Embed Size (px)
Citation preview
Deloitte LLP 2 New Street Square London EC4A 3BZ
Tel: +44 (0) 20 7936 3000 Fax: +44 (0) 20 7583 1198 www.deloitte.co.uk
Direct: 0207 007 0884 Direct fax: 020 7007 0158 [email protected]
Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
Member of Deloitte Touche Tohmatsu Limited
Jenny Carter Financial Reporting Council 8th Floor 125 London Wall London EC2Y 5AS By email to: [email protected] 30 April 2015 Dear Ms Carter
The future of financial reporting in the UK and Rep ublic of Ireland
Deloitte LLP is pleased to respond to FRED 58: Draft FRS 105 The Financial Reporting Standard applicable to the Micro-entities regime (‘FRED 58’), FRED 59: Draft Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland Small entities and other minor amendments (‘FRED 59’) and FRED 60: Draft Amendments to FRS 100 Application of Financial Reporting Requirements and FRS 101 Reduced Disclosure Framework (‘FRED 60’) (together ‘the FREDs’).
In Appendices 1-3 to this letter we set out our responses to the specific questions raised by the FRC and certain other key issues. Appendix 4 sets out more detailed drafting comments on the FREDs.
Overall we support the proposals. Our key comments, which we expand on in the appendices to this letter, are as follows:
• the section numbering should be kept consistent between FRS 102 and FRS 105 but FRS 105 should otherwise be drafted as a separate, standalone standard with paragraphs within sections numbered sequentially. We do not believe that the proposed approach is sufficiently clear for users to understand and follow;
• the requirements of Sections 11 and 12 of draft FRS 105 should be combined into a single financial instruments section for ease of use. The drafting of these sections should be reconsidered bearing in mind that the unstated objective of the proposals is to permit micro-entities to continue to apply the historical cost accounting practices that they have previously adopted under the FRSSE. It is likely to be more successful using familiar language taken from the FRSSE or FRS 4 than artificially using FRS 102 terminology which is not appropriate to the circumstances or the audience.
Jenny Carter 30 April 2015 Page 2
• we are pleased that in line with our previously expressed views, the FRC does not propose to
address accounting for service charges by residents’ management companies in the body of either FRS 102 or FRS 105. However, we are concerned about the statements made in the Accounting Council’s Advice to the FRC which we believe misrepresent the legal advice obtained by the ICAEW and the FRC and incorrectly imply that the legal advice resolves the accounting issue which it does not; and
• we do not agree with the proposed Section 1A of FRS 102. It is almost impossibly difficult to understand, particularly as the audience is small companies and their advisers. We believe that it should be completely restructured.
We would be happy to discuss our letter and the draft proposals with you. If you have any questions, please contact Joanna Mithen on 0207 303 6697 or [email protected] or Ken Rigelsford on 0207 007 0752 or [email protected].
Yours sincerely
Veronica Poole National Head of Accounting and Corporate Reporting Deloitte LLP
Jenny Carter 30 April 2015 Page 3
Appendix 1
FRED 58
Responses to detailed questions
Question 1 In adapting FRS 102 to create draft FRS 105, it is necessary to strike a careful balance between developing an accounting standard t hat:
(a) is easily accessible and understandable for pre parers of financial statements of entities of this size; yet
(b) maintains consistency with: (i) the language and terminology of FRS 102 (where the underlying recognition and
measurement requirements of the two standards are t he same); and (ii) the structure (i.e. the section and paragraph numbering) of FRS 102 upon which
draft FRS 105 is based.
…..
Do you agree with this approach? If not, why not? W hat alternative presentation do you propose?
We agree with this approach but do not believe that the proposals achieve the correct balance. Although we agree that it is important to maintain consistency with the structure of FRS 102 as far as possible, we do not believe that the current approach is sufficiently clear for users to understand or follow. This is particularly apparent where paragraph references that have been retained from FRS 102 contain entirely different words from those in FRS 102. A user could reasonably expect that the equivalent paragraph in FRS 102 would contain the same requirement as in FRS 105, which is not always the case. In addition we believe it is unhelpful to include numerous paragraph references only to refer to them as “[Not used]”.
We recommend that the section numbering should be kept consistent between FRS 102 and FRS 105, but that FRS 105 should otherwise be drafted as a separate, standalone standard with paragraphs within sections numbered sequentially and not constrained by the wording of FRS 102. It may be helpful to publish a separate ‘source’ table as an appendix or on the FRC website but this is something which is likely to be of interest only to a limited audience.
Question 2 The proposed amendments to align the req uirements of draft FRS 105 with company law are discussed in more detail in paragra phs 19 to 31 of the Accounting Council’s Advice.
Do you agree that draft FRS 105 accurately reflects the legal requirements and exemptions of the Micro-entities Regime including:
(a) Its scope? (b) The presentation and formats of financial state ments? (c) The prohibition of the use of the Alternative A ccounting Rules and Fair Value Rules? (d) The disclosure exemptions?
If not, why not? What further amendments are requir ed?
Jenny Carter 30 April 2015 Page 4
Broadly speaking, we agree. We make a number of detailed drafting comments to improve the alignment of draft FRS 105 with company law. These are included in Appendix 4.
Question 3 – Principles for simplification
The Accounting Council used the following principle s in considering whether further simplifications over and above the legal requiremen ts would be appropriate in draft FRS 105:
(a) if the burden of applying the accounting treatm ent in FRS 102 is not outweighed by the benefits for micro-entities and an alternative, mor e straightforward, treatment could be identified;
(b) if the lack of detail in the formats of the fin ancial statements and/or supporting disclosures would limit the understanding of the fi nancial information presented; and/or
(c) if transactions occur infrequently amongst micr o-entities.
Paragraphs 32 to 35 of the Accounting Council’s Adv ice provide further detail.
Do you agree with these overarching principles and the resulting simplifications proposed in draft FRS 105? If not, why not?
Yes, we broadly agree. However, please refer to our response to Question 7 below for further discussion.
Question 4 Financial Instruments (Section 11 Basic Financial Instruments and Section 12 Other Financial Instruments Issues )
The micro-entities regime prohibits the subsequent measurement of assets and liabilities at fair value, therefore financial instruments are measured at cost or amortised cost. Draft FRS 105 proposes a number of further simplifications over a nd above these legal requirements (see Section 11 Basic Financial Instruments ).
Paragraphs 44 to 50 of the Accounting Council’s Adv ice provide further details.
Do you agree with this approach? If not, why not?
Do you believe further simplifications are necessar y for micro-entities? If so, please provide further details.
Although we agree with an approach that simplifies the measurement of assets and liabilities for micro-entities, in our view use of terminology consistent with that included in FRS 4 Capital Instruments would be more appropriate. In practice, the unstated objective of the proposals is to permit micro-entities to continue to apply the historical cost accounting practices which they have previously adopted under the FRSSE for financial instruments. The difficulty is in codifying them when that has not been done before. It is likely to be more successful using familiar language taken from the FRSSE or FRS 4 than artificially using FRS 102 terminology which is not appropriate to the circumstances or the audience.
Jenny Carter 30 April 2015 Page 5
In particular, we suggest the terminology of ‘amortised cost’ should be amended throughout Sections 11 and 12 as the accounting treatment described in these Sections does not represent true amortised cost accounting. This may be confusing to users of the standard who are also working with other accounting frameworks. We also recommend that the requirements of Sections 11 and 12 should be combined into a single financial instruments section for ease of use. An alternative would be to rename Section 12 ‘Derivative financial instruments’ to clarify that this Section deals only with this type of financial instrument. This would also maintain consistency with the wording in paragraphs 26 and 27 to the Accounting Council’s Advice to the FRC to issue FRED 58, which refers to Section 12 as dealing specifically with derivative financial instruments.
