The regulator says the purpose of the briefing is to remind preparers and auditors about expectations in respect of the new standards, and also to identify other areas where recent FRC monitoring has identified room for improvement. The FRC will also have a focus on the accounting for, and disclosure of, certain types of supplier financing arrangements in response to concerns expressed by stakeholders.

Companies about to issue their first interim reports under IFRS 9 and 15 will be required to quantify and explain the effects of the new standards. For banks applying IFRS 9, the key focus will be on impairment, where the information provided needs to be sufficient to allow users to understand the change from the model for key portfolios adopted in accordance with IAS 39 ‘Financial Instruments: Recognition and Measurement’.

Non-financial services companies will need to consider the impact of the requirements on trade receivables - particularly if they have long-term balances, such as lease commitments, contract assets under IFRS 15 or intercompany receivables. Where they adopt the simplified approach, they will need to make clear how the lifetime expected credit losses have been determined.

Changes in revenue accounting policies required by IFRS 15 need to be fully explained with reference to performance obligations to improve the value content to users. Interim reports are now required to disaggregate revenue from contracts with customers, consistent with the full standard. The FRC says it expects directors to disclose significant judgements made in applying the new standards and to quantify and explain sources of estimation uncertainty.

The briefing makes clear the transparency of supplier finance arrangements will be an area of specific FRC focus during 2018, after stakeholders raised concerns about the use of facilities such as reverse factoring.  The FRC will also pay particular attention to impairment disclosures of companies in is priority sectors, and in market sectors where there have been a number of profit warnings and asset write-downs.

As regards issues raised through the FRC’s monitoring activities, the briefing highlights consideration of whether a matter is material; classification of cashflow; the handling of comparative earnings per share (EPS) information following a share split or consolidation; and the Companies Act requirements for the payment of dividends.

FRC Corporate Reporting Review Briefing is here.

Report by Pat Sweet