Section 393 of the Companies Act 2006 places a requirement on directors that the accounts must provide a true and fair view of the assets, liabilities, financial position and profit or loss of a company or group. Directors must provide such information as is necessary to ensure that this requirement is met, including where no specific accounting standard applies to a transaction, event or condition. For those companies using “UK-adopted international accounting standards”, IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” provides a basis for the use of judgement in resolving accounting issues in such situations.

The Government did not make an assessment in providing the Written Answer on 1 June 2022 to Question HL473. The interpretation of court judgements is not a matter for the Government, but for relevant regulators and the courts.

The Conceptual Framework issued by the International Accounting Standards Board is not an international accounting standard and therefore is not adopted into UK law. Nevertheless, it does provide a basis for the use of judgement in resolving accounting issues. It is only of relevance in situations where no specific international accounting standard applies to a transaction, event or condition (as set out in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors).

The Companies Act 2006 (the Act) requires UK-registered companies which use international accounting standards when preparing their accounts to use UK-adopted international accounting standards. UK-adopted international accounting standards are defined in Section 474 of the Act as the international accounting standards which are adopted for use within the United Kingdom by virtue of Chapter 2 or 3 of Part 2 of SI 2019/685. These are any international accounting standards endorsed by the EU as at the end of the EU Exit transition period, and any subsequent UK adoptions of international accounting standards by the Secretary of State or, following the delegation of this function, by the UK Endorsement Board. A consolidated text of UK-adopted international accounting standards can be found on the UK Endorsement Board’s website.

The UK Endorsement Board has been delegated powers to consider new international accounting standards for UK adoption only; it has no remit over audit policy and audit standards.

This includes an assessment of the compatibility of new standards with the requirements of the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685 (IAS Regulations). The IAS Regulations require that “the standard meets the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management.” These requirements were on-shored from EU legislation on the UK’s exit from the EU and have long been understood in the context of adoption of international accounting standards.

The UK Endorsement Board has been delegated powers to consider new international accounting standards for UK adoption only; it has no remit over audit policy and audit standards.

This includes an assessment of the compatibility of new standards with the requirements of the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685 (IAS Regulations). The IAS Regulations require that “the standard meets the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management.” These requirements were on-shored from EU legislation on the UK’s exit from the EU and have long been understood in the context of adoption of international accounting standards.

It has not proved possible to respond to this question in the time available before Prorogation. I will correspond directly with the noble Baroness.

The UK Endorsement Board is required to consult individuals and organisations with an interest in the quality and availability of accounts, including users and preparers of accounts. Regulation 8 of the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 sets out the requirements for consultation before adopting an international accounting standard for use in the UK.

The UK Endorsement Board does not exclusively seek views from equity analysts. The Board issues all its consultations on endorsement assessments publicly on its website, to ensure that all stakeholders have an opportunity to respond. All responses are given due consideration and are published on the Board’s website.

All members of the UK Endorsement Board were appointed following an open, transparent and rigorous recruitment process. The Board is comprised of a group of experts with a wealth of experience across different sectors including preparers of accounts, investors, academics and members of accounting firms. The Board has a diverse membership with a strong interest in the quality of financial reporting in the UK that will ensure that the UK’s contributions to developments in international accounting standards are world leading. Ongoing training for Board members focuses on new developments in financial and corporate reporting.

I refer the noble Baroness to my previous response to question number HL4416, answered on 7 December 2021.

Ensuring adequate company capital is maintained to comply with the Companies Act 2006 creditor and shareholder protection requirements is part of a company’s directors’ duties.

The Government’s White Paper, Restoring Trust in Audit and Corporate Governance set out proposals for increasing confidence that the capital maintenance laws are being complied with, including proposals to require companies to report their distributable reserves and for directors to make a formal statement about the legality of proposed dividends. We are considering responses to the White Paper and will publish our conclusions in due course.

The UK Endorsement Board (UKEB) has been delegated powers to consider new International Financial Reporting Standards (IFRS) for UK adoption. This includes an assessment of the compatibility of new standards with the requirements of the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685. The UKEB’s draft assessment of IFRS 17 against the criteria in that legislation is currently open for consultation.

The IFRS Foundation is an independent international body. The Foundation’s mission is to produce high quality international standards that bring transparency, comparability, and efficiency to financial markets. As an international body the Foundation is not bound by UK legislation when setting future work priorities.

In the UK, the UK Endorsement Board (UKEB) is responsible for adoption and endorsement of new or amended international accounting standards, issued by the International Accounting Standards Board (IASB) for use by UK companies.

