QinetiQ

Adoption of IFRS 9 Financial Instruments

IFRS 9 Financial Instruments (IFRS 9) has replaced the existing international financial instrument standard IAS 39 Financial Instruments: Recognition and Measurement (IAS 39), for periods beginning on or after 1 January 2018.

This report looks at a selection of December 2018 - March 2019 year ends where full year disclosures in relation to the actual adoption of IFRS 9 are being made for the first time. This report covers both the impact of the adoption of IFRS 9 and what disclosures have been made in relation to the adoption.

Intangible assets - disclosure of impairments

Businesses are currently facing a number of challenges, such as uncertainty surrounding Brexit and a sluggish economy. The retail sector in particular is experiencing a higher level of impairments (and, for some, going concern issues) as they contend with slow sales, high business rates and plenty of competition. Tougher economic conditions generally lead to increased risks of impairment, particularly for intangible assets such as goodwill. 

In the technical findings from the Financial Reporting Committee’s 2017/18 Corporate Reporting Review, published in October 2018 (FRC technical findings 2018), impairment was one area highlighted where additional information was often requested and disclosures did not always contain all the required information.

When writing this report the latest 2017 and 2018 financial statements of 20 UK listed companies were selected at random for review of the impairment-related disclosures, focussing on intangible assets. It was ensured that a variety of industries such as retail, IT services and tourism and leisure were included.

Brexit Disclosures

As the Brexit uncertainty continues, we look at how Brexit has been disclosed in a sample of FTSE 350 annual report and accounts.

As things currently stand, ‘exit day’ is still scheduled to be on 29 March 2019, although the likelihood of this date slipping appears to be increasing. The Government has issued the statutory instrument (SI 2019/145), Accounts and Reports (Amendment) (EU Exit) Regulations 2018, which effectively cuts the UK’s ties with the EEA (European Economic Area). The changes proposed will be made to the Companies Act 2006 and secondary legislation, making EEA states third countries under UK law. The Government has also issued another SI The Statutory Auditors and Third Country Auditors(Amendment) (EU Exit) Regulations 2019 dealing with statutory auditors and third country auditors. 

The Government has issued a number of additional pieces of guidance on how companies should operate in the event of a no-deal Brexit occurring on 29 March, on topics ranging from competition, insolvency and intellectual property, to the recognition of professional qualifications.

The Financial Reporting Council (FRC) and the Department for Business, Energy and Industrial Strategy (BEIS) have published letters for auditors and accountants to share information in case there is no deal for leaving the EU by Friday 29 March 2019.

It remains to be seen when these changes will actually come into force, and if further discussions with the European Union will change proposals that have been made. Needless to say our technical team will follow developments closely and ensure legislation and commentaries on the Croner-i Tax and Accounting platform are updated as soon as possible.

QinetiQ Group plc Monitor

QinetiQ Group plc Annual Report 2017
CR Monitor Issue: 
2018/0110
Company covered: 
QinetiQ Group plc
Period End: 
31 March, 2017
Report issued on 23 January 2018 covered the following practice issues:
Change
Recognition of additional intangible assets following business acquisitions.
Change
Additional pension disclosures linked to IFRIC 14 introduced.
Change
Auditors report presentation enhanced by the inclusion of new information.
New
Annual report section added discussing alternative performance measures.

Brexit Disclosures in Listed Company Annual reports

The referendum vote to leave the European Union (EU) has undoubtedly led to uncertainty for business and will potentially have far reaching impacts for companies from many different industries. This report, pulled together in March 2017, focuses on the information that companies have disclosed within their annual reports during the latter half of 2016. It sets out disclosures around risk as well as the disclosure of Brexit impacts which have already been felt and the resulting ramifications.

QinetiQ Group plc Monitor

QinetiQ Group plc Annual Report 2016
CR Monitor Issue: 
2017/0209
Company covered: 
QinetiQ Group plc
Period End: 
31 March, 2016
Report issued on 20 February 2017 covered the following practice issues:
Pronouncements
Explanation of transitional methods in respect of new revenue standard.
Change
Change in policy in respect of research and development tax credit.
Change
Auditors identify other payables, provisions and contingent liabilities as an area of risk of material misstatement.
Change
‘Business transformation’ identified as a principal risk.

IAS 19 Revised "Employee Benefits", an emerging issue under IFRS

This report focuses on the early adoption of amendments to IAS 19 “Employee benefits”. It considers three main areas: the recognition of actuarial gains and losses in other comprehensive income rather than partial recognition through profit or loss; the replacement of interest cost and expected return on plan assets with a net interest amount that is calculated by applying a discount rate to the net defined benefit obligation / asset; and the recognition of past service costs.