Response 7 - RSM UK

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Pauline Wallace Chair UK Endorsement Board 8th Floor 125 London Wall London EC2Y 5AS

RSM UK Tax and Accounting Limited 10th Floor 103 Colmore Row Birmingham B3 3AG United Kingdom rsmuk.com

Submission by email to: [email protected] 8 June 2023

Dear Pauline,

On behalf of RSM, a leading audit, tax and consulting firm to the UK middle market, we are pleased to comment on the UK Endorsement Board (UKEB) Draft Endorsement Criteria Assessment IAS 1 Narrow-Scope Amendments: Classification of Liabilities as Current or Non-current and Non-current liabilities with Covenants (DECA).

We agree with the DECA and support the adoption of these amendments into UK IFRS.

Our comments and detailed responses to the questions set out in the Invitation to Comment are set out in the appendix to this letter.

We would be pleased to respond to any questions the Board or its staff may have about any of our response.

Yours faithfully,

RSM UK Tax & Accounting Limited

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM UK Corporate Finance LLP, RSM UK Legal LLP, RSM UK Restructuring Advisory LLP, RSM UK Risk Assurance Services LLP, RSM UK Tax and Advisory Services LLP, RSM UK Audit LLP, RSM UK Consulting LLP and RSM UK Creditor Solutions LLP are limited liability partnerships registered in England and Wales, with registered numbers OC325347, OC402439, OC325349, OC389499, OC325348, OC325350, OC397475 and OC390886 respectively. RSM UK Employer Services Limited, RSM UK Tax and Accounting Limited and RSM UK Management Limited are registered in England and Wales with numbers 6463594, 6677561 and 3077999 respectively. RSM Northern Ireland (UK) Limited is registered in Northern Ireland at Number One Lanyon Quay, Belfast, BT1 3LG with number NI642821. All other limited companies and limited liability partnerships are registered at 6th Floor, 25 Farringdon Street, London, EC4A 4AB. The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM UK Legal LLP is authorised and regulated by the Solicitors Regulation Authority, reference number 626317.

APPENDIX

Questions

Joint assessment and adoption

1. Do you agree with the approach of joint assessment and adoption of the 2020 and 2022 Amendments as set out on pages 4 – 5 of the DECA? (please select one option)

  • Yes
  • No (Selected)

Please include any comments you may have in response to question 1:

We agree with the approach of a joint assessment and adoption of the 2020 and 2022 Amendments as set out on pages 4-5 of the DECA.

Our view is that it would not be appropriate to assess and adopt the amendments in isolation, particularly as the 2022 Amendments were issued to improve the application of the 2020 Amendments.

Technical criteria assessment

2. Do you agree with the draft assessment of the Amendments against the technical criteria as set out on pages 13 – 15 of the DECA? (please select one option)

  • Yes (Selected)
  • No

Please include any comments you may have in response to question 2:

We agree with the draft assessment of the Amendments against the technical criteria as set out on pages 13-15 of the DECA.

We believe that the Amendments provide reliable and relevant information for users with enhanced disclosures for non-current liabilities with covenants. Furthermore, the Amendments clarify the application of key definitions and classification of liabilities enhancing understandability and comparability.

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM UK Corporate Finance LLP, RSM UK Legal LLP, RSM UK Restructuring Advisory LLP, RSM UK Risk Assurance Services LLP, RSM UK Tax and Advisory Services LLP, RSM UK Audit LLP, RSM UK Consulting LLP and RSM UK Creditor Solutions LLP are limited liability partnerships registered in England and Wales, with registered numbers OC325347, OC402439, OC325349, OC389499, OC325348, OC325350, OC397475 and OC390886 respectively. RSM UK Employer Services Limited, RSM UK Tax and Accounting Limited and RSM UK Management Limited are registered in England and Wales with numbers 6463594, 6677561 and 3077999 respectively. RSM Northern Ireland (UK) Limited is registered in Northern Ireland at Number One Lanyon Quay, Belfast, BT1 3LG with number NI642821. All other limited companies and limited liability partnerships are registered at 6th Floor, 25 Farringdon Street, London, EC4A 4AB. The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM UK Legal LLP is authorised and regulated by the Solicitors Regulation Authority, reference number 626317.

True and fair view

3. Do you agree with the draft assessment that the Amendments are not contrary to the true and fair view requirement as set out on pages 16 of the DECA? (please select one option)

  • Yes (Selected)
  • No

Please include any comments you may have in response to question 3:

We agree that individual and consolidated accounts prepared using the Amendments would still give a true and fair view of the entity's assets, liabilities, financial position and profit or loss.

