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May 2020

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.

AcSB Response – Interest Rate Benchmark Reform Exposure Draft

May 25, 2020

On May 25, 2020, the Accounting Standards Board (AcSB) responded to the IASB Exposure Draft, Interest Rate Benchmark Reform—Phase 2 (Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16).

In its response letter, the AcSB supported the relief provided by the IASB and encouraged the IASB to provide more context and guidance on how the term “economically equivalent” will be applied in practice.

While they support the proposed amendments, they think certain principles underpinning them should be clarified both in the final amendments and in the basis for conclusions. Specifically, they encourage the IASB to provide more context and guidance on how the term “economically equivalent” will be applied in practice.

They also think the IASB should clarify how the proposed reliefs will work in multi-rate jurisdictions.

Review the letter on the IASB's website.

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 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

 

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 proposes to defer effective date of IAS 1 amendments

May 04, 2020

On May 4, 2020, the International Accounting Standards Board (IASB) published an exposure draft "Classification of Liabilities as Current or Non-current — Deferral of Effective Date (Proposed amendment to IAS 1)" proposing to defer the effective date of the January 2020 amendments to IAS 1 by one year. Comments are requested by June 3, 2020.

 

Background

On January 23, 2020, the IASB issued Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) providing a more general approach to the classification of liabilities under IAS 1, Presentation of Financial Statements based on the contractual arrangements in place at the reporting date. The amendments currently have an effective date of 1 January 2022.

In April 2020, the IASB held a supplementary IASB meeting to consider COVID-19-related matters including the Board's timelines in view of the COVID-19 pandemic. The Board tentatively decided to delay by one year the effective date of Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) to annual reporting periods beginning on or after 1 January 2023.

The proposed amendment published today is solely seeking to delay the effective date of the January 2020 amendments by one year.

 

Suggested changes

The changes proposed in ED/2020/3 Classification of Liabilities as Current or Non-current — Deferral of Effective Date (Proposed amendment to IAS 1) would defer the effective date of Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) to annual reporting periods beginning on or after 1 January 2023. Earlier application of the January 2020 amendments would continue to be permitted.

 

Comment period

Comments on the exposure draft are requested by June 3, 2020. The shortened comment period of 30 days was approved in a DPOC meeting on April 16, 2020.

 

Additional information

 

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 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.

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.

IIRC publishes consultation draft of its revised Framework

May 22, 2020

In February 2020, the International Integrated Reporting Council (IIRC) launched the revision of the International <IR> Framework and called for market feedback on specific themes to inform the nature and direction of the revision. A consultation draft of the revised Framework has now been released for a 90 day comment period.

The consultation draft has been informed by the 300 responses the IIRC received on three topic papers published in February, ongoing observation of market practice internationally, as well as the detailed deliberations of the IIRC’s Framework Panel, a diverse group of reporting experts from the business, investor and accountancy communities. Feedback on the draft is requested through an online survey and via participation in one of over 20 virtual roundtables hosted by the IIRC’s partners globally.

Review the draft and companion document setting out the basis for the proposed Framework revisions on the IIRC's website.

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