Crowe Horwath Reporting Insights

Director’s Update

Welcome to our fourth and final newsletter of 2017.

This newsletter includes articles about accounting standard implementation, a consultation about fundamental changes to the regime for setting Auditing Standards and strategic economic and business changes.

IFRS 16 Leases fundamentally changes lease accounting. The Crowe Leased Asset Calculator is a vital resource for implementing IFRS 16. Take a look at IFRS 16 Implementation Resource below.

The economic and business environment changes that we comment on are Initial Coin Offerings, Brexit and VAT in the Middle East. All three are examples of significant business trends that companies will have to prepare for and adapt to.

Ethics are critical to all that we do as professionals. The new guidance from ICAS is practical and the one page summary is a very helpful simple guide for discussing and resolving an ethical dilemma.

We wish our readers a pleasant and peaceful holiday season and happy new year.

To keep up to date with professional developments, follow me on LinkedIn and Twitter.

Kind regards,

David Chitty
International Accounting & Audit Director

IFRS 16 Implementation Resource

IFRS 16 (and its US GAAP equivalent ASC 842) fundamentally changes lease accounting, with the abolition of the operating lease. As a result, all leases will be presented on the balance sheet.

To assist with the implementation of IFRS 16, Crowe Horwath LLP has designed the Crowe Leased Asset Calculator. The Calculator is a complete resource for managing the implementation of IFRS 16. This video provides an overview of the Calculator and more information can be found here.

Remember that the effective date of IFRS 16 is for the financial statements of accounting periods commencing on or after 1 January 2019. Timely preparation for the change is essential. View our video on IFRS 16 here.

Standard Setting - Will it All Change?

The Monitoring Group (MG) has issued a consultation paper setting out various options to enhance the governance, accountability and oversight of the international audit standard-setting process. The MG is a group of international financial institutions and regulatory bodies committed to advancing the public interest in areas related to international audit standard setting and audit quality.

Currently International Standards on Auditing (ISA) are issued by the International Audit & Assurance Standards Board (IAASB), a body hosted by IFAC (International Federation of Accountants). The options offered by the MG could fundamentally change audit standard setting, including creating a standard-setting body that is independent of the profession.

This consultation is relevant to all stakeholders who are interested in and served by audit. Changes to the way auditing standards are set seems inevitable and will be in place for a generation. The consultation is open until 9 February 2018 and all parties with an interest should contribute their views.

Initial Coin Offerings: Understanding the Benefits, Risks & Regulations

There has been a rapid growth in Initial Coin Offerings (ICOs) of crypto-currencies. ICOs are used to raise funds for a variety of projects, including but not limited to businesses leveraging Blockchain or Distributed Ledger Technology. ICOs have a positive role, but the association of crypto-currencies with illegal activities makes ICO very high risk.

This is a largely unregulated activity that is drawing the attention of financial regulators, including the European Securities and Markets Authority (ESMA) which has issued two Statements on Initial Coin Offerings (ICOs):

• Risks of ICOs for investors
• Rules applicable to firms involved in ICOs.

ESMA is concerned that investors may be unaware of the high risks that they are taking when investing in ICOs and that firms involved in ICOs might conduct their activities without complying with relevant applicable EU legislation.

More regulatory activity can be anticipated.

Continuing Uncertainty in a Post-Brexit World

Brexit (the UK exit from the European Union) remains a challenge for businesses that work with or are looking to work with the United Kingdom and the European Union.

At the time of writing, the financial terms of the UK's settlement with the EU had not been agreed, and two other key issues were far from resolved. These were the land border between Northern Ireland (part of the UK) and the Republic of Ireland (an EU Member State) and the rights of the many EU citizens resident in the UK. Without progress on these issues, trade talks cannot commence. The result is continuing business uncertainty.

Crowe Clark Whitehill maintains a Brexit Hub that provides useful information about the business and taxation challenges related to Brexit. Follow this to keep informed.

VAT is Coming to the Middle East: What You Need to Know

VAT is being introduced in the Gulf Co-operation Council (GCC) states from 2018. The members of the GCC are Bahrain, Kuwait, Saudi Arabia, Oman, Qatar, and the UAE.

The introduction of VAT is presenting many challenges for businesses and requires careful planning. There is greater pressure on the maintenance of company records and the presentation of annual financial statements than there has been in the past in these countries. Businesses that have components in the GCC or that trade with the region should keep informed about developments.

An introduction to VAT in the region is available from Crowe Horwath UAE, together with additional materials that explain the regulatory framework.

Overview: How EU States are Reporting Non-Financial Information

The reporting of non-financial information (NFI) is a legal requirement for larger companies in the EU. As Member States were given flexibility with implementing the requirements, approaches to reporting varies. Despite the different approaches, NFI reporting in the EU is a major development that improves transparent reporting by companies in an environment that permits a company to determine the reporting framework that is right for its individual circumstances.

To further understand NFI reporting in the EU, Accountancy Europe, CSR Europe and the GRI (Global Reporting Initiative) have collaborated to collect information on Member State implementation to enable dialogue on the topic across Europe. The result is a comprehensive overview of how Member States are implementing NFI reporting.

New ICAS Report Offers Guidance on Resolving Ethical Dilemmas

ICAS has published a paper, The Ethical Journey - The Right, the Good and the Virtuous, a practical guide to resolving ethical dilemmas. The paper, part of their 'Power of One' business ethics initiative, has universal applicability and includes a one-page summary on how to consider an ethical issue.

• Download The Ethical Journey - The Right, the Good and the Virtuous
• Download The Ethical Journey - The Right, the Good and the Virtuous - Abridged version

What is a Public Interest Entity in the EU?

Accountancy Europe has published a paper that provides an overview of the PIE definitions applicable across the EU, the differences between them, and what has changed with the new EU rules on statutory audit that became applicable in June 2016.

New Report from the Anti-Fraud Collaboration Encourages the Reporting of Misconduct

Since about one-third of global respondents to a recent Global Business Ethics Survey reported that they observed alleged misconduct, the Anti Fraud Collaboration, has issued a report on Encouraging the Reporting of Misconduct. The Collaboration, a joint project of the Center for Audit Quality, Financial Executives International, the National Association of Corporate Directors, and The Institute of Internal Auditors, makes recommendations for creating and maintaining a retaliation-free environment and offers suggestions for countering obstacles that discourage reporting.

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