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Part I - IFRS

IASB publishes proposals for amendments under its annual improvements project (cycle 2018-2020)

May 21, 2019

On May 21, 2019, the International Accounting Standards Board (the Board) published an exposure draft ED/2019/2 "Annual Improvements to IFRS Standards 2018–2020". It contains proposed amendments to four International Financial Reporting Standards as result of the Board's annual improvements project. Comments are requested by August 20, 2019.

The Board uses the annual improvements process to make necessary, but non-urgent, amendments to IFRS Standards® that will not be included as part of another major project.

The ED proposes the following amendments:

Standard Subject of proposed amendment
IFRS 1, First-time Adoption of International Financial Reporting Standards Subsidiary as a first-time adopter. The proposed amendment would require a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent’s date of transition to IFRS Standards.
IFRS 9, Financial Instruments Fees in the ‘10 per cent’ test for derecognition. The proposed amendment clarifies which fees an entity includes when it applies the ‘10 per cent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognize a financial liability. Applying the proposed amendment, an entity would include only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
IFRS 16, Leases Lease incentives. The proposed amendment to Illustrative Example 13 accompanying IFRS 16 would remove from the example the illustration of the reimbursement of leasehold improvements by the lessor. The proposed amendment would resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.
IAS 41, Agriculture Taxation in fair value measurements. The proposed amendment would remove the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. The proposed amendment would ensure consistency with the requirements in IFRS 13.

In June 2018, the Board tentatively decided to also propose some amendments to IFRS 17, Insurance Contracts as part of its next cycle of annual improvements. However, these proposed amendments have now been moved the general project regarding proposed amendments to IFRS 17 that will see an exposure draft in June 2019.

ED/2019/2 Annual Improvements to IFRS Standards 2018–2020 does not contain proposed effective dates for the proposed amendments as the intention is to decide on these after the exposure period.

Review the following additional information:

 

Updated IASB work plan — Analysis

May 18, 2019

On May 18, 2019, the International Accounting Standards Board (the Board) updated its work plan following its May 2019 meeting.

Below is an analysis of all changes that were made to the work plan since our last analysis on April 12, 2019.

Standard-setting projects

  • Primary financial statements — at this month's meeting the IASB decided that the next consultation document will be an exposure draft, not a discussion paper; the timing remains unchanged (H2 2019)

Maintenance projects

Research projects

  • No changes

Other projects

  • Due Process Handbook Review — an exposure draft of proposed amendments was published on April 30, 2019; a first discussion of the feedback received is scheduled for Q4 2019

Known changes not reflected in the work plan update

The IASB has announced that it expects to publish an exposure draft Annual Improvements to IFRS Standards 2018–2020 on May 21, 2019. In the work plan the projects concerned are still noted as expecting an exposure draft in June 2019. The following projects are part of the annual improvements 2018-2020:

  • Fees in the ‘10 per cent’ Test for Derecognition (Amendments to IFRS 9)
  • Lease Incentives (Amendment to Illustrative Example 13 accompanying IFRS 16)
  • Subsidiary as a First-time Adopter (Amendments to IFRS 1)
  • Taxation in Fair Value Measurements (Amendments to IAS 41)

The revised IASB work plan is available on the Board's website.

    IASB issues podcast on IFRS 17 discussions

    May 17, 2019

    On May 17, 2019, the International Accounting Standards Board (the Board) released a podcast recorded by Darrel Scott, IASB member, and Andrea Pryde, technical staff, reporting on the discussion at the May 2019 meeting of the Board about IFRS 17, "Insurance Contracts".

    Listen to the 10-minute podcast on the Board's website.

    Webcast on research and the comparability of financial reporting

    May 14, 2019

    On May 14, 2019, the International Accounting Standards Board (the Board) released a webcast featuring Board member Ann Tarca discussing the results of research into the comparability of companies reporting using IFRS Standards.

    Professor Tarca's 24 minute webcast discusses:

    • definition and importance of comparability;
    • research evidence in four research areas:
      • Policy choice;
      • Measuring compliance;
      • Comparing numbers derived in accounting systems; and
      • Comparability and market outcomes;
    • tools the IFRS Foundation uses to promote comparability; and
    • the Board's achievements and challenges.

    Listen to the webcast on the Board's website.

    Summary of the April 2019 MCCG meeting

    May 14, 2019

    On May 14, 2019, the International Accounting Standards Board (the Board) published a summary of the Management Commentary Consultative Group (MCCG) meeting held on April 3, 2019.

