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 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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Finance Bill 2014 – Advance tax payments
The Finance Bill issued on 27 March 2014 included proposals for advance payments of tax to be made if HMRC issues accelerated payment notices when, for example, an entity participates in certain tax planning arrangements and there is an open enquiry.
Since UK and EU-IFRS accounting standards require the use of tax rates and laws that have been enacted or substantively enacted by the end of the reporting period, any accounting effect of the advance payment regime should not be reflected in financial statements for periods ending before the date of substantive enactment of the Finance Bill (usually early July).
However, entities may need to consider the effect on cash flow forecasts immediately and reassess their best estimate of the outcome of any tax uncertainties at each reporting date in any case.
KPMG's report on the draft clauses in the 2014 Finance Bill is available to download here.
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Goodwill, intangibles and amortisation - time for a rethink?
The Financial Reporting Council (FRC) has published a Staff Research Report, Investor Views on Intangible Assets and their Amortisation, which has identified a significant level of concern amongst investors about the accounting for intangible assets, especially those acquired in a business combination. The report also questions the quality of the related disclosures.
The IASB has also issued a Request for Information as part of its post implementation review of IFRS 3, with the aim of:
- assessing whether the current accounting for business combinations and the related disclosure requirements provide useful information to users of financial statements;
- finding out where the challenges lie in implementing the current accounting requirements for business combinations; and
- determining whether there are any unexpected costs in implementing IFRS 3.
Commenting in an article in Economia, Mike Metcalf, a UK partner in KPMG stated "The IASB’s review opens up] big-ticket questions about what accounts, and corporate reporting more widely, are about, for whom, how they portray performance, and how they facilitate accountability."
At the same time, KPMG IFRG Limited conducted a series of stakeholder interviews on the topic of goodwill impairment and has published its own report, Who cares about goodwill impairment? This report finds that the current IFRS model of mandatory annual impairment testing might be due for a re-think.
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Editorial amendments to FRS 102
The FRC has issued its latest editorial amendments/clarifications to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland in response to two common questions:
- Use of SORPs − Early application of FRS 102 is allowed, even when the relevant SORP has not yet been updated, provided early adoption does not lead to conflict with the requirements of a current SORP.
- Accounting for financial instruments − Chapters 11 and 12 of FRS 102, dealing with financial instruments, are amended to clarify the presentation requirements to be applied when an entity chooses to apply the recognition and measurement requirements of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments.
All editorial amendments and clarification statements issued by the FRC to date in relation to FRS 102 are available to download here.
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FRC Conduct Committee proposes greater transparency
The FRC has published a consultation paper proposing amendments to its Conduct Committee’s Operating Procedures for the review of company reports and accounts.
Under these proposals, a company subject to an enquiry by the Conduct Committee would be required to provide a ‘fair and balanced’ explanation of any such enquiry in the report and accounts in which any change was made (a Committee Reference). Further, the Conduct Committee would expect to be given the opportunity to comment on any explanation a company intends to give in its annual report and accounts, prior to its publication.
Other key amendments include:
- publication of the names of those companies who have published Committee References in the Conduct Committee’s annual Corporate Reporting Review report; and
- an explanation that the Conduct Committee’s letter to companies may include references to aspects of reporting other than compliance with mandatory reporting requirements, e.g., cutting clutter.
The FRC’s proposals and invitation to comment (by 16 June 2014) is available to download here.
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