2009 ANNUAL REPORT
YEAR ENDED 31 DECEMBER 2009
|Standard-setting and related activities|
|Publication and related activities|
|Standard-setting and related activities|
Salaries, wages and benefits
Cost of meetings and associated travel
|Publication and related activities|
Direct cost of sales from publications and related activities
( 22,956 )
( 19,294 )
|PROFIT (LOSS) BEFORE FAIR VALUE CHANGES AND EXCHANGE GAINS|
( 307 )
| Changes in fair value of financial instruments ||10(d)|
| Exchange gains (losses) |
PROFIT (LOSS) BEFORE TAX
Income tax credit (expense)
COMPREHENSIVE INCOME FOR THE YEAR
For the year ended
AS AT DECEMBER 2009
Cash and cash equivalents
Accrued interest receivable on bonds
Trade and other receivables
Leasehold property, leasehold improvements, furniture and equipment
Trade and other payables
Contributions received in advance
Publications revenue received in advance
Forward currency contracts at fair value
Contributions received in advance
Forward currency contracts at fair value
For the year ended 31 December 2009
Foreign exchange settlements
Publication and related activities
Salaries, wages and benefits
Publications direct cost
Income tax paid
NET CASH FROM OPERATING ACTIVITIES
Purchase of bonds
Matured bonds receipts
Purchase of leasehold improvements, furniture and equipment
NET CASH INCREASES/(DECREASE) FROM INVESTING ACTIVITIES
Effects of exchange rate changes on cash and cash equivalents
NET DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
1. Legal Form, Objectives and Restructuring
The objectives of the IASC Foundation are:
(a) to develop, in the public interest, a single set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles. These standards should require high quality, transparent and comparable information in financial statements and other financial reporting to help investors, other participants in the world’s capital markets and other users make economic decisions.
(b) to promote the use and rigorous application of those standards.
(c) in fulfilling the objectives associated with (a) and (b) to take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings; and
(d) to promote and facilitate adoption of International Financial Reporting Standards (IFRSs), being the standards and interpretations issued by the International Accounting Standards Board (IASB), through the convergence of national accounting standards and IFRSs.
The governance of the IASC Foundation rests primarily with its Trustees, who provide oversight of the IASB and its related bodies, the IFRS Interpretations Committee and the IFRS Advisory Council.
As a result of a constitutional change agreed in January 2009, a Monitoring Board comprised of public capital market authorities provides a formal link between the Trustees and public authorities.
In addition to their general oversight functions, the Trustees appoint the members of the IASB and related bodies, and are responsible for the financial and legal arrangements of the organisation. The IASB has the responsibility for setting accounting standards in accordance with its mandate and the due process set out in the IASC Foundation’s Constitution and the IASB’s Due Process Handbook .
For the purposes of organising the financial information the IASC Foundation has categorised income and expenses into two categories. Standard–setting and related activities includes all activities associated with standard–setting and support functions required to achieve the organisation’s objectives. Publications and related activities include information related to the sales of print and electronic IFRS materials, educational activities, and Extensible Business Reporting Language (XBRL).
Contributions are recognised as revenue in the year designated by the contributor.
Subscriptions to the IASC Foundation’s comprehensive package and e IFRS products are recognised as revenue on a time-apportioned basis over the period covered by the subscriptions. Royalties are recognised as revenue on an accrual basis. Publications direct cost of sales is comprised of printing, salaries, promotion, computer and various related overhead costs.
Inventories of current publications are valued at the lower of net realisable value and the cost of printing the publications, on a first-in-first-out basis. Inventories that have been superseded by new editions are written off.
Leasehold improvements and furniture and equipment are initially measured at cost, and depreciated on a straight-line basis (in the case of leasehold improvements over the period of the lease). All other assets are depreciated over 5 years, except computer equipment, which is depreciated over 3 years.
The IASC Foundation’s presentational and functional currency is sterling. Transactions denominated in currencies other than sterling are recorded at the exchange rate at the date of the transaction. Differences in exchange rates are recognised in the Statement of Comprehensive Income. Monetary assets and liabilities are translated into sterling at the exchange rate at the end of the reporting period.
