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Review of Part C
Jim Gaa, Chair, Part C Task Force
IESBA CAG Meeting
New York, USA
September 10, 2014
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• March 2013: Project Proposal approved by IESBA.• Sept 2013: CAG reviews s. 370• March 2014: CAG reviews s. 320• July 2014: IESBA reviews s. 320 & s.370• October 2014: Exposure Draft scheduled• January 2015: Begin Phase II (issues)
Background
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• Greater emphasis on non statutory information.• Intention is to maintain a strong requirement without being
overly prescriptive.• The overarching requirement is to present information in a
fair and honest manner.• And to provide guidance of meaning of fair and honest
manner.
Changes from extant Code
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– No intention to mislead
– Not omitting information
– In accordance with an applicable reporting framework, and
– Taking reasonable steps to: • Represent facts accurately and completely,
• Describe clearly the true nature of activities,
• Classify and record information in a timely and proper manner
Meaning of fair and honest manner
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• Board supported enhanced guidance on misuse of discretion but not too detailed, including a few examples.
• Proposed categories :– Determining estimates
– Selecting a particular accounting method
– Determining the timing of transactions
– Determining the structuring transactions
– Determining disclosures
Misuse of discretion
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• Pressure now addressed in s.370.• Guidance on presenting non statutory information added.• Guidance on steps to resolve the matter if PAIB is
associated with misleading information added. • Guidance on how to disassociate if information is still
misleading added.
Changes from extant Code
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• Do representatives agree the five categories of misuse of discretion and related examples (320.3) provide useful guidance to PAIBs?
• Do representatives agree that the proposed approach to materiality and to the guidance relating to disassociation (paragraphs 320.6-320.8) is appropriate and helpful?
• Do representatives agree that materiality is implicit within the term “misleading”?
• Is the degree of prescription in the proposed revised Section 320 appropriate?
Section 320: Matters for Consideration
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• Users requested more guidance on Pressure.• Section addresses pressure that could create threats to
compliance with the fundamental principles.• Two requirements:
– PAIB shall not allow pressure to result in breach of fundamental principles.
– PAIB shall not place pressure on others.
New Section on Pressure
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• 370.5 provides factors a PAIB may consider in determining whether pressure could lead to a breach.
• 370.6 provides actions a PAIB may consider if PAIB determines the pressure could lead to a breach.
• The factors and actions may overlap, e.g. constructive challenge.
• Board proposes a requirement to decline or discontinue activity, when pressure cannot be alleviated.
Pressure: Practical Guidance
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• Diversity of views on Board on whether or not to use language of threats and safeguards in s.370.
• TF considered merits of both views.• Large majority of Board agreed not to use language of
threats and safeguards in s370.
Pressure: Language of threats and safeguards
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• Do representatives agree with the Board’s approach to drafting S.370 emphasizing clear guidance rather than in terms of threats and safeguards?
• Are the actions a PAIB may consider when faced with pressure appropriate?
• Are there any other actions a PAIB could take?
Pressure: Matters for Consideration
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• Section 350 focuses on receiving offers.– TF plans to provide additional guidance when encountering the
making of offers.
• Without creating a “movable bar”, do Representatives have views about recognizing cultural diversity?– E.g., what is a gift and what does a gift imply or suggest?
• Do Representatives know of useful sources of information or policy about Inducements?
Phase 2: Inducements