This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice (http://www2.deloitte.com/ca/en/legal/cookies.html) for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

Part I - IFRS

IOSCO calls on IASB and FASB to collaborate on goodwill accounting

Feb 25, 2021

On February 25, 2021, the International Organization of Securities Commissions (IOSCO) released a statement urging the International Accouting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) to collaborate closely with each other on accounting for goodwill.

Both, IASB and FASB are currently working on goodwill projects, but some of their ideas seem to be diverging.

In July 2019, the FASB issued an invitation to comment Identifiable Intangible Assets and Subsequent Accounting for Goodwill, which noted that the FASB is considering whether to change the subsequent accounting for goodwill for cost-benefit reasons. In December 2020, during the deliberation of the responses, the FASB tentatively decided to reintroduce amortization of goodwill (please see the decision summary on the FASB website).

The IASB has also been discussing restoring amortization of goodwill. In December 2017, the Board decided tentatively not to reintroduce amortization and to focus on improving the impairment model instead. Consequently, the discussion paper DP/2020/1 Business Combinations — Disclosures, Goodwill and Impairment published in March 2020 notes: "The Board reached a preliminary view that it should retain an impairment-only approach." The IASB has not started deliberations on the feedback received yet.

The IOSCO statement now notes:

We observe that when the requirements under U.S. GAAP are as aligned as possible with those under IFRS on accounting for goodwill, there is greater comparability in financial statements prepared under IFRS and U.S. GAAP. In our experience, the likelihood of achieving a converged outcome is greatly enhanced when the two Boards work collaboratively, including similar timelines with their respective projects. We believe that maintaining and enhancing convergence in this area should continue to be an important consideration for the IASB and FASB.

The IOSCO has consistently supported the objective of a single set of high-quality accounting standards that are consistently and rigorously applied and notes that this view is also shared by the leaders of G20 and other international organizations. Most recently, the IOSCO noted in its comment letter on the IASB discussion paper (submitted in December 2020):

The G20 leaders have emphasized the importance of achieving a single set of high-quality global accounting standards that are consistently and rigorously applied. We believe the argument by the G20 is still relevant for this issue and therefore we call on the IASB and the FASB to increase their efforts to achieve convergence.

Review the following additional information:

FRC Lab report on virtual and augmented reality

Feb 22, 2021

A new report from the Financial Reporting Lab of the UK Financial Reporting Council (FRC) considers how virtual and augmented reality are and might be used to expand the scope and audience for corporate reporting.

The report notes that the COVID-19 pandemic has massively accelerated the adoption of technology across business and communications. These changes are driving some to ask if the digitisation of communications will permanently switch from physical to digital. Whilst the ultimate answer to this is currently unclear, it remains a good time to consider how virtual and augmented reality (the latter of which bridges the physical and digital) might work for corporate reporting. The report includes examples of current practice and highlights some possible future uses.

Review the report on the FRC's website.

Updated IASB work plan — Analysis

Feb 19, 2021

On February 19, 2021, the International Accounting Standards Board (IASB) updated its work plan following its January 2021 supplementary meeting and February 2021 meeting.

Below is an analysis of all changes made to the work plan since our last analysis on January 29, 2021.

Stan­dard-set­ting projects

Main­te­nance projects

Research projects

Other projects

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

AcSB Exposure Draft – Covid-19-Related Rent Concessions beyond June 30, 2021 (Proposed amendment to IFRS 16)

Feb 16, 2021

On February 16, 2021, the Accounting Standards Board (AcSB) issued its Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Comments are requested by February 25, 2021.

Review the exposure draft on the AcSB's website.

IASB finalizes amendments to IAS 8 regarding accounting estimates

Feb 12, 2021

On February 12, 2021, the International Accounting Standards Board (IASB) published "Definition of Accounting Estimates (Amendments to IAS 8)" to help entities to distinguish between accounting policies and accounting estimates. The amendments are effective for annual periods beginning on or after January 1, 2023.

 

Background

The requirements in IFRSs, in particular in IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, make a distinction between how an entity should present and disclose different types of accounting changes in its financial statements. Changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively.

Companies sometimes struggle to distinguish between accounting policies and accounting estimates and enforcers have identified divergent practices and the Interpretations Committee received a request to clarify the distinction. The Interpretations Committee passed the request on to the IASB. An exposure draft of proposed amendments published in September 2017 has now been finalized.

 

Changes

The changes to IAS 8 focus entirely on accounting estimates and clarify the following:

  • The definition of a change in accounting estimates is replaced with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”.
  • Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty.
  • The Board clarifies that a change in accounting estimate that results from new information or new developments is not the correction of an error. In addition, the effects of a change in an input or a measurement technique used to develop an accounting estimate are changes in accounting estimates if they do not result from the correction of prior period errors.
  • A change in an accounting estimate may affect only the current period’s profit or loss, or the profit or loss of both the current period and future periods. The effect of the change relating to the current period is recognized as income or expense in the current period. The effect, if any, on future periods is recognized as income or expense in those future periods.

 

Effective date

The amendments are effective for annual periods beginning on or after January 1, 2023 and changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted.

 

Additional information

 

IASB finalizes amendments to IAS 1 and the Materiality Practice Statement

Feb 12, 2021

On February 12, 2021, the International Accounting Standards Board (IASB) issued "Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)" with amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements. The amendments are effective for annual periods beginning on or after January 1, 2023.

 

Background

The feedback on the Board's DP on Principles of Disclosure suggested that guidance is required to assist entities in determining which accounting policies to disclose. It was noted that the application of materiality is key to deciding which accounting policies to disclose, however IAS 1, Presentation of Financial Statements does not refer to materiality but states that ‘[a]n entity shall disclose its significant accounting policies' without the Board providing a definition for the term "significant".

