International Financial Reporting Standards Foundation


ANNUAL REPORT

For the year ended

31 December 2012


Report of the independent auditor


We have audited the financial statements of the IFRS Foundation for the year ended 31 December 2012, which comprise the statement of comprehensive income, the statement of changes in equity, the statement of financial position, the statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is IFRSs.


This report is made solely to the IFRS Foundation's Trustees, as a body, in accordance with our engagement letter dated 10 December 2012 to you and for no other purpose. Our audit work has been undertaken so that we might state to the IFRS Foundation's Trustees those matters that we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the IFRS Foundation and the IFRS Foundation's Trustees as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Trustees and auditors

The IFRS Foundation's Trustees are responsible for the preparation of the financial statements in accordance with the IFRS Foundation's Constitution and IFRSs, and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with the IFRS Foundation's Constitution and International Standards on Auditing (UK and Ireland). Those Standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/ private.cfm.

Opinion on financial statements

In our opinion the financial statements:

BDO LLP
Chartered Accountants
London
United Kingdom
10 April 2013


BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).


Statement of comprehensive income


2012

2011

YEAR ENDED 31 DECEMBER

Notes

£'000

£'000

INCOME

Standard-setting and related activities

Contributions

3

20,030

20,562

Other income

149

37

20,179

20,599

Publications, education and XBRL

Revenue from publications, education and XBRL

4(a)

5,324

5,522

25,503

26,121

EXPENSES

Standard-setting

Salaries, wages and benefits

5

(15,571)

(16,253)

Trustees fees

6

(631)

(505)

Travel, accommodation and related expenses

7

(2,113)

(2,542)

Occupancy expenses

8

(1,367)

(1,335)

Other costs

9

(1,236)

(1,298)

Reduction (increase) in provision for HMRC tax settlement

15

290

(460)

(20,628)

(22,393)

Publications, education and XBRL

Direct cost of publications, education and XBRL

4(b)

(3,208)

(3,323)

(23,836)

(25,716)

OPERATING INCOME

1,667

405

Finance income

10

883

577

Finance costs

10

(126)

(274)

INCOME BEFORE TAX

2,424

708

Income tax expense

14

-

-

COMPREHENSIVE INCOME FOR THE YEAR

2,424

708

Statement of changes in equity

YEAR END 31 DECEMBER

Retained surplus at beginning of year

8,415

7,707

Comprehensive income for the year

2,424

708

RETAINED SURPLUS AT END OF YEAR

10,839

8,415


The accompanying notes form part of these financial statements.


Statement of financial position


2012

2011

AS AT 31 DECEMBER

Notes

£'000

£'000

ASSETS

Current assets

Cash and cash equivalents

8,379

6,997

Contributions receivable

3

1,674

1,808

Trade and other receivables

716

963

Prepaid expenses

668

567

Inventories

153

249

Bonds at fair value

12

760

3,403

Forward currency contracts at fair value

12

371

112

12,721

14,099

Non-current assets

Bonds at fair value

12

4,023

1,395

Forward currency contracts at fair value

12

40

128

Leasehold improvements, furniture and equipment

11(a)

793

518

4,856

2,041

TOTAL ASSETS

17,577

16,140

LIABILITIES

Current liabilities

Trade and other payables

265

269

Payroll taxes payable

627

544

Accrued expenses

1,285

1,424

Provision for HMRC tax settlement

15

94

436

Contributions received in advance

3

2,695

2,991

Rent incentive

82

82

Publications revenue received in advance

871

728

Forward currency contracts at fair value

12

-

169

5,919

6,643

Non-current liabilities

Forward currency contracts at fair value

12

15

195

Lease reinstatement obligation

11(b)

413

413

Rent incentive

391

474

819

1,082

TOTAL LIABILITIES

6,738

7,725

NET ASSETS

10,839

8,415


The accompanying notes form part of these financial statements.

The financial statements were approved by the Trustees of the IFRS Foundation on 10 April 2013 and authorised for issue on 10 April 2013.


