s decision-making process.

According to the latest IASB workplan, the board is set to publish its updated conceptual framework – which sets out how it develops new accounting standards – in the first quarter of next year.

FRS 101 amendments

The FRC has issued a consultation document in which it proposes making no changes to Financial Reporting Standard (FRS) 101, Reduced Disclosure Framework.

FRS 101 lets qualifying subsidiaries and parent companies use the recognition and measurement bases of international FRSs in their financial statements, but with fewer disclosures.

Related images

  • ESMA Paris building

Have your say

You must sign in to make a comment


Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2543

    Asset class: Search of an Asset manager / Advisor managing / Advising a risk-based equity derivatives overlay program.
    Asset region: Global Developed Markets Equities, Global Emerging Markets Equities, Swiss Equities.
    Size: CHF 700-2100 million.
    Closing date: 2019-06-17.

  • QN-2544

    Asset class: Transitional Real Estate Debt.
    Asset region: North America (USA/Canada).
    Size: $50-100mn.
    Closing date: 2019-06-17.

  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

Begin Your Search Here