Therefore, the Board decided to develop amendments IAS 1 to require entities to disclose their material accounting policies rather than their significant accounting policies. To support this amendment the Board has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2 Making Materiality Judgements to accounting policy disclosures.

 

Changes

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) amends IAS 1 in the following ways:

  • An entity is now required to disclose its material accounting policy information instead of its significant accounting policies;
  • several paragraphs are added to explain how an entity can identify material accounting policy information and to give examples of when accounting policy information is likely to be material;
  • the amendments clarify that accounting policy information may be material because of its nature, even if the related amounts are immaterial;
  • the amendments clarify that accounting policy information is material if users of an entity’s financial statements would need it to understand other material information in the financial statements; and
  • the amendments clarify that if an entity discloses immaterial accounting policy information, such information shall not obscure material accounting policy information.

In addition, IFRS Practice Statement 2 has been amended by adding guidance and examples to explain and demonstrate the application of the "four-step materiality process" to accounting policy information in order to support the amendments to IAS 1.

 

Effective date and transition

The amendments are applied prospectively. The amendments to IAS 1 are effective for annual periods beginning on or after January 1, 2023. Earlier application is permitted. Once the entity applies the amendments to IAS 1, it is also permitted to apply the amendments to IFRS Practice Statement 2.

 

Dissenting opinion

Board member Françoise Flores dissented from issuing the final amendments. Ms. Flores believes that stating that accounting policy information is material even if it is standardized or duplicates the requirements of IFRSs if the underlying accounting is complex and users of the entity’s financial statements would otherwise not understand material transactions, other events or conditions stretches the concept of materiality beyond its intended scope and undermines the overall aim of the amendments, which is to help an entity reduce the disclosure of immaterial accounting policy information.

 

Additional information

 

IASB proposes extending the practical relief regarding COVID-19-related rent concessions

Feb 11, 2021

On February 11, 2021, the International Accounting Standards Board (IASB) published an exposure draft “Covid-19-Related Rent Concessions beyond 30 June 2021 (Proposed amendment to IFRS 16)” that contains a proposed extension of the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. Comments are requested by 25 February 2021.

Background

In May 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS 16). The pronouncement amended IFRS 16, Leases to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. On issuance, the practical expedient was limited to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2021.

Since lessors continue to grant COVID-19-related rent concessions to lessees and since the effects of the COVID-19 pandemic are ongoing and significant, the IASB is now proposing to extend the time period over which the practical expedient is available for use.

Suggested changes

The changes proposed in ED/2021/2 Covid-19-Related Rent Concessions beyond 30 June 2021 (Proposed amendment to IFRS 16) would amend IFRS 16 to

  1. permit a lessee to apply the practical expedient regarding COVID-19-related rent concessions to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2022 (rather than only payments originally due on or before 30 June 2021);
  2. require a lessee applying the amendment to do so for annual reporting periods beginning on or after April 1, 2021;
  3. require a lessee applying the amendment to do so retrospectively, recognising the cumulative effect of initially applying the amendment as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment; and
  4. specify that, in the reporting period in which a lessee first applies the amendment, a lessee is not required to disclose the information required by paragraph 28(f) of IAS 8.

Comment period

The IFRS Foundation's Due Process Handbook sets out that 75% of the Trustees must approve comment periods shorter than 30 days. The Trustees approved a 14-day comment period. Therefore, comments on the proposed changes are requested by February 25, 2021.

Effective date

The Board expects to finalize the amendment by the end of March 2021 and proposes an effective date of April 1, 2021 for the final amendment (earlier application permitted, including in financial statements not yet authorized for issue at the date the amendment is issued).

Alternative view

The exposure draft includes an alternative view by Board member Nick Anderson. Mr. Anderson voted against publication of the exposure draft noting that when the practical expedient was initially offered, its application was limited to a very specific timeframe. Extending the period during which the practical expedient is available would further impede comparability between lessees that apply the practical expedient and those that do not.

Additional information

Recording of a virtual workshop on Discussion Paper Business Combinations under Common Control

Feb 10, 2021

On February 10, 2021, the International Accounting Standards Board (IASB) released a recording of the virtual workshop it gave on January 29 providing an overview of the November 2020 discussion paper DP/2020/2 "Business Combinations under Common Control" by the IASB technical staff, thoughts from the academic sector by Martin Hoogendoorn, and developing views of the EFRAG by Patricia McBride. The virtual workshop also included a Q&A session with the presenters and IASB Board member Ann Tarca.

Listen to a recording of the virtual workshop on the IASB website.

IASB posts recording of recent webinar on academics and the post-implementation reviews of IFRS 15

Feb 09, 2021

On February 9, 2021, the International Accounting Standards Board (IASB) posted the recording of its recent webinar on identifying research opportunities by academics in IFRS 15, "Revenue from Contracts with Customers".

The webinars lasted approximately 60 minutes and consisted of an overview of the standard’s objectives and related research opportunities, followed by questions and answers.

Listen to the webinar on the IASB’s website.

SEC provides sample letter for companies offering securities during extreme price volatility

Feb 08, 2021

On February 8, 2021, the Securities and Exchange Commission's (SEC) Division of Corporation Finance released a sample illustrative letter for companies seeking to raise capital in securities offerings during market and price volatility.

The sample letter contains comments on the types of disclosures the SEC would expect with respect to risk factors, use of proceeds, and the prospectus summary.

Review the release 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.