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© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013
Annual Financial
Reporting Seminar 2013
The Convention Centre
15th November
© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013
Mary Fulton National Technical Partner
Welcome and introduction
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© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013
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
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#Deloitteafrs
© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013
Tax Accounting
Information Stands – Level 3 Foyer
Companies Bill Financial
Transformation
IXBRL Corporate Governance
Future of Irish GAAP
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Ronan Nolan Partner
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Deloitte Ireland
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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.”
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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.”
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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.”
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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.”
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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.”
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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.”
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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.”
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APB, Professional Scepticism March 2012
“Neutral, inquiring or challenging?”
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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.”
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System 2 – ‘The Lazy Controller.’
Daniel Kahneman, Thinking, Fast and Slow 2011
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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.”
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Daniel Kahneman, Thinking, Fast and Slow 2011
the illusion of Validity
the planning fallacy
the sunk cost fallacy
the illusion of control
confirmation bias
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Daniel Kahneman, Thinking, Fast and Slow 2011
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
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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.
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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.
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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”
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“Breaking the Boilerplate”
Hans Hoogervorst June 2013
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“It ain’t gonna happen!”
the Accounting Onion August 2013
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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…
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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.”
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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”
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Sir David Tweedie, President Institute of Chartered Accountants in Scotland, January 28th, 2013
“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.
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Sir David Tweedie, President Institute of Chartered Accountants in Scotland, January 28th, 2013
“…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…”
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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?”
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The Chartered Accountant of the Future ?
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I believe the ability to exercise
professional judgement with integrity
is the hallmark of a Chartered
Accountant
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Changing times for reporters
Glenn Gillard National Accounting
Technical Partner
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key questions you need to ask 5
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What am I doing about new GAAP? 1
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Is my group reporting package
changing?
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Consolidation:
Package of Five
Fair Value
Offsetting
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What has changed in Irish GAAP? 3
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What has changed in IFRS? 4
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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
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© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013
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.
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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
© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013
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:
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© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013
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.
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Are there any other reporting
requirements changing?
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© 2013 Deloitte & Touche Annual Financial Reporting Seminar 2013 © 2013 Deloitte & Touche
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