Stakeholders who would like their feedback considered prior to the AcSB finalizing its comment letter are encouraged to submit comments to the AcSB by July 15, 2021.

Review the exposure draft on the AcSB's website.

This issue features:

• Spotlight — Improving the financial reporting of rate-regulated companies
• In profile — Jeremy Stuber, analyst and member of the Capital Markets Advisory Committee
• We need your views
• Stay up to date
• Resources for investors

Review the press release and Investor Update newsletter on the IASB’s website.

The proposed taxonomy update includes changes to elements to reflect new and amended disclosure requirements in Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) and Definition of Accounting Estimates (Amendments to IAS 8).

Review the press release and proposed taxonomy update on the IASB’s website.

Background

The IFRS Interpretations Committee received a submission about the determination of the exchange rate when there is a long-term lack of exchangeability as IAS 21, The Effects of Changes in Foreign Exchange Rates does not include explicit requirements on the exchange rate an entity uses when the spot exchange rate is not observable. The Committee researched possible narrow-scope standard-setting and concluded that the best way forward was to recommend that the IASB propose narrow-scope amendments to IAS 21 to address the matter.

In November 2019, the IASB took the matter over and during its subsequent meetings discussed how to assess whether a currency is exchangeable and which exchange rate to use when it is not. The Board decided to propose to add requirements to IAS 21 that will help an entity determine whether a currency is exchangeable into another currency and requirements the entity would apply when it is not.

Suggested changes

The proposed amendments in exposure draft ED/2021/4 Lack of Exchangeability (Proposed amendments to IAS 21) would amend IAS 21 to:

• Specify when a currency is exchangeable into another currency and when it is not — a currency is exchangeable when an entity is able to exchange that currency for the other currency, even if indirectly through another currency, through markets or exchange mechanisms that create enforceable rights and obligations without undue delay; a currency is not exchangeable into the other currency if an entity can only obtain an insignificant amount of the other currency.
• Specify how an entity determines the exchange rate to apply when a currency is not exchangeable — when a currency is not exchangeable an entity estimates the spot exchange rate as a rate that the entity would have been able to access had the currency been exchangeable, would have applied to an orderly transaction between market participants, and would faithfully reflect the economic conditions prevailing; an entity would also be able to use an observable exchange rate as the estimated spot exchange rate if it meets the noted requirements or the first subsequent exchange rate after exchangeability is restored.
• Require the disclosure of additional information when a currency is not exchangeable — when a currency is not exchangeable an entity discloses information that would enable users of its financial statements to evaluate how a currency’s lack of exchangeability affects, or is expected to affect, its financial performance, financial position and cash flows.

Comments on the proposed changes are requested by September 1, 2021.

Effective date

The exposure draft does not contain a proposed effective date as the IASB intends to decide on this after exposure. Early application would be permitted. The amendments would apply prospectively from the date of initial application of the amendments.

Additional information

• IASB press release
• IASB exposure draft
• Introductory webcast to the exposure draft

Since the IASB's deliberations in the project have already been completed, the shift in publication date must be attributed to an attempt to balance out comment letter periods on different consultations.

During the March 2021 IASB meeting, which discussed the comment letter period for the management commentary ED, the IASB noted the difficult balance and the constraints on respondents' capacities:

• The IASB has several consultation documents outstanding and plans to publish several more.
• The COVID-19 pandemic has placed constraints on stakeholder resources.
• Respondents to the ED may also develop responses to forthcoming proposals by the Trustees to change the Foundation’s Constitution to form an international sustainability reporting standards board within the existing governance structure of the IFRS Foundation and may find it difficult to respond to both documents at the same time.

Review the press release on the IASB's website.