We propose a number of detailed drafting amendments which are included in Appendix 4 below. Although we have suggested drafting amendments to Section 12, we believe that this material (whether retained as Section 12 or combined with Section 11) should be subject to a more fundamental reconsideration. The objective of this exercise should be to codify existing generally accepted accounting practice using easy to understand language and familiar terminology.
Question 5 Capitalisation of development costs (Sec tion 18 Intangible Assets other than Goodwill ) and borrowing costs (Section 25 Borrowing Costs )
Draft FRS 105 proposes to remove the accounting pol icy options from FRS 102 in relation to the capitalisation of borrowing costs (Section 25 Borrowing Costs ) and development costs (Section 18 Intangible Assets other than Goodwill ). The proposed mandatory treatment will be to exp ense both borrowing and development costs.
Paragraphs 42 to 43 of the Accounting Council’s Adv ice provide further details.
Do you agree with this approach? If not, why not?
Yes, we agree because if a choice was permitted it would not be possible to require disclosure of the policy adopted due to legal constraints. Some micro-entities will wish to capitalise borrowing costs (e.g. on investment property) and development costs and this may be very material to them. However, they are not forced to apply FRS 105 and can adopt capitalisation policies by applying FRS 102.
Question 6 Government grants (Section 24 Government Grants )
Draft FRS 105 removes the accounting policy option from FRS 102 in relation to the treatment of government grants (Section 24 Government Grants ). The proposed mandatory treatment will be to apply the performance method.
Paragraphs 42 to 43 of the Accounting Council’s Adv ice provide further details.
Do you agree with this approach? If not, why not? A lternatives would be to continue to permit the accounting policy choice (i.e. FRS 105 would allow a choice between the accruals method and the performance method) or to require the accruals meth od.
Jenny Carter 30 April 2015 Page 6
No, we do not agree with the proposed approach. We believe it would be preferable to retain the accruals method to maintain the existing and well understood practice adopted by the majority of micro-entities in accordance with the FRSSE.
Question 7 Simplifications via cross-referencing to requirements in FRS 102
There are a number of areas within draft FRS 105 wh ere it is proposed that the detailed requirements for a particular type of transaction a re removed but a cross-reference to FRS 102 is inserted for micro-entities that have these type of transactions, on the basis that these types of transactions occur infrequently amongst the majorit y of micro-entities.
The areas where this approach has been proposed inc lude:
(a) intermediate payment arrangements (Section 9 Consolidated and Separate Financial Statements );
(b) trade and asset acquisitions (Section 19 Business Combinations ); (c) puttable instruments and examples of compound f inancial instruments (Section 22
Liabilities and Equity ); (d) cash-generating units (Section 27 Impairment of assets ); and (e) foreign branches (Section 30 Foreign Currency Translation ).
Do you agree with this proposed approach in general , and specifically for these types of transactions? If not, why not? Alternatives would b e to reproduce the requirements of FRS 102 within draft FRS 105 or for draft FRS 105 to be sil ent.
No, we do not agree. In our view a better approach would, in general, be to remain silent on particular types of transactions that occur infrequently amongst the majority of micro-entities. This would be consistent with the principle of FRS 105 being a stand-alone standard for micro-entities. Any recourse to FRS 102 as non-mandatory guidance could then be achieved through application of Section 10 of draft FRS 105.
We would, however, recommend that detailed requirements for intermediate payment arrangements are included in FRS 105 due to the contentious history surrounding the accounting treatment of such arrangements. It is worthwhile remembering that UITF Abstract 32 has its origins in outlawing the practice of recognising an expense (and potentially obtaining a tax deduction) for cash transferred to an employee benefit trust in circumstances when no expense would otherwise have been recognised. This issue is one that could affect micro-entities and it is better that the standard itself deals with this.
Question 8 Other simplifications
Do you believe that any further accounting simplifi cations should be made to draft FRS 105 that would be appropriate for micro-entities? If so, ple ase provide specific details of the simplifications you propose and the reasons why the simplification should be made.
We do not believe that any further accounting simplifications are necessary.
In particular we support the removal of the requirement to account for deferred tax. We understand that some commentators are objecting to this and saying that it will lead to imprudent payment of dividends.
Jenny Carter 30 April 2015 Page 7
We disagree with this point of view. The amount of deferred tax provided will not usually be an indication of the liabilities which will arise in the foreseeable future. Reversing timing differences will typically be replaced with new originating differences. It is clearly important for companies to plan to be able to meet their tax liabilities when they fall due but deferred tax is a very crude method of achieving it. Companies and their advisers should be looking at more detailed forecasts to make this assessment. Also, the main purpose of the accounts of most micro-entities is to support their tax returns and deferred tax is completely irrelevant for this purpose.
Question 9 Residents’ management companies (FRED 50 )
The FRC’s Consultation Document proposed that a new sub-section is added to Section 34 Specialised Activities of FRS 102 for residents’ management companies, se tting out requirements that would be developed from the proposals set out in FRED 50 Draft FRC Abstract 1 – Residential Management Companies’ Financial Statements .
Only some 32% of respondents to this question agree d with the proposal, with the rest disagreeing (50%) or providing some other response (18%).
In light of feedback received, the FRC now proposes that a clear statement of the legal position (i.e. that residents’ management companies act as p rincipals) should be included in the Accounting Council’s Advice to the FRC (see paragra phs 54 to 59 of the Accounting Council’s Advice). This clarification of the legal position s hould reduce the diversity in practice that currently exists because when an entity enters into transactions as a principal, such transactions should be recorded in its accounts.
Do you agree with this approach? If not, why not? W hat alternative approach do you propose?
In our response to the Consultation Document Accounting Standards for Small Entities we disagreed with the proposed approach of addressing RMCs in Section 34 of FRS 102. We are pleased that the FRC has taken note of these comments and does not propose to address RMCs in the body of either FRS 102 or FRS 105. However, we are concerned about the statements made in the Accounting Council’s Advice to the FRC in both FREDs 58 and 59.
In our response to the previous consultation, we acknowledged that there exists diversity in practice in this area but believed that the benefit of introducing a clear requirement in this area would not outweigh the cost of doing so, particularly since the majority of RMCs would be expected to qualify as micro-entities. We said that we believed that the best course of action would be for the FRC to publish the legal opinion that it has obtained in relation to RMCs, and to permit RMCs to apply judgement in selecting the accounting treatment that is most appropriate to their circumstances.
We therefore agree with the current proposal that FRS 105 should not address this issue. However, we disagree with the statement in paragraph 59 of the Accounting Council’s Advice to the FRC on FRED 58, which is factually incorrect. The legal advice obtained by the ICAEW and the FRC did not say “and therefore it is not appropriate for an RMC to prepare dormant accounts if the RMC has entered into such transactions during the reporting period”. This is an accounting issue rather than a legal issue which goes to the whole crux of the matter and cannot be resolved by legal advice alone.
Jenny Carter 30 April 2015 Page 8
Also, the summary of the legal advice is incomplete. The legal advice to both the ICAEW and the FRC was that any cash received from tenants is held on trust and is not an asset of the company. This should be mentioned if the legal advice is to be mentioned at all.
In relation to the cash balances, FRED 50 proposed following the legal form of the arrangements with the result that the cash would not be on balance sheet even though the changes in that cash balance would be regarded as creating income and expenses. This is a completely illogical outcome. It would also mean that almost every RMC would have to change its existing accounting practice because those that do prepare non-dormant accounts showing the income and expenditure usually include the cash balances on the balance sheet for consistency.