Lease payments for office accommodation are recognised as an expense on a straight-line basis over the non-cancellable term of the lease. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.
Regular purchases and sales of financial assets are recognised on the trade date, the date on which the IASC Foundation is committed to purchase or sell the asset. Investments are recognised initially at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the IASC Foundation has transferred substantially all risks and rewards of ownership.
The IASC Foundation classifies financial assets as subsequently measured at either amortised cost or fair value based on its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. All financial assets, except for bonds and derivatives, are carried at amortised cost as the objective is to hold these assets in order to collect contractual cash flows and those cash flows are solely principal and interest. Investments in bonds are classified as subsequently measured at fair value through profit or loss, and the corresponding gains or losses are included within profit (loss) before tax. Bond holdings are discussed more fully in note 10.
The IASC Foundation uses contributions, primarily in US dollars and euro, to fund a portion of sterling obligations arising from its activities. In accordance with its financial risk management policy, the IASC Foundation does not hold or issue derivative financial instruments for trading purposes; the forward foreign currency hedges are entered into to provide certainty regarding funding to protect against currency fluctuation on future cash flows that are designated in US dollars and euro. Derivative financial instruments are recognised and subsequently measured at fair value. The corresponding gains or losses are included within profit (loss) before tax .
Provisions are recognised when the following three conditions are met—the IASC Foundation has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount of the provision represents the best estimate of the expenditure required to settle the obligation at the end of the reporting period. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.
The IASC Foundation makes estimates and assumptions regarding the future. In the future, actual experience may differ from those estimates and assumptions. The Trustees consider there are none that are material to the preparation of the financial statements.
The financial statements have been drawn up on the basis of accounting standards, interpretations and amendments effective at the beginning of the accounting period on 1 January 2009, except for that explained below. The IASB Foundation has concluded that there are no other relevant standards or interpretations in issue not yet adopted.
IFRS 9 Financial Instruments was issued in November 2009 and is required to be applied from 1 January 2013. The presentation of the IASC Foundation’s financial statements has not significantly changed as a result of the early adoption of the new standard as it did not change the measurement of any assets.
In order to conform to the current year’s presentation in the financial statements, the following comparative amounts were reclassified. The changes in presentation are to improve the information provided.
Recruitment expenses are included in Other Costs and listed in note 9. The prior year amount of £126,000 was presented as follows: £121,000 was included in Salaries, wages and benefits; £5,000 was included in Trustees’ fees. A corresponding change has been made to the statement of cash flows and the details of salaries, wages and benefits as disclosed in note 5.
Fund raising expenses are included in Other Costs and listed in note 9. In the prior year, £36,000 was listed separately in the statement of comprehensive income.
The details of accommodation expenses presented in note 8 (a) has been expanded to disclose the amount included in publication costs.
The details of cash holdings presented in note 10 (a) has been clarified by listing currencies irrespective of their country location.
The Trustees arrange the majority of the organisation’s operations to be funded through a number of national financing regimes. These funding efforts are guided by four principles:
Broad-based: A sustainable long-term financing system must expand the base of support to include major participants in the world’s capital markets, including official institutions, in order to ensure diversity of sources.
Compelling: A system must carry with it enough pressure to make free riding very difficult. This may be accomplished through various means, including official support from the relevant regulatory authorities and formal approval by the collecting organisations.
Open-ended: The financial commitments should be open-ended and not contingent on any particular action that would infringe on the independence of the IASC Foundation and the IASB. This should include sustained support from official international organisations, central banks and the major accounting firms.
Country-specific: The funding burden should be shared by the major economies of the world on a proportionate basis, using GDP as the determining measure. Each country or jurisdiction should meet its designated target in a manner consistent with the principles above. Trustees should be assigned to specific countries to assist in the development of the funding scheme.
