Variable consideration
Buyers do not always know how much they will end up having to pay for a product or service in circumstances, for example, where there is a foreign exchange risk sharing arrangement or an inflation escalation clause in the contract.
Currently there is a divergence in practice and the European Financial Reporting Advisory Group (EFRAG) has developed a discussion paper on the alternative possible accounting options available. The paper looks at the position of recognising a liability for variable consideration and changes to existing estimates of variable consideration. It is open for comment until 31 May.
EFRAG’s paper focuses on two issues. The first is when to recognise a liability for variable consideration. This issue relates to variable consideration that depends on the purchaser’s future actions, and concerns the recognition of financial liabilities covered by IAS 32 Financial Instruments: Presentation and IFRS 9 Financial Instruments when the variable consideration is to be paid in cash or financial instrument by the purchaser entity.
IFRS discussions are indicative of different interpretations
Discussions led by the IFRS Interpretations Committee are indicative of different interpretations of when there would be a financial liability according to the IAS 32 requirements for exchange transactions where the variable consideration depends on the purchaser’s future actions.
The second issue concerns the question of whether or when subsequent changes in the estimate of variable consideration should be reflected in the cost of the acquired asset. This relates both to situations under which the variable consideration depends on the purchaser’s future actions, as well as situations under which the variable consideration is unrelated to the purchaser’s future actions.
The issue concerns whether/when the measurement of an asset acquired in exchange for variable consideration should be updated to reflect remeasurements of the liability for variable consideration. The discussion paper focuses on acquired assets that are measured at cost, as it is generally for these assets that such an update to the carrying amount is relevant.
EFRAG has a podcast here explaining the proposals.
Sustainability reporting
EFRAG has recorded and made available its conference on the future of financial reporting. Mairead McGuinness, European commissioner for financial stability, financial services and Capital Markets Union, was the keynote speaker. Among other related topics, the conference looked at the reporting of ESG. The recordings and report are available here.
Audit of groups
IAASA has issued a revision to ISA 600, Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors) and conforming amendments.
The surrender of Irish audit licences by UK auditors and UK audit licences by Irish auditors has increased the number of component auditors and correspondingly increased the importance of this auditing standard.
The Immigrant Investor Programme closed on 15 February 2023
The new standard modernises the requirements and introduces a risk-based approach, a requirement for more scepticism and improved quality management. The revised standard is effective for audits of financial statements for periods beginning on or after 15 December 2023, with early adoption permitted.
Immigrant Investor Programme
The Irish minister for justice has closed the Immigrant Investor Programme (IIP) to further applications from close of business on 15 February 2023. This provided a pathway for non-EEA nationals to secure an immigration permission in Ireland on the basis of long-term investment in a range of options approved by government.
Established over a decade ago, the programme has approved investment of almost €1.252bn that has benefited many enterprises both economic and social, including community and sporting organisations.
However, there have been concerns for some around completing due diligence on the source of funds and whether by accepting the funds the entity or charity is at risk of being complicit in money laundering.
The government has confirmed that IIP applications on hand at close of business on 15 February 2023 that are awaiting a decision will be considered. These applications may relate to either previously approved projects or recently submitted new projects. The Department of Justice reported there are approximately 1,500 such cases.
There have been instances where an employee or director of a charity misused a company credit card
In addition, there are a number of projects where an application has not been formally submitted, but which have been significantly developed following contact with the IIP unit of the Department of Justice. It is proposed that such projects be given a period of three months in which to finalise and submit their applications.
The closure of IIP does not affect the operation of the Start-up Entrepreneur Programme (STEP), which was established in 2012 as a way for entrepreneurs with an innovative idea to apply for a residence permission in Ireland, and this will continue.
Credit cards in charities
A company credit card is a convenient way for companies to pay for business travel and other expenses for staff. However, there have been a number of recent instances documented in the media where a company credit card was misused by an employee or director of a charity.
The Charity Regulatory Authority has recently published guidance on how credit cards in charities should be managed and controlled. This includes a list of the key controls that would be expected to be in place and a list of the type of credit card expenditure that should be prohibited, including cash advances/withdrawals; items or services for personal use; expenses incurred by a spouse, family member, or other connected person; alcoholic beverages; and fuel for privately owned vehicles.
