IFAC, IASB, FEE, EU Updates
IASB Issues IFRS 16 ‘leases’
On 13 January 2016, the International Accounting Standards Board (IASB) issued a new Leases Standard, IFRS 16. It replaces accounting requirements introduced more than 30 years ago that are no longer considered fit for purpose, and is a major revision of the way in which companies account for leases.
IFRS 16 refers to the recognition, measurement, presentation and disclosure of leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.
The new Standard will provide much-needed transparency on companies’ lease assets and liabilities, meaning that off balance sheet lease financing is no longer possible. It will also improve comparability between companies that lease and those that borrow to buy.
IFRS 16 is effective for periods beginning on or after 1 January 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has also been applied.
IAASB Finalises Changes For Auditor Reporting On Special Purpose Financial Statements
The IAASB released ISA 800 (Revised), Special Considerations-Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks, and ISA 805 (Revised), Special Considerations-Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement.
Reporting on special purpose financial statements is linked to the IAASB’s new and revised Auditor Reporting standards issued in January 2015, in particular ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements, and new ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report. The amendments to ISA 800 and ISA 805 are limited to auditor reporting and are not intended to substantively change the underlying premise of these engagements in accordance with the extant ISAs.
ISA 800 (Revised) and ISA 805 (Revised) will become effective at the same time as the auditor reporting standards addressing general purpose financial statements–for audits of financial statements for periods ending on or after 15 December 2016.
IAASB Seeks Feedback On Standard-setting Activities To Enhance Audit Quality
The consultation focuses on three key areas: professional scepticism, quality control, and group audits.
Audit quality is at the heart of the IAASB’s work as the global auditing standard setter. Consequently, on 17 December 2015 the IAASB released its invitation to comment, enhancing audit quality in the public interest: a focus on professional skepticism, quality control and group audits (the ITC). This ITC highlights the board’s discussions in these three topic areas and indicates potential standard-setting activities that could enhance audit quality. The IAASB also released a companion document, overview of the ITC, which summarises the key areas the IAASB is exploring and the direction it may take.
“Responses to this consultation will guide the board’s work over the next few years, so it is essential that we hear from all stakeholder groups about where we should focus,” explained Kathleen Healy, IAASB Technical Director. “The Overview document, in particular, is designed to solicit feedback from and improve collaboration with investors, audit committees, and preparers. Other stakeholders may also find the Overview useful as a discussion and outreach document as they develop their comments.”
The IAASB’s Framework for Audit Quality, issued in 2014, explains the important role of auditors and their firms-as well as other stakeholders-in audit quality, and the contextual factors that affect it. It is an important reference document for this consultation.
The comment period for both publications is open until 16th, May 2016.
IESBA Releases Exposure Drafts On Code Of Ethics
Two exposure drafts issued by the International Ethics Standards Board for Accountants (IESBA) on 21 December 2015 detail key enhancements to fundamental aspects of the Code of Ethics for Professional Accountants that the independent standard-setting board is proposing.
The first exposure draft, Improving the Structure of the Code of Ethics for Professional Accountants-Phase 1, represents the first application of proposed new structure and drafting conventions for the Code of Ethics for Professional Accountants, covering both a number of the provisions of the code dealing with its general application and selected sections addressing professional accountants in public practice.
The second exposure draft, Proposed Revisions Pertaining to Safeguards in the Code-Phase 1, includes enhanced requirements and application material pertaining to the application of the code’s conceptual framework, including safeguards.
Comments on the “structure” exposure draft are due by 18 April 2016. Comments on the “safeguards” exposure draft should be received by 21 March 2016.