Financial reporting update: Revenue recognition, IR, and more
What follows is a roundup of recent developments in the financial reporting world.
Is corporate reporting improving?
The Financial Reporting Council (FRC) has published its 2017 assessment of reporting in the UK. In general the report is positive about reporting, though there is some criticism that explanations still are not as detailed as they might be. In particular, there is no improvement on how financial statements are linked back to the narrative.
Amendments to property, plant, and equipment standard
The International Accounting Standards Board (IASB) published an exposure draft, Property, Plant and Equipment — Proceeds Before Intended Use (Proposed Amendments to IAS 16), on proceeds from selling items produced while bringing an asset into the location and condition necessary for it to be capable of operating in the manner intended by management. Comments were requested by October 19th 2017.
Dividend reporting improvement seen in FTSE 100
A recent report by the FRC Financial Reporting Lab shows that companies are improving their dividend reporting. The Lab assessed the extent to which disclosure practice in FTSE 350 companies had changed. It identified developments in how companies describe their dividend policies, the risks to dividend payments, and the factors that were considered in setting the policy. Fifty-eight per cent of FTSE 100 companies now disclose information about distributable profits or distributable reserves, an increase from 40% in 2015. Progress in the FTSE 250 has been less significant, with 30% of companies making such disclosures.
Amendments made to IAS 28
The IASB has published Long-Term Interests in Associates and Joint Ventures (Amendments to IAS 28) to clarify that an entity applies IFRS 9, Financial Instruments, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. IAS 28 applies to all investments in which an investor has significant influence but not control.
Integrated reporting worldwide report
The integrated reporting council has published findings from its worldwide consultation on how well integrated reporting is being taken up. The report generally shows that respondents are positive about the concept, though some suggested changes to the framework.
Revenue recognition report
The CFA Institute, which represents global professional investors, has published a paper on the upcoming standard regarding revenue recognition. The standard should be applied from January 2018 and will be a major change in IFRS standards. The report looks at the possible implications.
David Hackett is technical policy manager at the Association of International Certified Professional Accountants.