UK long term public good

0. Do you agree with the initial assessment of one-off familiarisation costs for preparers and for users of the Amendments as set out on pages 17 & 18 of the DECA? (please select one option)

  • Yes
  • No (Selected)

Please include any comments you may have in response to question 4, including if any costs have been missed out or under-estimated:

The Amendments clarify the application of the requirements of IAS 1 and do not fundamentally change or introduce new principles.

We believe that the additional disclosures will enhance the information provided for users and there is unlikely to be a material one-off familiarisation cost for users.

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM UK Corporate Finance LLP, RSM UK Legal LLP, RSM UK Restructuring Advisory LLP, RSM UK Risk Assurance Services LLP, RSM UK Tax and Advisory Services LLP, RSM UK Audit LLP, RSM UK Consulting LLP and RSM UK Creditor Solutions LLP are limited liability partnerships registered in England and Wales, with registered numbers OC325347, OC402439, OC325349, OC389499, OC325348, OC325350, OC397475 and OC390886 respectively. RSM UK Employer Services Limited, RSM UK Tax and Accounting Limited and RSM UK Management Limited are registered in England and Wales with numbers 6463594, 6677561 and 3077999 respectively. RSM Northern Ireland (UK) Limited is registered in Northern Ireland at Number One Lanyon Quay, Belfast, BT1 3LG with number NI642821. All other limited companies and limited liability partnerships are registered at 6th Floor, 25 Farringdon Street, London, EC4A 4AB. The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM UK Legal LLP is authorised and regulated by the Solicitors Regulation Authority, reference number 626317.

Furthermore, we do not believe that there will be a material cost of familiarisation for preparers, as the Amendments will not lead to a significant change in accounting principles.

Therefore, we agree that the one-off familiarisation costs are unlikely to be material for preparers or users, that the benefits of applying the Amendments will outweigh the costs.

4. Do you agree with the initial assessment of costs of design of data collection processes and IT system changes for preparers and for users of the Amendments as set out on page 17 – 18 of the DECA? (please select one option)

  • Yes
  • No (Selected)

Please include any comments you may have in response to question 5, including if any costs have been missed out or under-estimated:

We believe that the data required to provide the additional disclosures as a result of the amendments is readily available to entities, with processes in place to record and monitor loan covenants. Therefore, we agree that the costs of design and data collection processes and IT system changes for preparer and for users of the Amendments are not likely to be material.

1. Do you agree with the initial assessment of costs of governance processes and external audit for preparers of the Amendments as set out on page 18 of the DECA? (please select one option)

  • Yes
  • No (Selected)

Please include any comments you may have in response to question 6, including if any costs have been missed out or under-estimated:

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM UK Corporate Finance LLP, RSM UK Legal LLP, RSM UK Restructuring Advisory LLP, RSM UK Risk Assurance Services LLP, RSM UK Tax and Advisory Services LLP, RSM UK Audit LLP, RSM UK Consulting LLP and RSM UK Creditor Solutions LLP are limited liability partnerships registered in England and Wales, with registered numbers OC325347, OC402439, OC325349, OC389499, OC325348, OC325350, OC397475 and OC390886 respectively. RSM UK Employer Services Limited, RSM UK Tax and Accounting Limited and RSM UK Management Limited are registered in England and Wales with numbers 6463594, 6677561 and 3077999 respectively. RSM Northern Ireland (UK) Limited is registered in Northern Ireland at Number One Lanyon Quay, Belfast, BT1 3LG with number NI642821. All other limited companies and limited liability partnerships are registered at 6th Floor, 25 Farringdon Street, London, EC4A 4AB. The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM UK Legal LLP is authorised and regulated by the Solicitors Regulation Authority, reference number 626317.

We agree that the costs of governance processes and external audit for preparers of the Amendments are unlikely to be material. We believe that governance and external audit processes for preparers will already capture information required to comply with the additional disclosures proposed by the Amendments.

5. Do you agree with the initial assessment of benefits for users and for preparers of the Amendments as set out on pages 18 of the DECA? (please select one option)

  • Yes (Selected)
  • No

Please include any comments you may have in response to question 7, including if any benefits have been missed out or under-estimated:

We agree with the initial assessment of benefits for users and preparers of the Amendments.