RMCs have a legal obligation (either under the terms of the lease or under statute) to provide tenants with service charge accounts. The ICAEW has issued guidance on this. However, this is a completely different matter from the statutory accounts of the company and we see no problem with the accounts being prepared as a dormant company. In the case of pension schemes, it is normal practice for the trustee company to be a dormant company. There is an accepted distinction between the accounts of the trust (the pension scheme itself) and the trustee company (which has no beneficial interest in the transaction and is therefore dormant). If the FRC were to mandate that an RMC cannot be dormant, we believe that it would have to articulate very clearly why the circumstances are different from those of a pension scheme trustee company.
We believe that the existing diversity in practice should be allowed to continue. We acknowledge that there are strongly held views on both sides and each point of view has validity. Comparability is not really an issue in this case and almost all of the companies are micro-entities which can file highly abbreviated accounts which are “presumed” to give a true and fair view.
A comment in the Advice to the FRC will not resolve the accounting issue. If the FRC concludes that an RMC should not be able to file dormant accounts, it will have to address this in accounting standards themselves. However, any suggestion that thousands of dormant companies will have to cease to be dormant is likely to be challenged on cost/benefit grounds. The information is already available to the tenants under separate legal requirements.
Question 10 Consultation Stage Impact Assessment
This FRED is accompanied by a Consultation Stage Impact Assessment. Do you have any comments on the costs or benefits discussed in that assessment?
We have no specific comments to offer in this regard.
Other issues on FRED 58 not addressed by the above questions
We set out in Appendix 4 a number of detailed drafting suggestions which are not repeated here. However, we wish to highlight the following significant issue.
Scope
Jenny Carter 30 April 2015 Page 9
The scope of FRS 105 as set out in paragraph 1.2 appears to restrict its application to companies that qualify as micro-entities whereas paragraph A3.2 in Appendix III suggests it may also be applied by other entities of similar size. We see no reason why the regime should not be available to other entities, particularly unincorporated businesses, subject to any legal restrictions. We therefore suggest that the scope of FRS 105 should extend to any other entity that would have met the criteria in the Act had it been a company incorporated under company law unless this is not permitted by law or regulation applicable to the entity in question. We note that this would currently exclude LLPs from the micros regime although we understand that the relevant law is likely to be amended later in the year to address this.
Jenny Carter 30 April 2015 Page 10
Appendix 2
FRED 59
Responses to detailed questions
Question 1 Do you agree that the proposed Section 1 A Small Entities adequately reflects the new small companies regime set out in company law a nd that the disclosure requirements for small entities are clear? If not, why not and what alternative approach would you propose?
No. Section 1A is almost impossibly difficult to understand, particularly as the audience is small companies and their advisers. We believe that it should be completely restructured.
It should first set out the disclosure requirements that small companies are required to comply with as a matter of law. These should use the exact words used in the Act and Regulations. It may then be helpful to point to the equivalent requirements of FRS 102 that may help when interpreting these legal requirements. The proposed drafting in FRED 59 mentions numerous paragraphs of FRS 102 but does not make any link to the legal requirements that they are seeking to satisfy. In some cases, it is far from obvious whether there is any underlying legal basis for requiring the disclosures.
The Section then needs to go on to explain that giving those disclosures required by law will not necessarily be sufficient to give a true and fair view.
Finally, the Section should refer to any ‘encouraged’ disclosures although we have some reservations about the value of so doing in principle. The purpose of accounting standards is to set minimum requirements and once they go beyond this it is difficult to know where to stop. However, we are conscious that in the present case the FRC is constrained by legal requirements and would otherwise have made these mandatory requirements (as they are for larger companies). We therefore accept that there is value ‘encouraging’ these disclosures in the hope that they will become generally accepted practice for small entities.
Question 2 In developing these proposals the FRC ha s applied the principle that there should not be differences between the recognition and meas urement requirements applicable to small entities and those applicable to larger entities. T his principle has been determined after taking account of the generally positive response to a sim ilar proposal in the Consultation Document.
Do you agree with this principle? If not, why not a nd what alternative principle or specific exceptions to the principle would you propose?
Yes, as stated in our response to the FRC’s Consultation Document: Accounting Standards for Small Entities, we agree with this principle.
Question 3 Do you agree that the transitional provi sions in FRS 102 are sufficient for small entities, or have you identified any further areas where transitional provisions should be considered? If so, please provide details.
Jenny Carter 30 April 2015 Page 11
Yes, we agree that the transitional provisions in FRS 102 are sufficient.
Question 4 Do you agree with the other amendments p roposed to FRS 102 for compliance with company law? If not, why not?
We agree with the amendments proposed to FRS 102 for compliance with company law subject to the following issue.
FRS 102 envisages that some PBE combinations are true mergers and should be accounted for using merger accounting. The effect of the proposed amendment to PBE34.80 is that a PBE which is a company should depart from this requirement and apply acquisition accounting instead. This is because the 2015 Regulations permit merger accounting only for group reconstructions. This will result in inconsistent accounting within the sector based on legal form and acquisition accounting is unlikely to be the most appropriate policy in the circumstances envisaged by this paragraph. We therefore propose that PBE34.80 is left as drafted and that companies should where appropriate make use of the true and fair override of company law to use merger accounting.
Question 5 This FRED is accompanied by a Consultation Stage Impact Assessment . Do you have any comments on the costs or benefits discusse d in that assessment?
We have no specific comments to offer in this regard.
Other issues on FRED 59 not addressed by the questi ons above
We set out in Appendix 4 a number of detailed drafting suggestions which are not repeated here. However, we wish to highlight the following significant issue.
Residents’ management companies
Our views on this subject are set out in Appendix 1 in response to Question 9. The concerns that we express about the words used in the Accounting Council’s Advice to the FRC apply equally to paragraph 33 of the Advice on FRED 59.
Jenny Carter 30 April 2015 Page 12
Appendix 3
FRED 60
Responses to detailed questions
Question 1 Do you agree with the amendments propos ed to FRS 100 and FRS 101? If not, why not?
Yes, we agree with the amendments proposed to FRS 100 and FRS 101, subject to the following points.
FRS 100
We believe that the list of factors set out in AG6(f) concerning whether the IFRS for SMEs meets the ‘equivalence’ test imposes restrictions that are not legally necessary. In particular we note that the detail in AG6 (f) referring to the differences between the IFRS for SMEs and the Accounting Directive appears excessive as no mention is made of differences between other accounting frameworks and the Accounting Directive. As already set out in AG5, the test of equivalence does not mean compliance with every detail of the Directive.
Additionally we recommend that AG7 be redrafted to remove some of the historical content, which has the potential to confuse users.
FRS 101
We recommend that the new paragraph AG1(d), as set out in paragraph 26, be redrafted as it is currently unclear as to how the transitional rules relating to contingent consideration on business combinations, in paragraph 65A of IFRS 3, would apply. In particular the wording relating to “the date when a qualifying entity first applied these amendments to FRS 101” is confusing for users (i.e. does it mean the beginning or end of that period).
Question 2 This FRED is accompanied by a Consultation Stage Impact Assessment . Do you have any comments on the costs or benefits discusse d in that assessment?
We have no specific comments to offer in this regard.
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 13
App
endi
x 4
Det
aile
d dr
aftin
g co
mm
ents
FR
ED
58
Top
ic
Ref
eren
ce
Sug
gest
ed a
men
ded/
addi
tiona
l tex
t
Not
es
Sco
pe
1.2
A
s ex
plai
ned
in A
ppen
dix
1 ab
ove,
this
par
agra
ph is
like
ly to
req
uire
red
rafti
ng to
cl
arify
that
the
scop
e of
the
stan
dard
is n
ot n
eces
saril
y re
stric
ted
to c
ompa
nies
.
