Annual Financial Reporting Seminar 2013 November · 2019-10-28 · Annual Financial Reporting Seminar 2013 © 2013 Deloitte & Touche Mary Fulton National Technical Partner Welcome

© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013

Annual Financial

Reporting Seminar 2013

The Convention Centre

15th November


Mary Fulton National Technical Partner

Welcome and introduction

2


Session 1

Liffey Hall

Welcome and Introduction - Mary Fulton

Key note address - Ronan Nolan

Changing times for reporters - Glenn Gillard

Tea/coffee and networking break

Session 2

Liffey Hall

IFRS Related Topics

Where to next? - Oliver Holt

In the pipeline - Brendan Sheridan

The New Irish GAAP

A whole new framework - Richard Howard

What is changing? - Ann McGonagle

Financial Instruments - a big issue! - Matthew Foley

Closing comments and Q&A - Gerry Fitzpatrick

Lunch and networking reception

AFRS Agenda 2013

3

#Deloitteafrs


Tax Accounting

Information Stands – Level 3 Foyer

Companies Bill Financial

Transformation

IXBRL Corporate Governance

Future of Irish GAAP

4


Ronan Nolan Partner

5

Deloitte Ireland

© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013 6

Jane Fuller, Chair, Financial Reporting and Analysis Committee,

Will Goodhart, Chief Executive, CFA Society of the UK- FT December 23rd, 2012

“In the great blame game that has followed the

financial crisis, the oddest culprit to be singled out

is International Financial Reporting Standards.

This is like blaming a tape measure for obesity.”


Jane Fuller, Chair, Financial Reporting and Analysis Committee,

Will Goodhart, Chief Executive, CFA Society of the UK- FT December 23rd, 2012

“The rapid build-up of assets – loans and trading

instruments – was clear to see. So was the suppression of

equity, which left banks short of loss-absorbing capacity.

Since the crisis, regulators and others conducting post

mortems have used numbers reported under IFRS to

demonstrate the dangerous increase in leverage.”


Prof. Prem Sikka, Centre for Global Accountability, University of Essex, January 16th, 2013

“I think we should restore the prudence principle

that enabled companies to

build up buffers.”


Prof. Stella Fearnley, Bournemouth University Business School, January 16th, 2013.”

“How many people knew that the IASB was busy taking

prudence out of its conceptual framework? There were all

these things that were happening that stakeholders knew

nothing about.”


Prof. David Cairns OBE, visiting professor, University of Edinburgh, January 16th, 2013

“Another solution … is to go back to the idea of building up

buffers, having general provisions, which somehow or other

attempt to smooth out the ups and downs of the economic

cycle…. We could go back to that, but I would not advocate

it. ... It may well not simply smooth out the bad and the

good, but may often, in some cases, hide losses as much as

profits.”


Sir David Tweedie, President Institute of Chartered Accountants in Scotland, January 28th, 2013

“I have heard it said that the IFRS got rid of prudence. It

didn’t….standards come first. ..prudence is written all

through them. .. We had a long discussion about where

prudence fits in with neutrality. .. being neutral means trying

to get the right answer without bias, and if you bring in

prudence you are biasing it. The idea therefore was, let’s put

in the standards and make them as prudent as we want them

to be; then, we want people to try to get the right answer

thereafter.”


ISA (UK and Ireland) 200, paragraph 13

“An attitude that includes a questioning mind,

being alert to conditions which may indicate

possible misstatement due to error or fraud, and a

critical assessment of audit evidence.”


APB, Professional Scepticism March 2012

“Neutral, inquiring or challenging?”

14


Source: Wikipedia

“Heuristics –

experience-based techniques for problem solving, learning

and discovery that give a solution which is not guaranteed to

be optimal…examples include using a ‘rule of thumb’, an

‘educated guess’, an intuitive judgement, stereotyping, or

‘common sense.”


System 2 – ‘The Lazy Controller.’

Daniel Kahneman, Thinking, Fast and Slow 2011

16


Daniel Kahneman, Thinking, Fast and Slow 2011.

“Expert intuition is the result of experience and

practice, but not all professionals’ intuition arises

from true experience. When faced with a difficult

question, we often answer an easier one instead,

usually without noticing the substitution.”



the illusion of Validity

the planning fallacy

the sunk cost fallacy

the illusion of control

confirmation bias



Pre-mortem session

More than a single scenario

individual loss aversion → not enough

overall risk

reframe by changing reference point

Session 1: The Psychology of

Professional Skepticism


T The Anchoring Effect

• We tend to rely too heavily on the first piece of information offered (the

"anchor") when making decisions.

• Once an anchor is set, other judgments are made by adjusting away

from that anchor.

• This applies even when anchor is obviously unrealistic.

• We are likely to be influenced by management’s own estimates and

assumptions even when we attempt to create our own independent

estimate.

21


Chartered Accountants Regulatory Board / Professional Standards, Code of Ethics for Members

A distinguishing mark of the accountancy profession is its

acceptance of the responsibility to act in the public interest.

Acting in the public interest involves having regard to the legitimate

interests of clients, government, …and others who rely upon the

objectivity and integrity of the accounting profession to support the

propriety and orderly functioning of commerce.

Therefore, a professional accountant‘s responsibility is not

exclusively to satisfy the needs of an individual client or employer.


How would you define yourself?

