FRC governance principles, IASB proposals, and more

FRC’s Wates Principles focus on key behaviours

The UK Financial Reporting Council (FRC) released the final version of the Wates Principles for private companies last week. The principles are designed to help companies improve corporate governance standards. The categories of the principles are purpose and leadership, board composition, board responsibilities, opportunity and risk, remuneration, and stakeholder relationships and engagement.

A full document outlining the principles is available on the FRC site.

IASB proposes amendments on contingent liabilities, assets

The International Accounting Standards Board (IASB) is seeking comment on proposed amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets, that would specify which costs a company should include when determining whether a contract will be loss-making.

A company terms a contract as loss-making (and describes it as onerous) if the costs the company anticipates incurring to fulfil the contract are higher than the economic gains the company expects to receive from the contract.

The proposed amendments would specify that the costs of fulfilling a contract include both incremental costs, such as the costs of materials, and an allocation of other costs directly related to the contract, such as the depreciation charge for equipment the company uses to fulfil contracts.

The proposed changes are published in an exposure draft, Onerous Contracts — Cost of Fulfilling a Contract. The deadline for comments is 15 April 2019.

IFRS 17 on insurance contracts

The IASB recommended a deferral of the effective date of IFRS 17 standards related to insurance contracts. The board has moved the effective date from January 2021 to January 2022. Discussion will continue in early 2019 about further amendments and will be followed by public consultation before changes are confirmed.

FRC Lab call

The FRC is following on from its disclosures work on dividend policy and disclosure reporting with a look at how reporting on the sources and use of cash can be presented in a way that is useful to investor decision-making. The FRC’s Financial Reporting Lab seeks to bring investors together with preparers to push forward best practice and highlight improvements in reporting.

Oxford Union debate

A number of high-level speakers took part in a debate at the Oxford Union on 11 December on whether corporate sustainability reporting should be mandated, and standardised by the IASB and the US Financial Accounting Standards Board (FASB). The debate, organised by Saïd Business School, focused on whether the organisations had the capacity and skillset to develop standards on sustainability or whether the inclusion of these would dilute their mission. Speakers included Bob Herz, a former FASB chairman, and Paul Druckman, the FRC’s Corporate Reporting Council chair and former CEO of the International Integrated Reporting Council.

— David Hackett is technical policy manager at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.