Michel Prada

Chair of the Trustees

Statement of cash flows


2012

2011

YEAR ENDED 31 DECEMBER

Notes

£'000

£'000

OPERATING ACTIVITIES

Cash received

Contributions

19,385

22,895

Publications, education and XBRL

5,276

5,977

Funding for Tokyo office

613

-

Interest

259

252

Foreign exchange settlements

88

-

Other receipts

29

32

Cash paid

Salaries, wages and benefits

(15,994)

(15,685)

Publications direct costs

(2,942)

(3,226)

Trustees' fees

(724)

(523)

Foreign exchange settlements

-

(109)

Other expenses

(4,025)

(6,023)

NET CASH FROM OPERATING ACTIVITIES

1,965

3,590

INVESTING ACTIVITIES

Matured bonds receipts

3,226

1,191

New bond purchases

(3,307)

-

Purchase of leasehold improvements, furniture and equipment

(488)

(189)

NET CASH (DECREASES) INCREASES FROM INVESTING ACTIVITIES

(569)

1,002

Effects of exchange rate changes on cash and cash equivalents

(14)

45

NET INCREASE IN CASH AND CASH EQUIVALENTS

1,382

4,637

Cash and cash equivalents at the beginning of the period

6,997

2,360

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

13(a)

8,379

6,997


The accompanying notes form part of these financial statements.

Notes to the financial statements


1.Legal form, objectives and restructuring

Incorporated in the State of Delaware, USA, on 6 February 2001, the International Financial Reporting Standards Foundation (IFRS Foundation) is a not-for-profit charitable organisation with its primary operations based in London.


The objectives of the IFRS 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 of financial information 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;


(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 IFRS 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.

2. Accounting Policies

(a) Basis of preparation

These financial statements have been prepared in accordance with IFRS. The policies have been consistently applied to all years presented, unless otherwise stated.


In 2009 the IFRS Foundation elected to apply IFRS 9 Financial Instruments (IFRS 9) earlier than the effective date.


(b) Contributions

Contributions are recognised as revenue in the year designated by the contributor. The estimated fair value of donated services is recognised as contribution revenue provided the services can be reliably measured and would normally have otherwise been purchased.


(c) Publications and related revenue

IFRS Foundation's comprehensive package and eIFRS 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 cost of sales is comprised of printing, salaries, promotion, technology and various related overhead costs.


(d) Inventories

Inventories comprise IFRS publications, which are carried at the lower of the cost of printing, on a first-in-first-out basis, and their net realisable value. Inventories of publications that have been superseded by new editions are written off.


(e) Depreciation

Leasehold improvements, furniture and equipment are initially measured at cost, and then depreciated on a straight-line basis. Leasehold improvements are depreciated over the period of the lease. All other assets are depreciated over 5 years, except computer equipment, which is depreciated over 3 years.


(f) Office accommodation - operating leases

The IFRS Foundation's lease of office space is classified and accounted for as an operating lease. Lease payments for office space, including amounts for the cost of reinstating a building on expiration of the lease, are recognised as an expense on a straight-line basis over the non-cancellable term of the lease. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.


(g) Foreign currency translation

The IFRS 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. Monetary assets and liabilities are translated into sterling at the exchange rate at the end of the reporting period. Exchange differences are recognised in the statement of comprehensive income.


(h) Financial instruments

Bonds and derivatives (forward currency contracts) are recognised at fair value and subsequently measured at fair value through profit or loss. The IFRS Foundation manages and receives information on its investments in bonds on a fair value basis. The IFRS Foundation uses forward currency contracts to manage its foreign currency risk.


All other financial instruments are recognised at fair value plus transaction costs and subsequently measured at amortised cost.


(i) Provisions and contingencies

Provisions are recognised when the following three conditions are met-the IFRS Foundation has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources with 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 a provision represents the best estimate of the expenditure required to settle the obligation at the end of the reporting period.


(j) New standards and interpretations issued

The financial statements have been drawn up on the basis of accounting Standards, Interpretations and amendments effective or early adopted at the beginning of the accounting period on 1 January 2012.