Ord
inar
y ac
tiviti
es
2.25
2.26
The
term
‘ord
inar
y ac
tiviti
es’ h
as b
een
elim
inat
ed fr
om c
ompa
ny la
w a
nd th
eref
ore
the
wor
ding
of t
he s
tand
ard
shou
ld r
efle
ct th
at.
Pre
sent
atio
n
3.23
Und
er c
ompa
ny la
w n
o sp
ecifi
c di
sclo
sure
req
uire
men
ts s
houl
d be
spe
cifie
d w
ithin
th
e m
icro
-ent
ity s
tand
ard
goin
g be
yond
thos
e re
quire
d by
law
. How
ever
we
note
th
at th
ose
incl
uded
in p
arag
raph
3.2
3 ar
e se
nsib
le a
nd w
ill a
id u
sers
in
unde
rsta
ndin
g fin
anci
al s
tate
men
ts o
f mic
ro-e
ntiti
es.
Not
es
8.8
Mic
ro e
ntiti
es th
at p
artic
ipat
e in
mul
ti-em
ploy
er d
efin
ed b
enef
it pe
nsio
n pl
ans
may
be
requ
ired
…..
The
issu
e is
not
res
tric
ted
to m
ulti-
empl
oyer
pla
ns b
ecau
se F
RS
105
doe
s no
t ge
nera
lly r
equi
re a
ny p
ensi
on s
chem
e de
ficit
to b
e pr
ovid
ed fo
r in
the
bala
nce
shee
t.
Not
es
8.9
“…in
rel
atio
n to
adv
ance
s an
d cr
edits
gr
ante
d to
dire
ctor
s m
anag
emen
t…”
“(a)
the
amou
nt o
f ad
vanc
es a
nd
cred
its g
rant
ed to
dire
ctor
s m
embe
rs
of th
e ad
min
istr
ativ
e, m
anag
eria
l and
su
perv
isor
y bo
dies
…”
Thi
s w
ould
mai
ntai
n co
nsis
tenc
y w
ith th
e re
fere
nce
to “
dire
ctor
s” in
s41
3. T
his
poin
t is
also
rel
evan
t for
foot
note
10
in S
ectio
n 33
Rel
ated
Par
ty D
iscl
osur
es
whi
ch r
efer
s to
“ad
min
istr
ativ
e, m
anag
eria
l and
sup
ervi
sory
bod
ies”
.
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 14
Bas
ic
Fin
anci
al
Inst
rum
ents
11.1
6 “…
initi
al tr
ansa
ctio
n pr
ice
excl
udin
g tr
ansa
ctio
n co
sts…
”
Tra
nsac
tion
cost
s ar
e ac
coun
ted
for
sepa
rate
ly in
acc
orda
nce
with
par
agra
ph
11.1
4A a
nd s
o sh
ould
be
excl
uded
for
the
purp
ose
of p
arag
raph
11.
16.
Bas
ic
Fin
anci
al
Inst
rum
ents
11.1
6A
“…In
oth
er c
ases
, int
eres
t inc
ome
or
expe
nse
is a
lloca
ted
to e
ach
perio
d at
a c
onst
ant r
ate,
whi
ch to
giv
e ap
prox
imat
ely
a co
nsta
nt r
ate
of
retu
rn o
n th
e ca
rryi
ng a
mou
nt. T
his
will
nor
mal
ly b
e th
e ra
te o
f int
eres
t ap
plic
able
und
er th
e co
ntra
ct.”
The
re is
a c
onfli
ct b
etw
een
allo
catio
n on
a “
syst
emic
bas
is”
and
“at a
con
stan
t ra
te”
with
the
latte
r be
ing
mor
e re
stric
tive
than
the
form
er. T
he d
efin
ition
of
“con
stan
t rat
e” is
not
cle
ar a
s to
whe
ther
this
ref
ers
to a
con
stan
t rat
e on
car
ryin
g am
ount
(as
per
FR
S 4
) or
a c
onst
ant a
mou
nt e
ach
perio
d.
Bas
ic fi
nanc
ial
inst
rum
ents
11.2
0
Thi
s is
cur
rent
ly [N
ot u
sed]
. How
ever
it w
ould
be
usef
ul to
hav
e so
me
guid
ance
for
whe
n th
e ex
pect
ed li
fe/c
ash
flow
s of
a fi
nanc
ial i
nstr
umen
t cha
nge.
Thi
s ne
ed n
ot
be a
s co
mpl
ex a
s un
der
FR
S 1
02 b
ut fo
r ex
ampl
e co
uld
say
that
cha
nges
sho
uld
be a
ccou
nted
for
pros
pect
ivel
y w
ithou
t adj
ustin
g th
e ca
rryi
ng a
mou
nt.
Impa
irmen
t of
finan
cial
in
stru
men
ts
11.2
5 “A
mic
ro-e
ntity
sha
ll re
cogn
ise
an
impa
irmen
t los
s im
med
iate
ly in
pro
fit
or lo
ss f
ollo
win
g th
e id
entif
icat
ion
of a
lo
ss e
vent
as
deta
iled
in p
arag
raph
11
.22.
Any
impa
irmen
t los
s re
cogn
ised
sho
uld
be th
e di
ffere
nce
betw
een
carr
ying
val
ue a
nd th
e be
st
estim
ate
of th
e am
ount
exp
ecte
d to
be
rec
eive
d in
set
tlem
ent.
”[11
.25(
a)
and
(b)
shou
ld b
e de
lete
d.]
The
cur
rent
wor
ding
of t
his
para
grap
h co
uld
be im
prov
ed to
mak
e it
clea
rer
whe
n an
impa
irmen
t may
nee
d to
be
reco
gnis
ed a
nd a
t wha
t am
ount
. The
orig
inal
dr
aftin
g is
unl
ikel
y to
ach
ieve
the
desi
red
outc
ome
and
a sh
orte
r si
mpl
er
alte
rnat
ive
is p
refe
rabl
e.
Tra
nsfe
rs o
f 11
.35
T
his
para
grap
h w
hich
cro
ss r
efer
s to
the
mor
e de
taile
d re
quire
men
ts in
the
sam
e
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 15
non-
cash
co
llate
ral
para
grap
h of
FR
S 1
02 s
houl
d be
del
eted
bec
ause
it is
hig
hly
unlik
ely
to a
pply
to a
m
icro
-ent
ity.
It is
not
obv
ious
wha
t tra
nsac
tions
it a
pplie
s to
with
out m
ore
deta
il.
Initi
al
reco
gniti
on o
f de
rivat
ives
12.6
/12.
6A
S
ome
refe
renc
e sh
ould
be
mad
e he
re to
the
elim
inat
ion
of r
isks
for
eco
nom
ic
purp
oses
/fac
t tha
t the
der
ivat
ive
finan
cial
inst
rum
ent h
as b
een
ente
red
into
in
orde
r to
man
age
risk.
It c
ould
then
be
stat
ed th
at th
e ac
coun
ting
trea
tmen
t of t
he
deriv
ativ
e w
ill d
epen
d on
the
acco
untin
g tr
eatm
ent o
f the
ris
k/un
derly
ing
asse
t.
Con
trac
tual
pa
ymen
ts
12.8
A
N
o on
e w
ill u
nder
stan
d w
hat t
his
para
grap
h m
eans
and
cro
ss r
efer
ring
to S
ectio
n 2
does
not
pro
vide
any
pra
ctic
al s
olut
ion.
