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Part I - IFRS

IASB releases podcast on IFRS 17 (May 2020)

May 26, 2020

On May 26, 2020, the International Accounting Standards Board (IASB) released a podcast featuring IASB member Darrel Scott and technical staff member Vitalina Kobernik as they discuss the developments at the May 2020 Board meeting related to the amendments to IFRS 17, "Insurance Contracts".

The amendments to IFRS 17 are being finalized by the staff. During this process the staff identified five (sweep) issues for which the Board decided to make additional changes to the standard, along with two other matters that were identified after the staff paper had been distributed.

Listen to the podcast on the IASB's website.

Updated IASB work plan — Analysis (May 2020)

May 25, 2020

On May 25, 2020, the International Accounting Standards Board (the Board) updated its work plan following its May 2020 meeting.

Below is an analysis of all changes made to the work plan since our last analysis on April 24, 2020.

Standard-setting projects

  • no changes

Maintenance projects

Research projects

  • Dynamic risk management — core model outreach has been clarified to take place in fourth quarter of 2020 (previously second half of 2020)

Other projects

  • IFRS Taxonomy update — Amendments to IFRS 17 and IAS 16 — a project newly added to the work plan; a proposed taxonomy update is expected in July 2020
  • IFRS Taxonomy update — Covid-19-related rent concessions (Amendment to IFRS 16) — a project newly added to the work plan; a proposed taxonomy update is expected in May 2020

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

 

IASB issues amendments to IAS 16 regarding proceeds before intended use

May 14, 2020

On May 14, 2020, the International Accounting Standards Board (IASB) published "Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16)" regarding proceeds from selling items produced while bringing an asset into the location and condition necessary for it to be capable of operating in the manner intended by management.

 

Background

The issue was initially raised with the IFRS Interpretations Committee that had originally intended to develop an interpretation of IAS 16, Property, Plant and Equipment to deal with it. However, during the course of discussions the Committee concluded that a narrow-scope amendment to IAS 16 would be a better solution. The IASB developed an exposure draft published in June 2017 and has now finalized the amendments.

 

Changes

Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) amends the standard to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss.

 

Effective date and transition

The amendments published today are effective for annual periods beginning on or after  January 1, 2022. Early application is permitted. An entity applies the amendments retrospectively only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments.

 

Additional information

 

IASB concludes the 2018-2020 annual improvements cycle

May 14, 2020

On May 14, 2020, the International Accounting Standards Board (IASB) issued "Annual Improvements to IFRS Standards 2018–2020". The pronouncement contains amendments to four International Financial Reporting Standards (IFRS Standards) as result of the IASB's annual improvements project.

Annual Improvements to IFRS Standards 2018–2020 makes amendments to the following standards:

Standard Subject of amendment

IFRS 1

First-time Adoption of International Financial Reporting Standards

Subsidiary as a first-time adopter. The amendment permits 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 IFRSs.

IFRS 9

Financial Instruments

Fees in the ‘10 per cent’ test for derecognition of financial liabilities. The 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 derecognise a financial liability. An entity includes 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 amendment to Illustrative Example 13 accompanying IFRS 16 removes from the example the illustration of the reimbursement of leasehold improvements by the lessor in order to 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 amendment removes 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. This will ensure consistency with the requirements in IFRS 13.

The amendments to IFRS 1, IFRS 9, and IAS 41 published today are all effective for annual periods beginning on or after January 1, 2022. Early application is permitted. The amendment to IFRS 16 only regards an illustrative example, so no effective date is stated.

Review the press release on the IASB's website.

IASB publishes amendments to IFRS 3 to update a reference to the Conceptual Framework

May 14, 2020

On May 14, 2020, the International Accounting Standards Board (IASB) published "Reference to the Conceptual Framework (Amendments to IFRS 3)" with amendments to IFRS 3, "Business Combinations" that update an outdated reference in IFRS 3 without significantly changing its requirements.

 

Background

In March 2018, the IASB issued the 2018 Conceptual Framework and most references to the Framework included in IFRSs were updated to the 2018 Framework at that time. However, paragraph 11 of IFRS 3, Business Combinations, which continued to refer to the 1989 Framework, was not updated as this could have caused conflicts for entities applying IFRS 3.

Potential conflicts occur as the definition of assets and liabilities in the 2018 Framework differ from those in the 1989 Framework potentially leading to day 2 gains or losses post-acquisition for some balances recognized.

In a May 2019 exposure draft, the IASB identified three possible amendments to IFRS 3 that would update IFRS 3 without significantly changing its requirements. These amendments have now been finalized.

 

Changes

The changes in Reference to the Conceptual Framework (Amendments to IFRS 3):

  • update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework;
  • add to IFRS 3 a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination; and
  • add to IFRS 3 an explicit statement that an acquirer does not recognize contingent assets acquired in a business combination.

 

Effective date

The amendments published today are effective for annual periods beginning on or after January 1, 2022. Early application is permitted if an entity also applies all other updated references (published together with the updated Conceptual Framework) at the same time or earlier.

 

Additional information

 

IASB finalizes amendments to IAS 37 regarding onerous contracts

May 14, 2020

On May 14, 2020, the International Accounting Standards Board (IASB) published "Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37)" amending the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous.