Because of the success of the Trustee funding initiative, a growing number of national levies, payments and broad-based regimes are now in place. The overall increase in contributions is due both in part to the establishment of those regimes and the increase during the year of the strengthening US dollar exchange rate relative to sterling. In 2009 the IASC Foundation received funds of £16,584,000 in contributions (2008: £12,747,000).
Contributions received before 31 December 2009, amounting to £49,000 (2008: £225,000), which were specifically designated by the contributors for use by the IASC Foundation in subsequent years, were recognised as current and non-current liabilities, depending upon the designation by the contributor. Contributions received or confirmed after 31 December 2009, amounting to a total of £1,068,000 (2008: £334,000) specifically designated by the contributors for use by the IASC Foundation in 2009 were recognised as revenues at the end of 2009 and included as contributions receivable.
A number of countries have recently implemented or will be introducing funding regimes in 2010. Using the IASC Foundation’s website, the Trustees are informing interested parties of their progress on establishing broad-based funding regimes throughout the world.
|Sales of subscriptions and publications||3,751||4,411|
|Royalties and permission fees||1,640||1,120|
|Other related activities||263||950|
|Staff/employee related costs||1,527||1,486|
|Cost of goods sold||475||433|
The IASC Foundation had an average of 114 employees (including IASB members and interns) during 2009 (2008: 101).
|Staff costs, including IASB members’ salaries and other costs||12,854||10,252|
|Contributions to defined contribution pension plans||652||533|
|Staff costs included in publications direct expenses (see note 4)|
|Salaries and other costs||1,437||1,366|
|Contributions to defined contribution pension plans||84||92|
The Trustee Remuneration Committee is responsible for reviewing, bench-marking and making recommendations on salary and benefit levels. These recommendations are reviewed and approved annually by the Trustee’s. As a number of the IASB members work outside the United Kingdom and therefore carry different employment tax burdens, the Trustees agree upon an annual remuneration budget for each of the IASB members inclusive of all employer contributions for tax and benefits. In 2009, the total cost for the 15 (2008: 13) IASB members’ salaries, including all applicable employment taxes and benefits, and relocation costs of new IASB members, amounted to £5,878,000 (2008: £4,728,000). In March 2009, effective for April 2009, the Trustees approved the following remuneration budgets: £493,990 per year for the IASB Chair (2008: £476,900), £401,370 per year for full-time members (2008: £389,680) and £200,310 per year for part-time members (2008: £194,840).
The Trustees are remunerated by annual and meeting fees and are reimbursed for the expenses of their travel on IASC Foundation business. In 2009 the annual fee for the Chair of the Trustees was £75,000 (2008: £75,000). In 2009, the Chair waived his fee and it was counted as a contribution. The annual fee for the other Trustees was £12,500 (2008: £12,500). Trustees received an attendance fee of £1,000 (2008: £1,000) for each formal meeting.
|IFRS Interpretations Committee and IFRS Advisory Council||314||351|
|Financial Crisis Advisory Group||218||-|
|Other advisory meetings||446||445|
|Travel for other consultation and liaison||560||506|
|Rates, insurance and energy||438||373|
|Less amounts included in publications costs||(237)||(218)|
|At 1 January 200 9||1,028||815||1,843|
|At 31 December 2009||1,028||1,073||2,101|
|At 1 January 2009||708||651||1,359|
|Charge for the year||34||115||149|
|At 31 December 2009||742||766||1,508|
|Net carrying amount at 31 December 2009||286||307||593|
|At 1 January 2008||838||771||1,609|
|At 31 December 2008||1,028||815||1,843|
|At 1 January 2008||598||583||1,181|
|Charge for the year||110||91||201|
|At 31 December 2008||708||651||1,359|
|Net carrying amount at 31 December 2008||320||164||484|
At the reporting date the IASC Foundation had no capital commitments (2008: £nil).