Unl
ess
the
para
grap
h ca
n se
t out
the
inte
nded
req
uire
men
t (w
hate
ver
that
is)
mor
e cl
early
it s
houl
d be
del
eted
.
Oth
er fi
nanc
ial
inst
rum
ents
is
sues
–
Impa
irmen
t
12.1
3 “A
fina
ncia
l ass
et m
ay b
e is
impa
ired
if it
is te
rmin
ated
ear
ly o
r be
com
es a
n on
erou
s co
ntra
ct.”
Thi
s se
nten
ce s
houl
d be
am
ende
d or
del
eted
. Ear
ly te
rmin
atio
n w
ould
lead
to
dere
cogn
ition
rat
her
than
impa
irmen
t. T
he r
efer
ence
to o
nero
us c
ontr
acts
is
conf
usin
g be
caus
e su
ch a
con
trac
t wou
ld b
e re
cogn
ised
as
a lia
bilit
y un
der
para
grap
h 12
.14B
alth
ough
cle
arly
any
ass
et w
ould
be
impa
ired
first
bef
ore
reco
gnis
ing
any
addi
tiona
l lia
bilit
y, w
hich
is p
resu
mab
ly w
hat t
his
para
grap
h is
in
tend
ed to
mea
n.
Der
ecog
nitio
n 12
.14
Del
ete
exis
ting
text
and
rep
lace
with
: “A
n en
tity
shal
l app
ly th
e de
reco
gniti
on r
equi
rem
ents
in
para
grap
hs 1
1.33
to 1
1.38
to
finan
cial
ass
ets
and
finan
cial
lia
bilit
ies
to w
hich
this
sec
tion
appl
ies.
”
Alth
ough
this
par
agra
ph r
efer
s to
a “
finan
cial
inst
rum
ent”
it s
eem
s to
add
ress
onl
y fin
anci
al a
sset
s be
caus
e of
the
cros
s re
fere
nce
to p
arag
raph
11.
33. D
eriv
ativ
es
can
be e
ither
ass
ets
or li
abili
ties
and
may
cha
nge
from
one
to th
e ot
her
durin
g th
eir
life.
If th
e re
quire
men
ts fo
r de
rivat
ives
are
ret
aine
d in
a s
epar
ate
Sec
tion
12
then
the
wor
ds u
sed
in F
RS
102
.12.
14 s
houl
d be
use
d w
ithou
t am
endm
ent.
Oth
er fi
nanc
ial
inst
rum
ents
–
Der
ecog
nitio
n
12.1
4A
“The
mic
ro-e
ntity
sha
ll no
t cla
ssify
su
ch g
ains
as
reve
nue
, unl
ess
the
finan
cial
inst
rum
ent i
s he
dgin
g sa
les.
”
Thi
s pa
ragr
aph
refe
rs to
the
fact
that
a m
icro
-ent
ity s
hall
not c
lass
ify a
ny g
ain
on
dere
cogn
ition
of a
fina
ncia
l ins
trum
ent a
ccou
nted
for
unde
r S
ectio
n 12
as
reve
nue.
Thi
s sh
ould
be
amen
ded
to r
efle
ct th
e fa
ct th
at if
the
finan
cial
inst
rum
ent
is h
edgi
ng s
ales
this
trea
tmen
t wou
ld in
fact
be
appr
opria
te.
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 16
One
rous
co
ntra
cts
12.1
4B
Add
at e
nd: “
A fi
nanc
ial i
nstr
umen
t he
ld fo
r he
dgin
g pu
rpos
es s
hall
be
asse
ssed
toge
ther
with
the
hedg
ed
risk
whe
n as
sess
ing
whe
ther
the
cont
ract
is o
nero
us.”
It ne
eds
to b
e cl
ear
that
a d
eriv
ativ
e co
ntra
ct is
not
nec
essa
rily
oner
ous
just
be
caus
e it
is ‘o
ut o
f the
mon
ey’.
Sep
arat
ion
of
inta
ngib
les
19.1
A
If
the
cros
s re
fere
nce
to F
RS
102
is r
etai
ned
(see
App
endi
x 1)
, it w
ould
be
help
ful
to d
isap
ply
the
requ
irem
ent t
o re
cogn
ise
inta
ngib
les
sepa
rate
ly fr
om g
oodw
ill in
a
busi
ness
com
bina
tion
on c
ost/b
enef
it gr
ound
s.
Con
tinge
nt
liabi
litie
s 21
.15
A m
icro
-ent
ity s
hall
disc
lose
the
tota
l am
ount
of a
ny c
ontin
gent
liab
ilitie
s no
t rec
ogni
sed
in th
e st
atem
ent o
f fin
anci
al p
ositi
on in
acc
orda
nce
with
pa
ragr
aph
8.8(
a).
The
cro
ss r
efer
ence
to p
arag
raph
8.8
(a)
does
not
add
any
thin
g us
eful
. It
wou
ld b
e m
ore
usef
ul to
say
that
this
is r
equi
red
by p
arag
raph
57(
1) o
f S
I 200
8/40
9 as
am
ende
d, p
erha
ps b
y w
ay o
f foo
tnot
e.
We
note
that
our
com
men
ts a
bout
the
‘ser
ious
ly p
reju
dici
al’ e
xem
ptio
n in
the
cont
ext o
f FR
S 1
02 a
re n
ot r
elev
ant t
o F
RS
105
bec
ause
the
stan
dard
’s
requ
irem
ents
are
alre
ady
the
bare
min
imum
req
uire
d by
law
.
Con
tinge
nt
asse
ts
21.1
6
We
cann
ot s
ee a
lega
l req
uire
men
t to
mak
e di
sclo
sure
s ab
out c
ontin
gent
ass
ets
for
a m
icro
-ent
ity s
o it
appe
ars
that
this
par
agra
ph s
houl
d be
del
eted
.
Cla
ssifi
catio
n of
an
inst
rum
ent a
s lia
bilit
y or
eq
uity
22.5
(a)
P
arag
raph
22.
5(a)
sho
uld
be d
elet
ed.
In F
RS
102
, it r
efer
s to
“an
inst
rum
ent o
f th
e ty
pe d
escr
ibed
in p
arag
raph
22.
4(b)
”. I
n F
RE
D 5
8, p
arag
raph
22.
4 ha
s be
en
com
plet
ely
rew
ritte
n co
mpa
red
with
the
equi
vale
nt p
arag
raph
in F
RS
102
and
no
long
er d
eals
with
put
tabl
e in
stru
men
ts.
Par
agra
ph 2
2.5(
a) g
ives
an
exam
ple
on
som
ethi
ng w
hich
doe
s no
t mee
t the
spe
cial
rul
e in
par
agra
ph 2
2.4(
b) o
f FR
S 1
02
and
is m
eani
ngle
ss w
ithou
t it.
Inde
ed, r
ead
outs
ide
of th
at c
onte
xt th
e an
swer
it
give
s is
inco
rrec
t.
Con
vert
ible
22
.13
“On
issu
ing
conv
ertib
le d
ebt o
r si
mila
r co
mpo
und
inst
rum
ents
that
P
arag
raph
22.
1 of
this
sec
tion
refe
rs to
“th
e ac
coun
ting
for
com
poun
d fin
anci
al
inst
rum
ents
” de
alt w
ith b
y th
is s
ectio
n. T
he r
efer
ence
to “
conv
ertib
le d
ebt”
in
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 17
debt
co
ntai
n bo
th a
liab
ility
and
equ
ity
com
pone
nt, a
mic
ro-e
ntity
sha
ll al
loca
te th
e pr
ocee
ds…
”
para
grap
h 22
.13
shou
ld th
eref
ore
be e
xten
ded
in o
rder
to m
aint
ain
cons
iste
ncy
thro
ugho
ut th
is s
ectio
n. In
deed
, it i
s un
clea
r w
hy th
e w
ordi
ng o
f thi
s pa
ragr
aph
depa
rts
from
that
of F
RS
102
. The
am
endm
ent c
larif
ies
that
, for
exa
mpl
e,
conv
ertib
le p
refe
renc
e sh
ares
wou
ld b
e ac
coun
ted
for
in th
is w
ay.