 

Background

The IFRS Interpretations Committee received a request to clarify what costs an entity considers in assessing whether a contract is onerous. The Committee’s research revealed that, for some contracts, differing interpretations of the onerous contract requirements in IAS 37, Provisions, Contingent Liabilities and Contingent Assets could have a material effect on entities that enter into those contracts. Consequently, the Committee recommended that the Board clarifies the onerous contract requirements in IAS 37. The Board supported the Committee’s suggestion and published an exposure draft of proposed clarifications in December 2018, which were finalized today.

 

Changes

The changes in Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

 

Effective date and transition requirements

The amendments published today are effective for annual periods beginning on or after January 1, 2022. Early application is permitted.

Entities apply the amendments to contracts for which the entity has not yet fulfilled all its obligations at the beginning of the annual reporting period in which the entity first applies the amendments. Comparatives are not restated.

 

Additional information

 

Outreach event on primary financial statements

May 14, 2020

On May 14, 2020, a web-based outreach event on primary financial statements co-hosted by FSR – Danish Auditors and the Confederation of Danish Industry (DI) with participation of IASB and EFRAG representatives drew a wide international audience. A recording of the event is now available.

The event was organized into a general introductory section and the discussion of five key topics (each again introduced by IASB and EFRAG) that were then opened to questions from the audience. The agenda below indicates where during the two-and-a-half hour recording the individual topics were discussed:

  • Opening and welcome
  • General introduction to the IASB exposure draft General Presentation and Disclosures (begins at about 5:00 minutes)
  • EFRAG’s view on the topic (begins at about 12:00 minutes)
  • Key Topic 1 – Defined lines and subtotals in the income statement – improved comparability or imposed uniformity? (begins at about 21:00 minutes)
  • Key Topic 2 – Looking at the new subtotals – what is the impact and will they work for all industries? (begins at about 1:20:00 hours)
  • Key Topic 3 – Management performance measures – definition, disclosure and unusual items: Will management still be able to explain the overall performance / generation of income in the context of the activities and business strategy? (begins at about 1:42:00 hours)
  • Key Topic 4 – Principles of aggregation and disaggregation – new proposals expected compared to how companies disaggregate information today (begins at about 2:19:00 hours)
  • Key Topic 5 – Statement of cash flows – change to the starting point, new disaggregation due to new line items introduced and removal of classification choice for interest and dividends (begins at about 2:27:00 hours, introduction by IASB and EFRAG only, no discussion due to reasons of time)

The recording of the outreach event is available here. You can also access the slides for the event on the EFRAG website.

IFRS Foundation Trustee discusses sustainability reporting

May 13, 2020

On May 13, 2020, the International Accounting Standards Board (IASB) released a speech given by Teresa Ko, IFRS Foundation Trustee, in a virtual presentation at the Green and Sustainable Finance Cross-Agency Steering Group meeting. In her speech, she discussed the possible roles the IFRS Foundation may have for the development of internationally recognized standards on sustainability reporting.

Specifically, Ms. Ko discussed:

  • Background on how the IFRS Foundation started and its role in the development of the IFRS Standards.
  • Current state of sustainability report where there are over 650 different metric available and the desire by many to consolidate the metrics into a global comparable framework.
  • Actions taken by (1) the IASB which include the update to its Practice Statement Management Commentary and (2) the Trustees which include the establishment of a working group to determine the role of the IFRS Foundation in sustainability reporting.

Review the full presentation on the IASB’s website.

Summary of the April 2020 ASAF meeting now available

May 11, 2020

On May 11, 2020, the International Accounting Standards Board (IASB) staff published a summary of the Accounting Standards Advisory Forum (ASAF) meeting held via remote participation on April 2, 2020.

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

  • IBOR reform and its effects on financial reporting — Phase 2 (1–12): The ASAF were provided with an overview of the IASB’s proposed amendments for the forthcoming Exposure Draft Interest Rate Benchmark Reform — Phase 2 and gave their initial views to the expected proposals, which they were in broad agreement. In addition, the ASAF members provided feedback on what constitutes a ‘modification’ of financial assets and financial liabilities, disclosures, and other topics.
  • Update on agenda planning (13–17): The ASAF was given an update on the IASB’s work plan and the change of timelines of various projects due to the coronavirus pandemic. The ASAF expects its next meeting to be held in July 2020 and will likely be virtual.
  • Goodwill and Impairment (18–25): The ASAF were provided with an overview of the IASB’s preliminary views on Discussion Paper Business Combinations — Disclosures, Goodwill and Impairment and provided recommendations on how to conduct outreach and fieldwork activities.
  • Better Communication — Primary Financial Statements (26–46): The ASAF discussed topics related to the proposals in Exposure Draft General Presentation and Disclosures. Topics discussed include subtotals and categories in the statement of profit or loss, disaggregation, management performance measures, and statement of cash flows.

Review the full summary on the IASB's website.

AcSB Exposure Draft – Classification of Liabilities as Current or Non-Current – Deferral of Effective Date (Proposed Amendment to IAS 1)

May 06, 2020

On May 6, 2020, the Accounting Standards Board (AcSB) issued its Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. In response to COVID-19, the exposure draft proposes to defer the effective date of the amendments to annual reporting periods beginning on or after January 1, 2023. Comments are requested by June 3, 2020.

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

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

Review the press release and exposure draft on the AcSB's website.

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