The IFRS Foundation has concluded that there are no relevant Standards or Interpretations in issue that are not yet adopted that will have a material impact on the IFRS Foundation's financial statements.


3. Contributions

Since 2006, the Trustees have sought to establish national financing regimes, proportionate to a country's relative GDP, that establish a levy on companies or provide an element of publicly supported financing. However, voluntary systems remain in place in some jurisdictions.


Contributions received before 31 December 2012, amounting to £2,695,000 (2011: £2,991,000), which were specifically designated by the contributors for use by the IFRS Foundation in subsequent years, were recognised as current and non-current liabilities, depending upon the designation by the contributor. Contributions received after 31 December 2012, amounting to a total of £1,674,000 (2011: £1,808,000), specifically designated by the contributors for use by the IFRS Foundation in 2012, were recognised as revenues at the end of 2012 and included as contributions receivable.


Separate funding of £613,000 was received for the set-up and operating costs of the Tokyo office; £130,000 has been recognised as other income to offset the current year's costs that commenced 1 October 2012.

4. Publications and related activities

(a) Revenue from publications, education and XBRL

2012

2011

£'000

£'000

Sales of subscriptions
and publications

3,065

3,260

Royalties and permission fees

2,031

2,031

Other related activities,
including education and XBRL

228

231

TOTAL

5,324

5,522

(b) Cost of publications, education and XBRL

2012

2011

£'000

£'000

Staff/employee related costs
(see note 5)

1,717

1,666

Cost of goods sold

542

577

Depreciation

39

39

Other costs, including occupancy expenses

910

1,041

TOTAL

3,208

3,323

5. Salaries, wages and benefits

The IFRS Foundation had an average of 127 employees (including IASB members and interns) during 2012 (2011: 125).


2012

2011

£'000

£'000

Staff costs, including IASB members salaries and other costs

14,964

15,627

Contributions to defined contribution pension plans

607

626

15,571

16,253

Staff costs included in publications direct expenses (see note 4)

Salaries and other costs

1,604

1,575

Contributions to defined contribution pension plans

113

91

1,717

1,666

Total

17,288

17,919


The Trustees Human Capital Committee is responsible for reviewing, bench-marking and making recommendations on salary and benefit levels. These recommendations are reviewed and approved annually by the Trustees as a whole. Effective April 2012, the Trustees approved annual remuneration levels resulting in the following gross salaries: £537,800 for the IASB Chair (2011: £527,200); £474,100 for the IASB Vice Chair (2011: £ 464,900), and; an average of £440,200 for other full-time members (2011: £435,200).

6. Trustees' fees

The Trustees are remunerated by an annual fee and are reimbursed for the expenses of their travel on IFRS Foundation business; there were 21 Trustees in 2012 (2011: 20). In 2012 the fee for the Chair of the Trustees was £200,000 (2011: £100,000 for Acting Co-Chairs of the Trustees). The mix of annual fees for the other Trustees changed during 2012 to a fixed fee of £20,000 with an additional £7,000 paid to the committee chairs; the change maintains these fees at the prior year level. Previously, other Trustees received a fixed fee of £12,500 and an attendance fee of £1,000 for each formal meeting.

7. Travel, accommodation and related expenses

2012

2011

COST INCURRED BY:

£'000

£'000

IASB Members

674

944

Trustees

543

536

IFRS Interpretations Committee and IFRS Advisory Council

409

409

Other IFRS Foundation staff

487

653

TOTAL

2,113

2,542

8. Occupancy expenses

2012

2011

£'000

000

Rent

786

725

Service charges

205

208

Rates, insurance and energy

450

456

Depreciation

211

210

1,652

1,599

Less amounts included in publications costs

(285)

(264)

TOTAL

1,367

1,335



9. Other Costs

2012

2011

£'000

£'000

Communication and technology

520

528

Audit, legal and taxation fees

254

211

External relations

90

116

Recruitment activities

158

124

Other

214

319

TOTAL

1,236

1,298

10. Finance income and finance costs

2012

2011

FINANCE INCOME

£'000

£'000

Interest income - deposits

23

9

Fair value gains on forward foreign exchange contracts

647

481

Fair value gains on bonds

139

87

Exchange gains

74

-

TOTAL

883

577


2012

2011

FINANCE COSTS

£'000

£'000

Fair value losses on forward foreign exchange contracts

(126)