Dis
clos
ure
of
pens
ion
com
mitm
ents
28.4
0A
T
he d
iscl
osur
e is
not
res
tric
ted
to m
ulti-
empl
oyer
pla
ns b
ecau
se F
RS
105
doe
s no
t gen
eral
ly r
equi
re a
ny p
ensi
on s
chem
e de
ficit
to b
e pr
ovid
ed fo
r in
the
bala
nce
shee
t. It
shou
ld in
stea
d re
fer
to d
efin
ed b
enef
it pl
ans.
Tra
nsiti
on to
th
is [d
raft]
F
RS
35.1
The
ref
eren
ce in
this
par
agra
ph to
“…
EU
-ado
pted
IFR
S o
r an
othe
r se
t of g
ener
ally
ac
cept
ed a
ccou
ntin
g pr
inci
ples
” se
ems
inap
prop
riate
. The
maj
ority
of m
icro
-en
titie
s w
ill p
resu
mab
ly b
e tr
ansi
tioni
ng fr
om a
ccou
ntin
g un
der
the
FR
SS
E o
r ol
d U
K G
AA
P a
nd th
eref
ore
it m
akes
sen
se to
ref
er to
thes
e sp
ecifi
cally
in th
is
para
grap
h co
nsis
tent
with
par
agra
ph 3
5.4.
Def
initi
on o
f tim
ing
diff
eren
ces
App
endi
x I:
Glo
ssar
y
The
re is
no
need
to in
clud
e a
defin
ition
of “
timin
g di
ffer
ence
s” a
s de
ferr
ed ta
x is
no
t cov
ered
in th
is s
tand
ard,
ther
efor
e th
is s
houl
d be
del
eted
.
Def
initi
on o
f tr
easu
ry
shar
es
App
endi
x I:
Glo
ssar
y “A
n en
tity’
s ow
n eq
uity
inst
rum
ents
, he
ld b
y th
at e
ntity
or
othe
r m
embe
rs
of th
e co
nsol
idat
ed g
roup
.”
FR
S 1
05 c
anno
t be
appl
ied
in c
onso
lidat
ed fi
nanc
ial s
tate
men
ts a
nd th
eref
ore
the
refe
renc
e to
equ
ity in
stru
men
ts h
eld
by o
ther
mem
bers
of t
he c
onso
lidat
ed g
roup
is
irre
leva
nt.
Intr
oduc
tion
App
endi
x III
: N
ote
on le
gal
requ
irem
ents
A3.
1
T
he r
efer
ence
to th
e “M
icro
-ent
ities
’ Acc
ount
s R
egul
atio
ns”
shou
ld in
clud
e th
e w
ordi
ng “
as a
men
ded
in 2
013
and
2015
” th
roug
hout
.
Intr
oduc
tion
App
endi
x III
: N
ote
on le
gal
requ
irem
ents
A
s no
ted
abov
e, th
is p
arag
raph
is in
cons
iste
nt w
ith p
arag
raph
1.2
. O
ne o
r ot
her
or b
oth
will
ther
efor
e ne
ed to
be
amen
ded.
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 18
A3.
2
FR
ED
59
Top
ic
Ref
eren
ce
Sug
gest
ed a
men
ded/
addi
tiona
l tex
t N
otes
Exe
mpt
ions
fo
r qu
alify
ing
entit
ies
4 –
1.12
The
re is
no
expl
anat
ion
of w
hy th
e cl
ear
and
sim
ple
com
plet
e ex
empt
ions
fro
m th
e di
sclo
sure
req
uire
men
ts o
f Sec
tions
11
and
12 h
ave
been
rep
lace
d w
ith a
long
list
of
para
grap
h nu
mbe
rs. I
f thi
s is
bec
ause
the
omitt
ed p
arag
raph
s ar
e co
nsid
ered
to b
e re
quire
d by
law
, thi
s sh
ould
be
clea
rly e
xpla
ined
. How
ever
, par
agra
ph 1
.2A
say
s th
at
FR
S 1
02 d
oes
not n
eces
saril
y co
ntai
n al
l leg
al d
iscl
osur
e re
quire
men
ts s
o w
e be
lieve
th
at th
e ap
proa
ch ta
ken
just
add
s co
mpl
exity
. It i
s si
mpl
er to
say
lega
l req
uire
men
ts
shou
ld b
e co
nsid
ered
sep
arat
ely
Eff
ectiv
e da
te
of
amen
dmen
ts
5 –
1.15
Som
e co
mpa
nies
may
wis
h to
ear
ly a
dopt
the
2015
Reg
ulat
ions
to b
enef
it fr
om th
e in
crea
sed
smal
l com
pany
thre
shol
ds w
hile
app
lyin
g th
e F
RS
SE
in 2
015.
Par
agra
ph
1.15
sho
uld
clar
ify w
heth
er o
r no
t thi
s is
per
mitt
ed. A
com
pany
com
plyi
ng w
ith th
e F
RS
SE
wou
ld m
ake
mor
e di
sclo
sure
s th
an r
equi
red
by la
w u
nder
the
revi
sed
Reg
ulat
ions
but
that
of i
tsel
f w
ould
not
be
in b
reac
h of
the
law
. If t
he F
RC
wis
hes
to
proh
ibit
this
pra
ctic
e, it
sho
uld
be m
ade
clea
r in
the
draf
ting
of th
is p
arag
raph
.
Abr
idge
d ac
coun
ts
6 –
1A.6
It is
fact
ually
cor
rect
that
abr
idge
d ac
coun
ts m
ust g
ive
a tr
ue a
nd fa
ir vi
ew. H
owev
er,
give
n th
e ve
ry s
peci
fic p
rovi
sion
in th
e la
w to
per
mit
cert
ain
line
item
s to
be
omitt
ed,
we
ques
tion
whe
ther
thei
r om
issi
on w
ould
be
chal
leng
ed in
pra
ctic
e. P
arag
raph
1A
.6
may
be
view
ed b
y so
me
as u
njus
tifie
d ‘g
old
plat
ing’
whi
ch s
eeks
to r
estr
ict t
he u
se o
f an
exe
mpt
ion
prov
ided
in th
e la
w w
hich
is s
ubje
ct to
sha
reho
lder
app
rova
l. W
e be
lieve
that
the
mea
ning
of t
rue
and
fair
will
dev
elop
to a
ccom
mod
ate
this
. We
ther
efor
e su
gges
t tha
t thi
s pa
ragr
aph
is d
elet
ed.
Alte
rnat
ive
6 –
1A.7
Con
sist
ent w
ith th
e re
quire
men
ts o
f IA
S 1
, we
belie
ve th
at th
e in
tent
ion
of th
ese
para
grap
hs is
to in
dica
te th
e m
inim
um le
vel o
f det
ail w
hich
mus
t be
pres
ente
d on
the
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 19
form
ats
6 –
1A.8
fa
ce o
f the
bal
ance
she
et a
nd in
com
e st
atem
ent.
It w
ould
be
help
ful i
f the
par
agra
phs
coul
d cl
arify
that
the
head
ings
them
selv
es a
re n
ot m
anda
tory
title
s an
d th
at o
ther
la
ngua
ge c
an b
e us
ed.