The IASC Foundation has made a provision for reinstatement which covers the cost of reinstating the building when the lease expires in September 2018. The estimated amount and timing of any outflow are subject to options to extend the lease. The corresponding property asset is amortised over the period of the lease.
|Balance at 1 January||413||202|
|Provision made in year||-||211|
|Balance at 31December||413||413|
Lease commitments relate to operating leases for office space with lease terms expiring in September 2018, and with options to extend for a further 10 years. All operating lease contracts contain market review clauses. Payments on the leases, excluding service charges and property rates, are as follows:
|Within one year||778||400|
|In two to five years||3,113||3,113|
|More than five years||2,916||3,694|
Since 2001 the IASC Foundation has rented office space at 610 Fifth Avenue, New York, NY, USA. The only obligation incurred in this regard relates to payment of ongoing rent and a provision of 90 days’ notice of termination.
|Audit, legal and taxation fees||138||118|
10. Financial instruments
The IASC Foundation receives contributions in a number of currencies but its expenditures are largely sterling based. This exposes the organisation to financial risks. The IASC Foundation also faces risks associated with its use of financial instruments. This note describes the organisation’s objectives, policies and processes for managing those risks and the methods used to measure them.
There have been no substantive changes in the organisation’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods.
The principal financial instruments used by the IASC Foundation, from which financial instrument risk arises, are as follows:
Derivative instruments - forward currency contracts
Trade and other receivables
Cash and cash equivalents
Trade and other payables.
(a) Cash and cash equivalents
Liquidity risk associated with cash and bond holdings
The IASC Foundation manages its working capital to ensure sufficient cash resources are maintained to meet short-term liabilities. The IASC Foundation has no bank borrowings.
Cash holdings: Management seeks to keep an amount in cash equal to or exceeding the upcoming quarter’s expenditure. Cash is held either on current or on short-term deposits at floating rates of interest determined by the relevant bank’s prevailing base rate. Part of the cash at bank is held in euro and US dollar accounts. Cash at bank to pay for general operations in London is held by Barclays Bank PLC, London. A US dollar account, used to pay most US dollar expenses, is held by Barclays Bank PLC in New York. Other deposits and balances required from time to time to cover hedging obligations and for investment purposes are held in accounts with Barclays Bank (Suisse) S.A in Geneva. All decisions regarding the Geneva accounts are managed by the Trustees of the IASC Foundation.
Interest income on cash deposits amounted to £56,000 (2008: £218,000). Due to the relatively short durations and levels of cash deposits and returns, interest rate risk is not considered significant.
|Cash and bank deposits due after 15 days in Geneva|
|Bank sterling deposits due within 45 days||2,145||2,440||0.45||2.20|
|Bank dollar deposits due within 90 days||-||2,055||-||0.85|
|Cash and bank deposits due on demand|
Bond holdings: The Trustees have invested surplus funds of the IASC Foundation in sterling-denominated, fixed rate notes of the UK government and international organisations with an AAA rating. Funds are divided into relatively equal sums with maturities in each of the next five years.
The IASC Foundation manages and receives information on its investments in bonds on a fair value basis. Information is provided on that basis to the Trustees and key management personnel. Bonds are carried at fair value through profit or loss, based on quoted prices in active markets (described as level 1 by IFRS 7). The maturity of the bonds is as follows:
|Nominal value||Nominal value||Fair value||Fair value|
|Less than one year||1,504||1,343||1,528||1,375|
|More than one year and less than two years||1,189||1,503||1,237||1,582|
|More than two years and less than three years||3,286||2,489||3,446||2,624|
|More than three and less than four years||706||2,011||706||2,073|
|More than four and less than five years||672||-||666||-|
Bonds provide a yield in the range of 1.0% to 3.0% per year.
(c) Trade and other receivables
In addition to its financing programme, the IASC Foundation supplements its funding through publications and related activities. For publications and subscriptions sales the IASC Foundation does not offer credit. For licensing and royalty arrangements some credit risk arises. However the organisation works largely with major publishers and accounting bodies, with whom it has long-standing relationships, and therefore the IASC Foundation does not credit check these customers before it enters into business with them.