    The MCCG discussed the following topics:

    • Overall proposed approach to reporting business model, strategy, operating environment and risks including cross-cutting issues;
    • Business model;
    • Strategy; and
    • Operating environment and risks.

    Review the press release and summary on the Board's website.

    Leases: What investors need to know about the new standard

    May 13, 2019

    In 2019, the CFA Institute, a global association of investment professionals, published a paper on the new leasing standard and the top ten considerations for investors.

    Companies' lease obligations are moving front and center onto the balance sheet, as a new leasing standard went into effect for both US GAAP and IFRS companies effective January 1, 2019. Because US GAAP and IFRS have decided on different solutions and transition methods, investors need to carefully consider the impacts of the new standards on the companies in which they invest. The CFA Institute has therefore prepared a guide to help investors understand the change they are about to witness. It provides the top ten considerations for investors as they evaluate the impact of the change to the new standard. As the most significant change and the greatest comparability challenges arise from lessee accounting, the report focuses on lessee accounting.

    The top 10 considerations identified in the report are:

    1. The Basics – Helping investors understand the basics of the new US GAAP and IFRS standards and their differences.
    2. Transition Methods – Explaining the methods and implications of transitioning to the new standards under US GAAP and IFRS – as well as the comparability challenge brought about by the differing methods.
    3. Transition Impact Disclosures – The transition disclosures to expect, some examples to illustrate, and how investors should evaluate the transition impact.
    4. Financial Statement Captions – The implications, and differences, of the new US GAAP and IFRS standard on financial statement captions. Including a quick illustration for those analytically inclined to visualize the effects and differences of the new standard on the income statement.
    5. Non-GAAP Measures – The implications of the different US GAAP and IFRS treatment of leases on the most notable non-GAAP measures. Most importantly, alerting investors to the fact that net income will likely be lower for IFRS companies while measures of operating income such as EBITDA and EBIT will be higher than the past and relative to US GAAP companies.
    6. Cash – Explaining how cash doesn’t change, but the statement of cash flows will change, for IFRS companies.
    7. Ratios – An analysis of the implications, and differences, of the US GAAP and IFRS standard on solvency, liquidity, profitability, earnings per share, return on equity, performance and coverage ratios. The comparability challenges abound and investors need to understand them.
    8. Disclosures – Why disclosures are more important than ever to investors now that the lease liabilities are measured in the financial statements. Considerations for investors as they analyze these new liabilities and value the company.
    9. Industries Impacted – A quantitative analysis of those companies in the S&P 500 expected to be most significantly impacted.Spoiler: retail, transports and some sleepers.
    10. Market Expectations – Consideration of how the market might react to the newly visible leverage.

    Review the report on the CFA Institute's website.

    Summary of the April 2019 ASAF meeting now available

    May 13, 2019

    On May 13, 2019, the staff of the International Accounting Standards Board (IASB) published a summary of the Accounting Standards Advisory Forum (ASAF) meeting held in London on April 1 and 2, 2019.

    The topics covered during the meeting were the following (numbers in brackets are references to the corresponding paragraphs of the summary):