Item
s of
OC
I 6
– 1A
.8
(d)
clas
ses
of e
quity
, suc
h as
pai
d-in
ca
lled-
up c
apita
l, sh
are
prem
ium
, re
valu
atio
n re
serv
e an
d re
tain
ed e
arni
ngs
and
item
s of
inco
me
and
expe
nse
that
, as
requ
ired
by th
is [d
raft]
FR
S, a
re
reco
gnis
ed in
oth
er c
ompr
ehen
sive
in
com
e an
d pr
esen
ted
sepa
rate
ly in
eq
uity
.
Item
s re
cogn
ised
in O
CI a
re n
ot n
eces
saril
y re
cogn
ised
in s
epar
ate
com
pone
nts
of
equi
ty (
e.g.
act
uaria
l gai
ns a
nd lo
sses
are
typi
cally
incl
uded
in r
etai
ned
earn
ings
).
The
ref
eren
ce to
pai
d-in
cap
ital s
houl
d al
so b
e am
ende
d to
alig
n w
ith th
e no
rmal
UK
G
AA
P te
rmin
olog
y.
Abr
idge
d ac
coun
ts
6 –
1A.1
0
See
abo
ve r
e 1A
.6. T
he s
ame
issu
e ap
plie
s to
this
par
agra
ph.
Info
rmat
ion
in
note
s 6
– 1A
.12
“A s
mal
l ent
ity s
hall
appl
y on
ly p
arag
raph
s 8.
3 an
d 8.
4 of
Sec
tion
8 in
rel
atio
n to
the
stru
ctur
e of
the
note
s.”
If th
e in
tent
ion
is th
at a
sm
all e
ntity
sho
uld
appl
y on
ly p
arag
raph
s 8.
3 an
d 8.
4 of
S
ectio
n 8
then
this
sho
uld
be m
ade
clea
r ei
ther
in p
arag
raph
1A
.12
or in
par
agra
ph
1A.2
.
Info
rmat
ion
in
note
s 6
– 1A
.14(
a)
“Acc
ount
ing
polic
ies
adop
ted
(in
acco
rdan
ce w
ith p
arag
raph
s 8.
5 an
d 8.
6).”
P
arag
raph
8.6
ref
ers
to c
ritic
al ju
dgem
ents
whi
ch d
oes
not a
ppea
r to
be
a di
sclo
sure
re
quire
men
t in
law
for
sm
all c
ompa
nies
.
Info
rmat
ion
in
note
s 6
– 1A
.14(
v)
“Dis
clos
ure
of a
ll re
late
d pa
rty
tran
sact
ions
with
out d
istin
guis
hing
thos
e no
t con
clud
ed u
nder
nor
mal
mar
ket
cond
ition
s w
ill m
eet t
his
requ
irem
ent.
Dis
clos
ure
shal
l inc
lude
the
amou
nt o
f the
tr
ansa
ctio
ns, t
he n
atur
e of
the
tran
sact
ions
…”
It w
ould
be
usef
ul in
this
par
agra
ph to
cla
rify
that
a s
mal
l com
pany
cou
ld v
olun
taril
y di
sclo
se a
ll re
late
d pa
rty
tran
sact
ions
and
stil
l mee
t the
req
uire
men
t of t
he la
w
with
out p
rovi
ding
sep
arat
e de
tails
of t
hose
not
con
clud
ed u
nder
nor
mal
mar
ket
cond
ition
s (s
ee p
arag
raph
36
in A
ppen
dix
IV to
FR
S 8
for
the
just
ifica
tion
for
this
). It
is
like
ly th
at th
is m
ay b
e an
eas
ier
appr
oach
for
a sm
all c
ompa
ny to
ado
pt a
s al
l re
late
d pa
rty
tran
sact
ions
cou
ld s
impl
y be
incl
uded
rat
her
than
an
entit
y ha
ving
to
indi
vidu
ally
rev
iew
thes
e to
det
erm
ine
whe
ther
or
not t
o in
clud
e a
rela
ted
part
y tr
ansa
ctio
n in
the
disc
losu
re n
ote.
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 20
Alte
rnat
ive
form
ats
12 –
4.2
A
C
onsi
sten
t with
the
requ
irem
ents
of I
AS
1, w
e be
lieve
that
the
inte
ntio
n of
this
pa
ragr
aph
is to
indi
cate
the
min
imum
leve
l of d
etai
l whi
ch m
ust b
e pr
esen
ted
on th
e fa
ce o
f the
bal
ance
she
et. I
t wou
ld b
e he
lpfu
l if t
he p
arag
raph
s co
uld
clar
ify th
at th
e he
adin
gs th
emse
lves
are
not
man
dato
ry ti
tles
and
that
oth
er la
ngua
ge c
an b
e us
ed.
Alte
rnat
ive
form
ats
16 –
5.5
B
C
onsi
sten
t with
the
requ
irem
ents
of I
AS
1, w
e be
lieve
that
the
inte
ntio
n of
this
pa
ragr
aph
is to
indi
cate
the
min
imum
leve
l of d
etai
l whi
ch m
ust b
e pr
esen
ted
on th
e fa
ce o
f the
inco
me
stat
emen
t. It
wou
ld b
e he
lpfu
l if t
he p
arag
raph
s co
uld
clar
ify th
at
the
head
ings
them
selv
es a
re n
ot m
anda
tory
title
s an
d th
at o
ther
lang
uage
can
be
used
.
Con
solid
ated
F
inan
cial
S
tate
men
ts
27 –
9.3
Thi
s w
hole
par
agra
ph n
eeds
to b
e re
draf
ted
to e
nsur
e co
nsis
tenc
y w
ith th
e la
w.
Unl
ess
ther
e ar
e go
od r
easo
ns, t
he e
xact
wor
ds u
sed
in th
e la
w s
houl
d be
re
prod
uced
bec
ause
the
exem
ptio
n is
a q
uest
ion
of la
w.
For
exa
mpl
e, th
e pa
ragr
aph
refe
rs to
‘equ
ity’ w
here
as th
e R
egul
atio
ns r
efer
to
‘allo
tted
shar
es’ w
hich
has
a s
peci
fic le
gal m
eani
ng.
Ano
ther
exa
mpl
e is
the
use
of ‘9
0% o
wne
d su
bsid
iary
’ as
shor
than
d w
here
as th
e R
egul
atio
ns s
ay ‘w
here
that
par
ent u
nder
taki
ng h
olds
90%
or
mor
e of
the
allo
tted
shar
es’.
The
re a
re s
ome
wor
ds m
issi
ng f
rom
sub
-par
agra
ph (
e) w
hich
doe
s no
t mak
e se
nse.
IFR
S 9
and
co
nflic
t with
th
e la
w
30 –
11.
2A
T
his
para
grap
h sh
ould
be
dele
ted
from
the
body
of t
he s
tand
ard
and
the
issu
e ad
dres
sed
in th
e ap
pend
ix o
f leg
al r
equi
rem
ents
. T
he is
sue
is la
rgel
y th
eore
tical
and
af
fect
s on
ly c
ompa
nies
that
hav
e fir
st e
lect
ed to
app
ly IF
RS
9 a
nd th
en a
ccou
nted
for
inst
rum
ents
at F
VT
PL
whe
n th
is w
ould
not
be
perm
itted
by
IAS
39.
We
belie
ve th
at
this
will
affe
ct n
o m
ore
than
a h
andf
ul o
f co
mpa
nies
. It t
here
fore
doe
s no
t des
erve
the
prom
inen
ce g
iven
to it
.