Stage Description You might say

1 Obedience & Punishment “I will do that because I won’t be caught and punished”

2 Self-interest “I will do that because there is something in it for me”

3 Accord & Conformity “I will do that because my gang would like it – I want to be liked and

accepted”

4 Maintenance of social order “I will do that because it is required by the law/rules, even though it is

not necessarily good for me”

5 Social Contract Orientation “I will do that because, even though the law says I should not / need

not do it, I can achieve the greater good for the greater number by

doing it”

6 Universal Ethical Principles “I will do that because, even though the law says I should not / need

not do it, and the greater number may not benefit, it is simply just”


“Breaking the Boilerplate”

Hans Hoogervorst June 2013


“It ain’t gonna happen!”

the Accounting Onion August 2013


Report of the Commission of Investigation into the Banking Sector in Ireland, issued March 2011

‘The Silent Observers: External Auditors’ “Auditors are

also required …… to make a judgment on at least the short

term sustainability of the bank’s business model and strategy.

The auditors clearly fulfilled this narrow function according to

existing rules and regulations. They did not, however,

generally report excesses over prudential sector lending limits

to the FR… Auditors, therefore, did not feel that commenting

on the implications of such business model problems fell

within their proper remit…


John Griffith-Jones, UKFCA, Speech at London Mansion House, October 2012

“Audit Reports are

less and less useful to the world at large...In the period up to

the crisis,…. the perceived wisdom for closing the audit

expectation gap was to lower the expectation rather than to

expand the scope. And the result? The dogs did not bark.

Why? Because it was not their responsibility to do so.”


Prof. Prem Sikka, Centre for Global Accountability, University of Essex, January 16th, 2013

“Auditors have been the real weak link in the

banking crisis....Nowhere in the Companies Act does

it say that auditors are not required to provide any

warning about a company not being a going

concern”



“The minute you put a going concern qualification on a

bank, there will be an immediate run. So a relationship

between the auditor and the regulator is required. I think

that that was missing at the time.



“…the 2008 audit report of one of the companies in receipt

of the troubled asset relief programme funds cost $119

million, and in 2009 it cost $193 million and yet the audit

report was, word for word, the same. So you had no idea

what a totally different audit was actually undertaken. There

was clearly an emphasis on different aspects of that audit,

but an outsider would not know…”


David Tweedie, President Institute of Chartered Accountants in Scotland, January 28th, 2013

“…What makes you say it is a going concern?

In what areas did you have disputes with management?

What areas were you concerned about?

On what areas did you spend a long time in the audit?

What are the big estimates that are involved in the audit,

because there are always estimates in the accounts?

Which are the ones that you had to look at very carefully, and

which ones were pretty significant?”

32

The Chartered Accountant of the Future ?


I believe the ability to exercise

professional judgement with integrity

is the hallmark of a Chartered

Accountant


Changing times for reporters

Glenn Gillard National Accounting

Technical Partner



key questions you need to ask 5


What am I doing about new GAAP? 1


46 13


Is my group reporting package

changing?

2


Consolidation:

Package of Five

Fair Value

Offsetting


What has changed in Irish GAAP? 3



What has changed in IFRS? 4


Standard / Interpretation

Effective date

(annual period

beginning)

New IFRS/Amendments

Amendments to IFRS 1–Government Loans 1 January 2013

Amendments to IFRS 7–Offsetting Financial Assets and Financial Liabilities 1 January 2013

IFRS 13 Fair Value Measurements 1 January 2013

Amendments to IAS 1– Presentation of Items of Other Comprehensive Income 1 July 2012

Amendments to IAS 19 Employee Benefits 1 January 2013

Annual Improvements 2011 1 January 2013

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013

New IFRSs or amendments—applicable for 31 December 2013 year-

ends

44


IAS 1 – Items in Other

Comprehensive Income

• Items of OCI must be grouped

based on whether they will be

reclassified to profit or loss

(‘recycled’) or not

• Tax on items of OCI is to be

allocated on the same basis.

45 Footer

© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013 46 Footer

Recognition

Disclosure

Presentation

IAS 19 – Post Employment Benefits

© 2013 Deloitte & Touche

Amendments to IFRS 7: Offsetting Financial Assets and

Financial Liabilities

• Required disclosures

about rights of offset and

related arrangements

(such as collateral posting

requirements) for financial

instruments under an

enforceable master

netting agreement or

similar arrangement


What is the objective of IFRS 13?

#1:

What is meant

by “fair value”?

#2:

How should an

entity measure fair

value?

#3

What should be disclosed

about fair value

measurements?

IFRS 13 sets out a framework for measuring

fair value in a single IFRS, and answers:

48


Fair value hierarchy

Level 1

Quoted prices in active market for identical assets or liabilities

Level 2 Observable inputs other

than quoted prices in level 1, either directly or

indirectly

Level 3

Unobservable inputs

• The fair value hierarchy is applicable to

both financial and non-financial items

that are within the scope of IFRS 13

• The fair value hierarchy gives the

highest priority to quoted prices in

active markets for identical assets and

liabilities and the lowest priority to

unobservable inputs

• The fair value measurement is

categorised in its entirety based on

the lowest level of significant input

• Fair value hierarchy depends on the

inputs, not valuation techniques.

49


Are there any other reporting

requirements changing?

5





© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013 © 2013 Deloitte & Touche

© Deloitte LLP: The seminar and these accompanying handouts have been written in general terms and therefore cannot be relied on to cover specific situations; furthermore, responses given in

the seminar to questions are based on only an outline understanding of the facts and circumstances of the cases and therefore do not form a substitute for considered specific advice tailored to

your circumstances. Applications of the principles set out will depend on the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining

from acting on any of the contents of this seminar and these accompanying handouts. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this handout to

their specific circumstances. Please feel free to contact any partner. We would be pleased to advise you on the application of the principles demonstrated at the seminar to your specific

circumstances but in the absence of such specific advice cannot be responsible or liable to you for the content of our presentation.

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55 CTT October 2010

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Annual Financial Reporting Seminar 2013 November · 2019-10-28 · Annual Financial Reporting Seminar 2013 © 2013 Deloitte & Touche Mary Fulton National Technical Partner Welcome