    • Accounting treatment of ICOs and tokens in France (1–14): The ANC member provided an overview of the accounting regulation for Initial Coin Offerings and tokens issued by the ANC in December 2018. Aspects considered by the ASAF members were the application of IFRS, holders, prevalence, and legitimization.
    • Management commentary (15–36): The objective of the session was to receive the ASAF members' input on the staff's proposals. Aspects considered by the ASAF members were the interaction between management commentary and other reports, providing information 'through the eyes of management' and the interplay with users' information needs and with the concept of neutrality, forward-looking information in management commentary, and information about tax in management commentary.
    • IFRS 17 Insurance Contracts (37–46): The objective of the session was to ask ASAF members’ views on the Board’s tentative decisions on possible amendments to IFRS17 Insurance Contracts. Topics discussed by the ASAF members were loans that transfer insurance risk, acquisition cash flows for renewals, profit allocation for some contracts, the risk mitigation option, balance sheet presentation, transition, and the level of aggregation.
    • Onerous Contracts — Cost of Fulfilling a Contract (47–52): ASAF members provided preliminary views on the exposure draft.
    • Accounting Policy Changes (53–58): ASAF members provided views on how to proceed with this project.
    • Provisions (59–68): ASAF members provided views on research to date and future of this project. Topics discussed by the ASAF members were aligning the liability definition with the Conceptual Framework, clarifying which costs to include, clarifying whether the discount rate should reflect the own credit risk, and several other topics.
    • Subsidiaries that are SMEs (69–74): The objective of the session was to obtain ASAF members’ views on the likelihood of a standard that permits a subsidiary of a parent entity that applies IFRSs to apply the recognition and measurement requirements of IFRSs and the disclosures requirements in the IFRS for SMEs, should the Board proceed with the project, being adopted in the ASAF members' jurisdictions.
    • Application of IFRS Practice Statement 2: Making Materiality Judgements to reporting climate related and other emerging risk issues on financial statements (75–81): The AASB presented its December 2018 guidance Climate-related and other emerging risks disclosures: assessing financial statement materiality using AASB Practice Statement 2. The objective of the session was to obtain ASAF members’ advice on whether the guidance is useful and any similar recent developments in ASAF member jurisdictions.
    • Improving the impairment testing model in IAS 36 Impairment of Assets (82–89): A representative of the AASB presented the AASB Research Report 9 Perspectives on IAS 36: A case for standard setting activity. The objective of the session was for the AASB to share the results of their research and seek feedback from other ASAF members.
    • Business Combinations under Common Control (90–94): ASAF members provided views on the accounting approach to business combination under common control between entities that are wholly owned by the controlling party.
    • Targeted standards-level review of disclosures (95–105): The purpose of the session was to seek ASAF members’ views on potential disclosure requirements identified by users of financial statements during outreach relating to IAS 19 Employee Benefits and IFRS 13 Fair Value Measurement.
    • IFRS Foundation – Due Process Handbook Review (106–113): The staff presented what was at the time of the meeting a preview of the amendments that were proposed on 30 April to the Due Process Handbook. The main amendments relate to effects analysis and agenda decisions.

    full summary of the meeting is available on the IASB's website.

     

    AcSB Exposure Draft – Interest Rate Benchmark Reform (Proposed amendments to IFRS 9 and IAS 39)

    May 13, 2019

    On May 13, 2019, the Accounting Standards Board (AcSB) issued its Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Comments are requested by June 17, 2019.

    The AcSB would like input from Canadian respondents on the following additional question regarding the proposed amendments:

    The IASB has developed the proposed amendments in accordance with its due process for application around the world. Assuming the Exposure Draft proposals are finalized and approved by the IASB in accordance with its due process, do you think that the proposals are appropriate for application in Canada? If not, please specify which aspects of the proposals, and what
    circumstances, make the accounting requirements proposed in the Exposure Draft inappropriate.

    Review the press release and Exposure Draft on the AcSB's website.

    FRC guide to help smaller listed companies improve financial reporting

    May 13, 2019

    In May 2019, the UK Financial Reporting Council (FRC) published "Smaller Listed and AIM Quoted Companies — A Practical Guide for Audit Committees on Improving Financial Reporting".

    In 2015, the FRC published a discussion paper on the same topic found that "whilst the system of financial reporting is not fundamentally flawed, there is a higher incidence of poorer quality annual reports by smaller quoted companies than by their larger counterparts". Therefore, the FRC has developed a guide that offers practical, cost-effective suggestions on how smaller quoted companies can improve the quality of their financial reporting and suggested questions for audit committees to ask themselves and those associated with the financial reporting process that are designed to encourage the smaller quoted companies to reflect on current practices and consider areas for improvement. The guide not only builds on the 2015 discussion paper but also includes more recent developments such as three new international accounting standards, on revenue (IFRS 15), leases (IFRS 16) and financial instruments (IFRS 9), coming into effect in the last three years.

    Review the guide on the FRC's website.

    SEC proposes to amend definitions of “accelerated filer” and “large accelerated filer”

    May 09, 2019

    On May 9, 2019, the Securities and Exchange Commission (SEC) issued a proposed rule, “Amendments to the Accelerated Filer and Large Accelerated Filer Definitions.”

    The proposal would amend Exchange Act Rule 12b-2 and “reduce costs for certain lower-revenue companies by more appropriately tailoring the types of companies that are categorized as accelerated and large accelerated filers while maintaining effective investor protections.”

    Comments on the proposed rule are due 60 days after the date of its publication in the Federal Register.

    Review the press release and proposed rule on the SEC’s website.

    Correction list for hyphenation

    These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.