Als
o, w
e ar
e un
clea
r w
hy th
is p
oten
tial c
onfli
ct w
ith IF
RS
9 h
as b
een
deal
t with
by
requ
iring
the
com
pany
to d
epar
t fro
m IF
RS
9 w
here
as t
he o
ther
pot
entia
l con
flict
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 21
abou
t the
trea
tmen
t of g
ains
and
loss
es a
risin
g fr
om o
wn
cred
it ris
k ha
ve b
een
addr
esse
d th
roug
h th
e su
gges
ted
use
of th
e tr
ue a
nd fa
ir ov
errid
e (s
ee A
4.12
C in
dr
aft A
ppen
dix
IV to
FR
S 1
02).
Fin
anci
al
inst
rum
ents
di
sclo
sure
s
36 –
11.
48A
T
he fo
llow
ing
disc
losu
res
are
requ
ired
only
for f
inan
cial
inst
rum
ents
at f
air v
alue
th
roug
h pr
ofit
or lo
ss th
at a
re n
ot h
eld
as
part
of
a tr
adin
g po
rtfo
lio a
nd a
re n
ot
deriv
ativ
es a
ccou
nted
for
in a
ccor
danc
e w
ith p
arag
raph
36(
4) o
f Sch
edul
e 1
to th
e R
egul
atio
ns (
and
not f
or th
ose
acco
unte
d fo
r at
fair
valu
e th
roug
h pr
ofit
and
loss
in
acco
rdan
ce w
ith p
arag
raph
s 36
(2)
and
36(3
) of
Sch
edul
e 1
to th
e R
egul
atio
ns).
We
are
uncl
ear
abou
t the
rat
iona
le fo
r th
e pr
opos
ed c
hang
es to
this
par
agra
ph. T
he
new
wor
ding
is s
imila
r to
IFR
S 7
.28(
b) b
ut ig
nore
s ot
her
part
s of
that
par
agra
ph o
f IF
RS
7, i
n pa
rtic
ular
28(
a).
How
ever
, we
have
mor
e ge
nera
l con
cern
s ab
out t
he p
urpo
se a
nd s
cope
of
this
pa
ragr
aph
whi
ch w
e ha
ve m
entio
ned
in r
espo
nses
to p
revi
ous
cons
ulta
tions
. We
unde
rsta
nd th
at th
e in
tent
ion
of th
e pa
ragr
aph
is to
pro
vide
gui
danc
e on
mee
ting
the
disc
losu
re r
equi
rem
ent i
n pa
ragr
aph
36(4
) of
Sch
edul
e 1
to th
e A
ccou
ntin
g R
egul
atio
ns in
circ
umst
ance
s w
hen
that
par
agra
ph a
pplie
s. In
gen
eral
, we
pref
er n
ot
to d
eal w
ith th
e di
sclo
sure
req
uire
men
ts r
equi
red
by la
w in
FR
S 1
02. H
owev
er, i
n th
is
case
we
acce
pt th
at it
is h
elpf
ul to
pro
vide
gui
danc
e on
whi
ch s
peci
fic r
equi
rem
ents
of
IFR
S 7
sho
uld
be p
rovi
ded
to m
eet t
he r
equi
rem
ent f
or “
disc
losu
res
requ
ired
by
such
acc
ount
ing
stan
dard
s”.
On
the
assu
mpt
ion
that
this
is th
e ob
ject
ive,
our
con
cern
is th
at th
e sc
ope
of
para
grap
h 11
.48A
is n
ot th
e sa
me
as p
arag
raph
36(
4) o
f Sch
edul
e 1.
The
firs
t se
nten
ce o
f pa
ragr
aph
11.4
8A r
efer
s to
‘fin
anci
al in
stru
men
ts’ g
ener
ally
but
the
wor
ds ‘t
hat a
re n
ot h
eld
as p
art o
f a tr
adin
g po
rtfol
io a
nd a
re n
ot d
eriv
ativ
es’ a
re
rele
vant
onl
y to
liab
ilitie
s in
acc
orda
nce
with
par
agra
ph 3
6(2)
of S
ched
ule
1. T
he
curr
ent d
rafti
ng d
oes
not a
ccom
mod
ate
thos
e as
sets
that
are
not
per
mitt
ed to
be
FV
TP
L by
par
agra
ph 3
6(3)
but
are
acc
ount
ed fo
r at
FV
TP
L un
der
para
grap
h 36
(4).
Our
sug
gest
ed a
men
dmen
t add
ress
es th
e sc
ope
issu
e as
sum
ing
that
the
inte
ntio
n is
to
cov
er b
oth
asse
ts a
nd li
abili
ties
acco
unte
d fo
r at
FV
TP
L un
der
para
grap
h 36
(4).
H
owev
er, f
urth
er c
onsi
dera
tion
shou
ld b
e gi
ven
as to
whe
ther
the
prop
osed
di
sclo
sure
req
uire
men
ts a
dequ
atel
y ad
dres
s as
sets
. Alte
rnat
ivel
y, th
e sc
ope
of
para
grap
h 11
.48A
cou
ld b
e re
stric
ted
to li
abili
ties
but e
ither
way
the
posi
tion
shou
ld
Jenn
y C
arte
r 30
Apr
il 20
15
Pag
e 22
be m
ade
clea
r. W
e ac
know
ledg
e th
at r
efer
ring
to p
arag
raph
s in
the
Reg
ulat
ions
is
not i
deal
but
to s
et o
ut th
e sc
ope
in fu
ll w
ould
req
uire
the
com
plet
e te
xt o
f par
agra
phs
36(2
) an
d 36
(3)
to b
e co
pied
into
par
agra
ph 1
1.48
A.
IFR
S 9
and
co
nflic
t with
th
e la
w
39 –
12.
2A
S
ee a
bove
re
11.2
A.
The
sam
e is
sue
aris
es h
ere.
Pro
visi
ons
and
Con
tinge
ncie
s
51 –
21.
17
It
may
be
poss
ible
that
in s
ome
case
s th
e re
quire
men
ts in
the
stan
dard
s to
dis
clos
e “t
he g
ener
al n
atur
e of
the
disp
ute”
wou
ld m
eet t
he c
orre
spon
ding
lega
l req
uire
men
ts.
It w
ould
ther
efor
e be
pre
fera
ble
for
FR
S 1
02 to
ret
ain
the
FR
S 1
2 ap
proa
ch w
ith
“unl
ess
its d
iscl
osur
e is
req
uire
d by
law
” in
clud
ed a
nd le
ave
the
inte
rpre
tatio
n of
the
law
to th
e ju
dgem
ent o
f oth
ers.
PB
E
com
bina
tions
59
–
PB
E34
.80
T
hese
am
endm
ents
hav
e be
en m
ade
to r
ecog
nise
that
mer
ger
acco
untin
g is
onl
y pe
rmitt
ed fo
r gr
oup
reco
nstr
uctio
ns u
nder
the
revi
sed
lega
l req
uire
men
ts. H
owev
er, i
t se
ems
ques
tiona
ble
whe
ther
acq
uisi
tion
acco
untin
g w
ould
giv
e a
true
and
fair
view
in
the
circ
umst
ance
s en
visa
ged
by th
e pa
ragr
aph
and
it w
ould
als
o be
a d
epar
ture
from
w
ell-e
stab
lishe
d pr
actic
e in
the
char
ity s
ecto
r. W
e re
com
men
d th
at th
is is
sue
is
disc
usse
d w
ith r
epre
sent
ativ
es o
f the
sec
tor
and
cons
ider
atio
n is
giv
en to
re
com
men
ding
the
use
of th
e tr
ue a
nd fa
ir ov
errid
e in
app
ropr
iate
cas
es.