Proposed amendments to the Constitution

The Trustees are proposing amendments that are a prerequisite for creating a potential International Sustainability Standards Board (ISSB) within the governance structure of the IFRS Foundation. They regard:

• The objective of the IFRS Foundation. The objective of the IFRS Foundation would be amended to state that the IFRS Foundation has two standard setters: The International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB). Through the ISSB, the IFRS Foundation would "develop, in the public interest, a single set of high quality, understandable, enforceable and globally accepted sustainability standards based upon clearly articulated principles".
• The governance of the ISSB and the IASB. The Trustees propose that the Constitution is amended to stipulate that the Executive Director of the Foundation is appointed by the Trustees, in consultation with the chairs of the IASB and the ISSB. This proposed amendment would clarify reporting lines in an organisation with two standard-setting boards.
• The name of the new board and its standards. The Trustees propose to name the new board the 'International Sustainability Standards Board (ISSB)'. The new board’s standards would be known as ‘IFRS sustainability standards’.
• The composition of the ISSB. The new board would normally comprise 14 members. The members of the ISSB would appointed by the Trustees. A minority of ISSB members could be part-time members. The main qualifications for membership of the ISSB would be professional competence and relevant professional experience. The board would comprise three members from the Asia-Oceania region, three members from Europe, three members from the Americas, one member from Africa, and four members appointed from any area. The Chair would be chosen by the Trustees from among the full-time members as would a potential Vice-Chair be.

Please click to access the proposed amendments on the IASB website. Comments are requested by July 29, 2021.

Feedback statement

In September 2020, the Trustees published a consultation paper to assess demand for global sustainability standards and what role the Foundation might play in the development of such standards. They received 577 comment letters indicating great international demand for global sustainability standards and broad support for establishing a standard setter for these standards under the governance of the IFRS Foundation. The feedback statement summarizes the responses and states how the Trustees have responded to the feedback.

Access the feedback statement on the IASB's website.

Review the press release announcing the publication of the proposed amendments to the Constitution and the feedback statement on the IASB's website.

The workshop, held in conjunction with the European Accounting Association (EAA) and the European Financial Reporting Advisory Group (EFRAG), was moderated by EAA President Thorsten Sellhorn and included an overview of the Request for Information by the IASB technical staff; an academic reflection by Professor Niclas Hellman; EFRAG’s summary of the initial input gathered by European constituents by Robert Stojek; and a Q&A session with the presenters and Board Member Ann Tarca.

Listen to the recording on the IASB's website.

The alert highlights “observations from recent exams of investment advisers, registered investment companies, and private funds offering ESG products and services.”

Review the alert on the SEC's website.

Below is an analysis of all changes made to the work plan since our last analysis on March 26, 2021.

Stan­dard-set­ting projects

• Disclosure Initiative — Subsidiaries that are SMEs — the issuance of an exposure draft is now expected in July 2021 (pre­vi­ously Q3 2021).
• Management Commentary — As reported earlier, the issuance of an exposure draft is now expected in May 2021 (pre­vi­ously April 2021).
• Second Comprehensive Review of the IFRS for SMEs Standard — This project has been moved from research project to standard-setting project; the next milestone continues to be an exposure draft with no date given.

Main­te­nance projects

• IFRS 16 and COVID-19 — This project has been removed from the work plan due to the issuance of the IFRS amendments.
• Lack of Exchangeability (Amendments to IAS 21) — Discussions on the feedback to the exposure draft published on April 20, 2021 are expected in H2 2021.

Research projects

• Dynamic Risk Management — The project is now in the decide project direction stage. No expected date is given.
• Extractive Activities — The decision on the project direction is pushed into Q3 2021 (previously May 2021).
• Goodwill and Impairment — The decision on the project direction is now expected in May 2021 (previously April 2021).
• Pension Benefits that Depend on Asset Returns — The review of the research is now expected in Q3 2021 (previously April 2021).
• Post-implementation Review of IFRS 9 — Classification and Measurement — A request for information is now expected in Q3 2021 (previously H2 2021).

Other projects

• IFRS Taxonomy Update — Amendments to IAS 1, IAS 8 and IFRS Practice Statement 2 — Discussions on the feedback on the proposed IFRS Taxonomy Update published on April 21, 2021 is expected in Q3 2021.
• Sustainability Reporting — Feedback on the proposed amendments to the IFRS Foundation Constitution is expected in Q4 2021.
• Third Agenda Consultation — Feedback on the request for information published on March 30, 2021 is expected in H2 2021.

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