The UKEB consults publicly with stakeholders that have an interest in financial reporting in the UK so that it can develop and represent evidence-based UK views with the aim of acting as the UK voice on IFRS financial reporting. The UKEB’s draft assessment of IFRS 17 is currently open for stakeholder consultation.

The Secretary of State set Terms of Reference for the UK Endorsement Board which direct it to adhere to the guiding principles of accountability, independence, transparency and thought leadership. This includes the need for the UKEB to adhere to Managing Public Money principles. Further, the UKEB is required to report annually to the Secretary of State on how it is discharging its functions. This report will be laid in Parliament.

The International Accounting Standards Board (IASB) is an independent international body, which sets its own agenda and timetable.

Insurance companies across the world use a wide variety of accounting practices when reporting the financial position and performance of their businesses. Achieving a standardised approach to reporting financial position and performance for a global industry with such diverse accounting practices takes considerable time and resources.

The UK Endorsement Board is an independent unincorporated association and has autonomy of decision-making in relation to the functions conferred upon it. Procurement of legal advice in undertaking those functions is a matter for the UK Endorsement Board.

The UK Accounting Standards Endorsement Board Limited, an incorporated subsidiary of the Financial Reporting Council, provides the operational facilities and resources to support the UK Endorsement Board’s activities. This maintains the independence of the UK Endorsement Board’s technical decision-making.

The UK Endorsement Board formally commenced outreach activities following the inaugural Board meeting on 26^th March 2021.

Prior to the UK Endorsement Board being formed, the Secretary of Secretary of State for Business, Energy and Industrial Strategy (BEIS) held the powers to formally adopt accounting standards for use in the UK. During this period, the UK Endorsement Board Secretariat worked with the Financial Reporting Council (FRC) and BEIS to develop endorsement and adoption advice for consideration by the Secretary of State. This included outreach activities.

The UK Accounting Standards Endorsement Board Limited is a wholly-owned subsidiary of the FRC. It does not undertake any functions to which outreach activities are relevant.

The UK Endorsement Board (UKEB) is in the process of assessing IFRS 17 for use in the UK. The criteria for their assessment is set out in The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685. The UKEB is expected to publish its draft Endorsement Criteria Assessment for public consultation, shortly. This draft assessment is expected to include consideration of the effects of IFRS 17 on the profits of inherited estates of insurance companies.

Peter Drummond fed back the views that had been received by the FRC in discussions on the IFRS standard. The ‘reported remarks’ do not reflect the view of the UKEB Secretariat or the UKEB Board but of certain stakeholders; such views have been considered by the UKEB along with other evidence. The outcome of this consideration will be set out in the draft Endorsement Criteria Assessment, when it is issued for public consultation.

The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685, regulation 7, paragraph 1(a) sets out the “true and fair” adoption criterion.

The endorsement assessment referred to in these questions was included in an Endorsement Criteria Assessment provided by the UK Endorsement Board Secretariat for consideration as a part of the Government’s formal adoption decision.

The Government’s assessment applied the three adoption criteria set out in regulation 7.

The IASB amendment Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) extends the date a lessee is permitted to apply a practical expedient to rent concessions that meet certain conditions, from on or before 30 June 2021, to on or before 30 June 2022. This was an extension to a Covid-19-related exemption provided to help shield companies from the impact of the Covid-19 lockdown.

The Government understands that the UK Endorsement Board Secretariat’s draft Endorsement Criteria Assessment was published for comment and no comments were received on that paragraph.

The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685, regulation 7, paragraph 1(a) sets out the “true and fair” adoption criterion.

The endorsement assessment referred to in these questions was included in an Endorsement Criteria Assessment provided by the UK Endorsement Board Secretariat for consideration as a part of the Government’s formal adoption decision.

The Government’s assessment applied the three adoption criteria set out in regulation 7.

The IASB amendment Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) extends the date a lessee is permitted to apply a practical expedient to rent concessions that meet certain conditions, from on or before 30 June 2021, to on or before 30 June 2022. This was an extension to a Covid-19-related exemption provided to help shield companies from the impact of the Covid-19 lockdown.

The Government understands that the UK Endorsement Board Secretariat’s draft Endorsement Criteria Assessment was published for comment and no comments were received on that paragraph.

The UK Endorsement Board is an independent, unincorporated association which will report annually on the carrying out of its functions to the Secretary of State. This report will be laid in Parliament. The Board is also required to report annually to the FRC which has oversight of its governance and adherence to due process.

Procurement of legal advice is a matter for the UK Endorsement Board.