Review of Part C

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Review of Part C

Jim Gaa, Chair, Part C Task Force

IESBA CAG Meeting

New York, USA

September 10, 2014


• March 2013: Project Proposal approved by IESBA.• Sept 2013: CAG reviews s. 370• March 2014: CAG reviews s. 320• July 2014: IESBA reviews s. 320 & s.370• October 2014: Exposure Draft scheduled• January 2015: Begin Phase II (issues)

Background


• Greater emphasis on non statutory information.• Intention is to maintain a strong requirement without being

overly prescriptive.• The overarching requirement is to present information in a

fair and honest manner.• And to provide guidance of meaning of fair and honest

manner.

Changes from extant Code


– No intention to mislead

– Not omitting information

– In accordance with an applicable reporting framework, and

– Taking reasonable steps to: • Represent facts accurately and completely,

• Describe clearly the true nature of activities,

• Classify and record information in a timely and proper manner

Meaning of fair and honest manner


• Board supported enhanced guidance on misuse of discretion but not too detailed, including a few examples.

• Proposed categories :– Determining estimates

– Selecting a particular accounting method

– Determining the timing of transactions

– Determining the structuring transactions

– Determining disclosures

Misuse of discretion


• Pressure now addressed in s.370.• Guidance on presenting non statutory information added.• Guidance on steps to resolve the matter if PAIB is

associated with misleading information added. • Guidance on how to disassociate if information is still

misleading added.

Changes from extant Code


• Do representatives agree the five categories of misuse of discretion and related examples (320.3) provide useful guidance to PAIBs?

• Do representatives agree that the proposed approach to materiality and to the guidance relating to disassociation (paragraphs 320.6-320.8) is appropriate and helpful?

• Do representatives agree that materiality is implicit within the term “misleading”?

• Is the degree of prescription in the proposed revised Section 320 appropriate?

Section 320: Matters for Consideration


• Users requested more guidance on Pressure.• Section addresses pressure that could create threats to

compliance with the fundamental principles.• Two requirements:

– PAIB shall not allow pressure to result in breach of fundamental principles.

– PAIB shall not place pressure on others.

New Section on Pressure


• 370.5 provides factors a PAIB may consider in determining whether pressure could lead to a breach.

• 370.6 provides actions a PAIB may consider if PAIB determines the pressure could lead to a breach.

• The factors and actions may overlap, e.g. constructive challenge.

• Board proposes a requirement to decline or discontinue activity, when pressure cannot be alleviated.

Pressure: Practical Guidance


• Diversity of views on Board on whether or not to use language of threats and safeguards in s.370.

• TF considered merits of both views.• Large majority of Board agreed not to use language of

threats and safeguards in s370.

Pressure: Language of threats and safeguards


• Do representatives agree with the Board’s approach to drafting S.370 emphasizing clear guidance rather than in terms of threats and safeguards?

• Are the actions a PAIB may consider when faced with pressure appropriate?

• Are there any other actions a PAIB could take?

Pressure: Matters for Consideration


• Section 350 focuses on receiving offers.– TF plans to provide additional guidance when encountering the

making of offers.

• Without creating a “movable bar”, do Representatives have views about recognizing cultural diversity?– E.g., what is a gift and what does a gift imply or suggest?

• Do Representatives know of useful sources of information or policy about Inducements?

Phase 2: Inducements

www.ifac.org

The Ethics Board

http://www.ifac.org/

Documents

Review of Part C