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June 2020

Combinations of businesses under common control—one size does not fit all

Jun 29, 2020

On June 29, 2020, the In­ter­na­tional Ac­count­ing Stan­dards Board (IASB) is­sued an Update, prepared by departing Board member Gary Kabureck, which summarizes and discusses the preliminary views that the Board has reached in its project on how to account for combinations of businesses under common control.

The International Accounting Standards Board (Board) is carrying out a research project to consider filling a gap in IFRS Standards by improving the comparability and transparency of reporting on combinations of businesses under common control. IFRS 3, Business Combinations, covers how to account for mergers and acquisitions between unrelated parties but it does not cover combinations of businesses under common control.

The Board plans to publish a discussion paper to seek public feedback on its views later this year.

For more in­for­ma­tion, see the Update on the IASB’s web­site.

FASB Issues Taxonomy Q&A Related to COVID-19 Pandemic and Relief Disclosures

Jun 22, 2020

On June 22, 2020, the Fi­nan­cial Ac­count­ing Stan­dards Board (FASB) staff has issued a Q&A on the “application of the US GAAP Financial Reporting Taxonomy (Taxonomy) to disclosures related to the effects of the coronavirus (also referred to as COVID-19) pandemic and relief efforts.”

The Q&A focuses on disclosures related to:

  • Income taxes.
  • Payroll taxes.
  • Loans.
  • Grants.
  • Pensions.
  • Overall discussion of the COVID-19 pandemic.

For more information, see the press release on the FASB’s Web site.

IASB finalizes narrow-scope amendments to IFRS 17 and IFRS 4

Jun 25, 2020

On June 25, 2020, the International Accounting Standards Board (IASB) issued 'Amend­ments to IFRS 17' to address concerns and im­ple­men­ta­tion chal­lenges that were iden­ti­fied after IFRS 17 'Insurance Contracts' was published in 2017. The amend­ments are effective for annual periods beginning on or after January 1, 2023 with earlier ap­pli­ca­tion permitted. The IASB has also published 'Extension of the Temporary Exemption from Applying IFRS 9 (Amend­ments to IFRS 4)' to defer the fixed expiry date of the amendment also to annual periods beginning on or after January 1, 2023.

Back­ground

Since IFRS 17 Insurance Contracts was issued in May 2017, the Board has been mon­i­tor­ing the im­ple­men­ta­tion and has learned about concerns and im­ple­men­ta­tion chal­lenges. The Board had pre­vi­ously indicated that it would consider whether ad­di­tional action is needed to address matters arising during im­ple­men­ta­tion. At the October 2018 meeting of the Board a list of 25 potential amend­ments to the standard was iden­ti­fied and the criteria against which any possible amendment would be con­sid­ered were agreed. An Exposure Draft of proposed amend­ments was published on June 26, 2019 with comments requested by September 25, 2019.

In the re­de­lib­er­a­tions in the project on possible amend­ments to IFRS 17 following the end of the comment period, the IASB refined its proposals and took ad­di­tional feedback by con­stituents on board resulting in the final amend­ments issued today.

Changes

The main changes resulting from Amend­ments to IFRS 17 and Extension of the Temporary Exemption from Applying IFRS 9 (Amend­ments to IFRS 4) are:

  • Deferral of the date of initial ap­pli­ca­tion of IFRS 17 by two years to annual periods beginning on or after January 1, 2023 and change the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contractsfrom applying IFRS 9 Financial In­stru­ments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after January 1, 2023.
  • Ad­di­tional scope exclusion for credit card contracts and similar contracts that provide insurance coverage as well as optional scope exclusion for loan contracts that transfer sig­nif­i­cant insurance risk.
  • Recog­ni­tion of insurance ac­qui­si­tion cash flows relating to expected contract renewals, including tran­si­tion pro­vi­sions and guidance for insurance ac­qui­si­tion cash flows recog­nized in a business acquired in a business com­bi­na­tion.
  • Clar­i­fi­ca­tion of the ap­pli­ca­tion of IFRS 17 in interim financial state­ments allowing an accounting policy choice at a reporting entity level.
  • Clar­i­fi­ca­tion of the ap­pli­ca­tion of con­trac­tual service margin (CSM) at­trib­ut­able to in­vest­ment-re­turn service and in­vest­ment-re­lated service and changes to the cor­re­spond­ing dis­clo­sure re­quire­ments.
  • Extension of the risk mit­i­ga­tion option to include rein­sur­ance contracts held and non-fi­nan­cial de­riv­a­tives.
  • Amend­ments to require an entity that at initial recog­ni­tion recog­nizes losses on onerous insurance contracts issued to also recognize a gain on rein­sur­ance contracts held.
  • Sim­pli­fied pre­sen­ta­tion of insurance contracts in the statement of financial position so that entities would present insurance contract assets and li­a­bil­i­ties in the statement of financial position de­ter­mined using port­fo­lios of insurance contracts rather than groups of insurance contracts.
  • Ad­di­tional tran­si­tion relief for business com­bi­na­tions and ad­di­tional tran­si­tion relief for the date of ap­pli­ca­tion of the risk mit­i­ga­tion option and the use of the fair value tran­si­tion approach.
  • Several small amend­ments regarding minor ap­pli­ca­tion issues.