(210)

Exchange losses

-

(64)

TOTAL

(126)

(274)


11. Leases

(a) Leasehold improvements, furniture and equipment

Leasehold
improvements

Furniture,

equipment

TOTAL

£'000

£'000

£'000

COST

At 1 January 2012

1,073

1,046

2,119

Additions

173

315

488

Disposals/retirements

-

(320)

(320)

At 31 December 2012

1,246

1,041

2,287

ACCUMULATED DEPRECIATION

At 1 January 2012

813

788

1,061

Charge for the year

49

162

211

Disposals/retirements

-

(318)

(318)

At 31 December 2012

862

632

1,494

NET CARRYING AMOUNT AT 31 DECEMBER 2012

384

409

793

 

NET CARRYING AMOUNT AT 31 DECEMBER 2011

260

258

518


(b) Lease commitments


Lease commitments relate to operating leases for office space with lease terms expiring in September 2018 in London and 2022 in Tokyo, and with options to extend for a further 10 years in London. All operating lease contracts contain market review clauses. Payments on the leases, excluding service charges and property rates, are as follows:


2012

2011

PAYMENTS

£'000

£'000

Within one year

855

798

In two to five years

3,419

3,437

More than five years

947

1,827

TOTAL

5,221

6,062


Since 2001 the IFRS Foundation has rented office space at 610 Fifth Avenue, New York, USA. The only obligation incurred in this regard relates to payment of on-going rent and a provision of 90 days' notice of termination.

The IFRS Foundation is committed to make payments to cover the cost of reinstating the London building when the lease expires in September 2018 and the Tokyo building when the lease expires in September 2022. The estimated amount assumes that the London reinstatement work would take place in 2018, subject to the option to extend the lease for a further 10 years, which could affect the timing of any outflow.

12. Financial instruments

For accounting purposes, the IFRS Foundation categorises its financial instruments based on their measurement, namely financial instruments at fair value through profit or loss or financial instruments at amortised cost.

Financial instruments at fair value through profit or loss

Fair value

Notional value

Fair value

Notional value

2012

2012

2011

2011

FINANCIAL ASSETS

'000

'000

'000

'000

Bonds, including acccrued interest

£4,783

£4,673

£4,798

£4,723

Forward foreign exchange contracts USD

£230

$19,500

-

-

Forward foreign exchange contracts Euro

£181

3,300

£240

6,600

 

FINANCIAL LIABILITIES

Forward foreign exchange contracts USD

£(5)

$5,800

£(364)

$24,650

Forward foreign exchange contracts Euro

£(10)

3,300

-

-


The IFRS Foundation measures all other financial instruments at amortised cost. The carrying amount of these instruments is a reasonable approximation of their fair value. These financial instruments include:

  • Financial assets: cash and cash equivalents; contributions receivable; and publication related receivables.
  • Financial liabilities: trade and other payables; and contributions received in advance.

13. Financial risk management

The IFRS Foundation's activities and holdings of financial instruments, expose it to financial risks namely liquidity, interest rate, credit and currency risks. This note describes the organisation's objectives, policies and processes for managing those risks and the methods used to measure them.


(a) Liquidity and interest rate risk
The IFRS Foundation manages its working capital to ensure sufficient cash resources are maintained to meet short-term liabilities. The IFRS 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. Part of the cash at bank is held in Euros, Japanese Yen and US Dollar accounts.