The IASC Foundation has no significant exposure to large or key customers: its largest customer does not exceed 3 per cent of the IASC Foundation’s revenues. The maximum exposure to credit risk is considered to be the trade receivable balance at the year-end; other financial assets in the financial statements, such as contributions receivable, are generally realised in full.
|Not yet due||804||541|
|Past due but not impaired||106||99|
Where past due accounts are still unpaid six months or more after invoice date and the IASC Foundation considers the amount impaired it provides for the amount as a bad debt provision in the financial statements. At 31 December 2009 the amount provided for was £20,000 (2008: £25,000).
(d) Currency risk
The IASC Foundation’s expenses arise largely in sterling, whereas the organisation has received funding and future financing commitments in US dollars and euros. The Trustees have implemented a strategy to mitigate the foreign exchange fluctuations and timing risks connected with the various funding regimes. The IASC Foundation generally forward sells approximately 90 per cent of its net US dollar contributions and 50 per cent of its net euro contributions to fix a sterling equivalent. Foreign currency is sold forward on a two year rolling basis.
Details of these forward contracts are set out in the table below.
|Forward contracts US dollar||2009||2008|
|£’000||$’000||Weighted AverageRate||£’000||$’000||Weighted AverageRate|
|Forward contracts euro||2009||2008|
|£’000||€’ 000||Weighted AverageRate||£’000||€’ 000||Weighted AverageRate|
The ranges of rates for the US dollar are 1.4741 – 1.8170 (2008: 1.8060 - 1.9970) and the euro 1.250 (2008: 1.250 - 1.255).
The following changes to fair value are reported in the Statement of Comprehensive Income.
|Income (Charge) in Statement of Comprehensive Income||2009||2008|
|Forward foreign exchange contracts||3,047||(3,277)|
|Changes in fair value of financial instruments||2,966||(2,977)|
Below are the fair values of these contracts, based on quoted prices in active markets (described as level 1 by IFRS 7), as reported in the Statement of Financial Position.
|Forward contracts expiring end of each calendar quarter of 2009||-||(2,287)|
|Forward contracts expiring end of each calendar quarter of 2010||(355)||(1,208)|
|Forward contracts expiring end of each calendar quarter of 2011||(93)||-|
(e) Foreign Currency Sensitivity
The following table shows the sensitivity of the reported results to a potential 10 per cent fluctuation in year-end exchange rates.
|Forward Sales||£Weakens 10%||£ Strengthens 10%|
|Profit and loss effect (before tax)||(1,269)||1,038|
|Profit and loss effect (before tax)||(222)||182|
From time to time theIASC Foundation holds US dollar funds in anticipation of US dollar liabilities. Over the year the US dollar exchange rate reached a high of 1.70 to sterling, whilst the low point was 1.37 to sterling. The following table shows the sensitivity of the reported results to a potential 10 per cent fluctuation in year-end exchange rates.
|CashHolding||£Weakens 10%||£ Strengthens 10%|
|Profit and loss effect (before tax)||65||(53)|
|Profit and loss effect (before tax)||3||(3)|
For US tax purposes, the IASC Foundation is classified as a not-for-profit, tax-exempt organisation.
In 2006 the IASC Foundation reached an agreement with the UK authorities regarding the status of taxation on its publications and related revenues. In 2009 the taxation credit is calculated on this basis, and is estimated to be £60,000 (2008: a charge of £60,000). On the basis of activity for 2009 and from previous years, at the end of 2009 the IASC Foundation is carrying forward a loss for UK tax purposes of £957,000 (2008: £201,000).
Consistent with IAS 12 Income Taxes, the IASC Foundation does not recognise this loss as a deferred tax asset, because of the uncertainty of being able to utilise these losses in the future.
|Net assets at the beginning of the reporting period||9,084||10,831|
|Comprehensive income in the year net of tax||647||(1,747)|
|Net assets at the end of the reporting period||9,731||9,084|
Inventory of books amount to £138,000 (2008: £77,000).
14. Approval of financial statements
These financial statements were approved by the Trustees of the IASC Foundation on