Although the IASB had in its dis­cus­sions leading up to the Exposure Draft voted unan­i­mously to leave the annual cohort re­quire­ment in IFRS 17 unchanged and did not ask a question on it in the draft, some re­spon­dents commented on the IASB’s decision to retain the re­quire­ments unchanged. The IASB, therefore, included in its de­lib­er­a­tions the question of annual cohorts in February 2020 once more. However, it came to the same con­clu­sion as before and decided to retain, unchanged, the annual cohort re­quire­ment in IFRS 17.

Effective date and tran­si­tion

The amend­ments to IFRS 17 are effective for annual periods beginning on or after January 1, 2023. Earlier ap­pli­ca­tion is permitted. They are applied ret­ro­spec­tively.

Extension of the Temporary Exemption from Applying IFRS 9 (Amend­ments to IFRS 4) defers the fixed expiry date of the amendment to annual periods beginning on or after January 1, 2023. 

Ad­di­tional in­for­ma­tion

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IASB issues “Investor Update” newsletter

Jun 03, 2020

On June 3, 2020, the International Accounting Standards Board (IASB) issued the latest edition of its newsletter "Investor Update", which profiles recently introduced IFRS Standards and other changes to the pipeline as well as how those changes may affect companies and performance.

This issue features:

  • IFRS Foundation response to COVID-19
  • New project timelines
  • We need your views—open consultations
  • Stay up to date
  • Resources for investors

Review the Investor Update newslet­ter on the IASB’s website.

IASB issues investor webcast on expected credit losses and related disclosures

Jun 04, 2020

On June 4, 2020, the International Accounting Standards Board (IASB) issued a webcast for investors that outlines the information that entities will provide in expected credit losses (ECL) when using IFRS 9 and IFRS 7 to prepare financial statements and notes.

The webcast is hosted by IASB Vice-Chair Sue Lloyd and technical staff member Sid Kumar and covers the following areas:

  • ECL model development
  • Important characteristics of the ECL model
  • ECL related disclosures
  • Interaction with regulatory provisions

For more information, see the press release on the IASB’s website.

IASB issues podcast on latest Board developments (June 2020)

Jun 30, 2020

On June 30, 2020, the IASB has released a podcast featuring IASB Chair Hans Hoogervorst and Vice-Chair Sue Lloyd discussing deliberations at the June IASB meeting.

The podcast discusses:

  • IBOR reform and the effects on financial reporting — Phase 2;
  • Classification of liabilities as current or non-current; 
  • Disclosure initiative — Accounting policies; 
  • Disclosure initiative — Targeted standards-level review of disclosures; and 
  • Maintenance and consistent application.

The podcast also touches on the publication of the amended insurance contracts standard IFRS 17.

The podcast (17 minutes) can be accessed through the press release on the IASB website.

Updated IASB work plan — Analysis (June 2020 meeting)

Jun 26, 2020

On June 26, 2020, following the IASB's June 2020 meeting, we have analysed the IASB work plan to see what changes have resulted from the meeting and other de­vel­op­ments since the work plan was last revised in May 2020.

Below is an analysis of all changes made to the work plan since our last analysis on May 25, 2020.

Stan­dard-set­ting projects

  • No changes

Main­te­nance projects

  • Accounting Policy Changes (Amend­ments to IAS 8)— this project has been removed from the work plan as the Board decided not to continue with this project.
  • Amend­ments to IFRS 17— this project has been removed from the work plan due to the issuance of the amend­ments.
  • IFRS 16 and COVID-19— this project has been removed from the work plan due to the issuance of the amend­ments.
  • Supply Chain Financing Arrange­ments — Reverse Factoring— the tentative agenda decision expected in the second half of 2020 in respect of this project has been included in the work plan.
  • The Board decided not to adda project on the sale of a sub­sidiary to a customer to the work plan (the staff had rec­om­mended a nar­row-scope amendment).

Research projects

  • No changes.

Other projects

  • IFRS Taxonomy update — Common Practice (IAS 19 Employee Benefits) — this project has been added to the work plan with a proposed IFRS taxonomy update expected in the fourth quarter of 2020.
  • IFRS Taxonomy update — Covid-19-re­lated rent con­ces­sions (Amendment to IFRS 16) — feedback on the proposed update is expected in July 2020.
  • IFRS Taxonomy update — Interest rate benchmark reform — Phase 2  — this project has been added to the work plan with a proposed IFRS taxonomy update expected in the third quarter of 2020.

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

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