Bond holdings: The Trustees have invested surplus funds of the IFRS Foundation in sterling-denominated, fixed rate bonds of international organisations, with AAA ratings at the time of purchase; these funds are reserves for continuing operations. The IFRS Foundation manages and receives information, from its advisors, on its investments in bonds on a fair value basis that includes value changes attributable to interest rate risk. Information is provided on that basis to the Trustees and key management personnel. Bond values are quoted on active markets (described as level 1) and can be converted into cash if necessary.


b) Credit risk
The IFRS Foundation is not exposed to material credit risk as investments are with highly rated and established institutions and contributions are due primarily from large regulatory or governmental bodies. For publications and subscriptions sales the IFRS Foundation generally does not offer credit. For licensing and royalty arrangements some credit risk arises. If accounts receivable are unpaid six months or more after the invoice date, the IFRS Foundation considers the amount impaired and recognises a bad debt provision. At 31 December 2012 the amount provided for was £55,000 (2011: £19,000).


(c) Foreign currency risk
The IFRS Foundation's expenses arise largely in sterling, whereas the organisation receives funding and future financing commitments, under various funding regimes, primarily in US Dollars and Euros. Some expenses are incurred and paid in US Dollars and Euros after which the net contributions in those currencies are exchanged for sterling. This exposes the organisation to currency risk.


The Trustees have implemented a strategy to mitigate the foreign exchange fluctuations and timing risks connected with these expected future net contributions. The IFRS Foundation generally forward sells approximately 90 per cent of its expected net US Dollar contributions and 50 per cent of its expected net Euro contributions to fix a sterling equivalent. Foreign currency is sold forward on a two-year rolling basis. See note 12 for more information on the fair value of these forward contracts.


As at 31 December 2012 the IFRS Foundation had sold forward, on a two-year rolling basis, US Dollar $25,300,000 at a weighted average rate of 1.602 (2011: $24,650,000 at a weighted average rate of 1.589). It had also sold forward, on a two-year rolling basis Euro €6,600,000 at a weighted average rate of 1.186 (2011: €6,600,000 at a weighted average rate of 1.151).


All non-current forward contracts expire in 2014 (2011: expire in 2013).


(d) Foreign currency sensitivity
As a result of its use of forward contracts as described above, the IFRS Foundation is exposed to the currency risk associated with the remaining 10 per cent of projected net US Dollar contributions and 50 per cent of projected net Euro contributions that are not covered by the forward contracts.


A potential 10 per cent increase in average exchange rates for sterling would have produced estimated losses on the remaining 10 per cent of actual net US Dollar contributions received during the year of £130,000 and on the remaining 50 per cent of actual net Euro contributions received during the year of £290,000. To the extent that projected contributions in either currency change, the IFRS Foundation actively manages the amount of each currency forward sold.

14. Taxation

For US tax purposes, the IFRS Foundation is classified as a not-for-profit, tax-exempt organisation.


In 2006 the IFRS Foundation reached an agreement with the UK authorities regarding the status of taxation on its publications and related revenues. For 2012 the taxation expense is calculated on this basis, and is estimated to be £0 (2011: £0). On the basis of activity for 2012 and from previous years, at the end of 2012 the IFRS Foundation is carrying forward a loss for UK tax purposes of £3,626,000 (2011: £2,728,000). Consistently with IAS 12 Income Taxes, the IFRS 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.

15. Reduction (increase) in provision for HMRC Tax settlement

In May 2011 the UK tax authority (HMRC) began a review of the IFRS Foundation's records related to the employment taxation of staff and secondees from other jurisdictions, as well as for other more general taxation matters. Because of time-limited nature of their inquiry, the HMRC requested and the IFRS Foundation agreed to make payments on account of £76,000 (2011: £24,000), on a without prejudice basis pending final resolution and settlement.


During 2012 the HMRC agreed with the IFRS Foundation's position on one of the significant outstanding issues; as a result, a reduction in provision of £290,000 has been recognised in the statement of comprehensive income. Discussions are progressing on the remaining issue and a final liability has not been assessed by the HMRC. An estimated remaining cost of £170,000 (2011: £460,000) has been provided and the net liability after payments on account amounts to £94,000 (2011: £436,000).


16. Approval of financial statements

These financial statements were approved by the Trustees of the IFRS Foundation on 10 April 2013 and authorised for issue on 10 April 2013, and at that date there were no significant events after the reporting period.



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