We believe that the proposed Amendments would provide useful and relevant information on the nature of non-current liabilities for financial statement users, enhancing both the understandability and comparability of financial statements. Furthermore, we believe that the additional disclosures on covenants will provide users with useful information and a better understanding of the nature of an entity's liabilities.

Furthermore, we believe that the Amendments provide greater clarity for preparers of financial statements in terms of the classification of liabilities.

2. Do you agree with the draft assessment that the Amendments are likely to be conducive to the long term public good in the UK as set out on pages 16 – 19 of the DECA? (please select one option)

  • Yes (Selected)
  • No

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM UK Corporate Finance LLP, RSM UK Legal LLP, RSM UK Restructuring Advisory LLP, RSM UK Risk Assurance Services LLP, RSM UK Tax and Advisory Services LLP, RSM UK Audit LLP, RSM UK Consulting LLP and RSM UK Creditor Solutions LLP are limited liability partnerships registered in England and Wales, with registered numbers OC325347, OC402439, OC325349, OC389499, OC325348, OC325350, OC397475 and OC390886 respectively. RSM UK Employer Services Limited, RSM UK Tax and Accounting Limited and RSM UK Management Limited are registered in England and Wales with numbers 6463594, 6677561 and 3077999 respectively. RSM Northern Ireland (UK) Limited is registered in Northern Ireland at Number One Lanyon Quay, Belfast, BT1 3LG with number NI642821. All other limited companies and limited liability partnerships are registered at 6th Floor, 25 Farringdon Street, London, EC4A 4AB. The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM UK Legal LLP is authorised and regulated by the Solicitors Regulation Authority, reference number 626317.

We believe that the Amendments are likely to be conductive to the long term public good in the UK. The Amendments provide clarity on the classification of liabilities, increase transparency through additional disclosures on covenants and will improve financial reporting for entities that prepare financial statements using UK-adopted IFRS.

6. Do you agree with the draft assessment that the Amendments are not likely to lead to a 'significant change in accounting practice' as set out on page 19 of the DECA? (please select one option)

  • Yes (Selected)
  • No

Please include any comments you may have in response to question 9:

We believe that the Amendments provide clarification of existing accounting guidance and will not significantly change accounting practice or principles.

7. Do you have any other comments you would like to add?

We have no further comments.

Thank you for completing this Invitation to Comment

Please submit this document by close of business on Thursday, 8 June 2023 to: [email protected]

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM UK Corporate Finance LLP, RSM UK Legal LLP, RSM UK Restructuring Advisory LLP, RSM UK Risk Assurance Services LLP, RSM UK Tax and Advisory Services LLP, RSM UK Audit LLP, RSM UK Consulting LLP and RSM UK Creditor Solutions LLP are limited liability partnerships registered in England and Wales, with registered numbers OC325347, OC402439, OC325349, OC389499, OC325348, OC325350, OC397475 and OC390886 respectively. RSM UK Employer Services Limited, RSM UK Tax and Accounting Limited and RSM UK Management Limited are registered in England and Wales with numbers 6463594, 6677561 and 3077999 respectively. RSM Northern Ireland (UK) Limited is registered in Northern Ireland at Number One Lanyon Quay, Belfast, BT1 3LG with number NI642821. All other limited companies and limited liability partnerships are registered at 6th Floor, 25 Farringdon Street, London, EC4A 4AB. The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM UK Legal LLP is authorised and regulated by the Solicitors Regulation Authority, reference number 626317.

END OF DOCUMENT

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM UK Corporate Finance LLP, RSM UK Legal LLP, RSM UK Restructuring Advisory LLP, RSM UK Risk Assurance Services LLP, RSM UK Tax and Advisory Services LLP, RSM UK Audit LLP, RSM UK Consulting LLP and RSM UK Creditor Solutions LLP are limited liability partnerships registered in England and Wales, with registered numbers OC325347, OC402439, OC325349, OC389499, OC325348, OC325350, OC397475 and OC390886 respectively. RSM UK Employer Services Limited, RSM UK Tax and Accounting Limited and RSM UK Management Limited are registered in England and Wales with numbers 6463594, 6677561 and 3077999 respectively. RSM Northern Ireland (UK) Limited is registered in Northern Ireland at Number One Lanyon Quay, Belfast, BT1 3LG with number NI642821. All other limited companies and limited liability partnerships are registered at 6th Floor, 25 Farringdon Street, London, EC4A 4AB. The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM UK Legal LLP is authorised and regulated by the Solicitors Regulation Authority, reference number 626317.