Below is an analysis of all changes made to the work plan since our last analysis on August 11, 2020.

Standard-setting projects

• No changes

Maintenance projects

• 2019 Comprehensive review of the IFRS for SMEs — discussion of the feedback on the request for information is now expected in the fourth quarter of 2020 (previously no date given)
• IBOR reform and its effects on financial reporting — Phase 2 — this project has been removed from the work plan since the IASB issued final amendments yesterday
• Lease Liability in a Sale and Leaseback — the issuance of an exposure draft is now expected in the fourth quarter of 2020 (previously September 2020)

Research projects

• Business Combinations under Common Control — a discussion paper is now expected in the fourth quarter of 2020 (previously September 2020)
• Dynamic Risk Management — Core model outreach is now expected in the fourth quarter of 2020 (previously October 2020)
• Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — the request for information is now expected in the fourth quarter of 2020 (previously October 2020)

Other projects

• Due Process Handbook Review — this project has been removed from the work plan since the IFRS Foundation published the revised handbook on August 21, 2020
• IFRS Taxonomy Update — Common Practice (IAS 19 Employee Benefits) — a proposed IFRS Taxonomy Update is now expected in November 2020 (previously October 2020)
• IFRS Taxonomy Update — COVID-19 Related Rent Concessions (Amendments to IFRS 16) — this project has been removed from the work plan since the IFRS Foundation published the final Taxonomy Update on August 18, 2020
• IFRS Taxonomy Update — Interest Rate Benchmark Reform — Phase 2 — a proposed IFRS Taxonomy Update was published yesterday and feedback on the proposed update is expected to be discussed in October 2020

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

In that context the CFA Institute published a consultation paper that defines ESG-related features as components or capabilities of investment products that can be combined in different ways to meet different investor needs. It identifies the following six ESG-related features:

• ESG integration;
• ESG-related exclusions;
• Best-in-class;
• ESG-related thematic focus;
• Impact objective; and
• Proxy voting, engagement and stewardship.

The features are expected to serve as a backbone of the standard in that they are a mechanism to connect investor needs and disclosure requirements.

The CFA Institute seeks input on the consultation paper from the wider investment community to help shape an exposure draft, which is expected to be released in May 2021.

Responses on the consultation paper are requested by October 19, 2020.

Review the paper, a response form for providing comments, and volunteer opportunities in connection with developing the new standard on the CFA Institute's website.

Background

Interbank offered rates (IBORs) are interest reference rates, such as LIBOR, EURIBOR and TIBOR, that represent the cost of obtaining unsecured funding, in a particular combination of currency and maturity and in a particular interbank term lending market. Recent market developments have brought into question the long-term viability of those benchmarks.

The IASB addressed the issues in a project split into two phases: Phase 1 dealt with pre-replacement issues (issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark). This part of the project was concluded on 26 September 2019 by publishing Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7).

Phase 2 of the project dealt with replacement issues, therefore, the amendments published today address issues that might affect financial reporting when an existing interest rate benchmark is actually replaced. This part of the project has been concluded by the issuance of today's amendments.

Changes

The changes in Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) relate to the modification of financial assets, financial liabilities and lease liabilities, specific hedge accounting requirements, and disclosure requirements applying IFRS 7 to accompany the amendments regarding modifications and hedge accounting.

• Modification of financial assets, financial liabilities and lease liabilities. The IASB introduces a practical expedient for modifications required by the reform (modifications required as a direct consequence of the IBOR reform and made on an economically equivalent basis). These modifications are accounted for by updating the effective interest rate. All other modifications are accounted for using the current IFRS requirements. A similar practical expedient is proposed for lessee accounting applying IFRS 16.
• Hedge accounting requirements. Under the amendments, hedge accounting is not discontinued solely because of the IBOR reform. Hedging relationships (and related documentation) must be amended to reflect modifications to the hedged item, hedging instrument and hedged risk. Amended hedging relationships should meet all qualifying criteria to apply hedge accounting, including effectiveness requirements.
• Disclosures. In order to allow users to understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as well as the entity’s progress in transitioning from IBORs to alternative benchmark rates, and how the entity is managing this transition, the amendments require that an entity discloses information about
  • how the transition from interest rate benchmarks to alternative benchmark rates is managed, the progress made at the reporting date, and the risks arising from the transition;
  • quantitative information about non-derivative financial assets, non-derivative financial liabilities and derivatives that continue to reference interest rate benchmarks subject to the reform, disaggregated by significant interest rate benchmark;
  • to the extent that the IBOR reform has resulted in changes to an entity’s risk management strategy, a description of these changes and how is the entity managing those risks.

The IASB also amended IFRS 4 to require insurers that apply the temporary exemption from IFRS 9 to apply the amendments in accounting for modifications directly required by IBOR reform.

The IASB has come to the conclusion that the application of all proposed amendments is mandatory. It also assessed that the nature of the proposed amendments is such that they can only be applied to modifications of financial instruments and changes to hedging relationships that satisfy the relevant criteria and, as such, no specific end of application requirements needed to be specified.

Effective date and transition

The amendments are effective for annual periods beginning on or after January 1, 2021 and are to be applied retrospectively. Early application is permitted. Restatement of prior periods is not required, however, an entity may restate prior periods if, and only if, it is possible without the use of hindsight.

Additional information

• IASB press release
• IASB project summary (link to IASB website)

In addition to the amendments, the IASB has also published a corresponding proposed IFRS Taxonomy update (comments requested by September 28, 2020).

This Taxonomy update includes elements to reflect the new disclosure requirements introduced by the recently-issued amendment to IFRS 16.

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

The Handbook continues to note that agenda decisions do not have the status of IFRSs and cannot add or change requirements in the standards, however, it now also states that in many cases an agenda decision includes explanatory material that explains how principles and requirements in IFRSs apply to the transaction or fact pattern described in the agenda decision. As these explanations "may provide additional insights that might change an entity’s understanding of the principles and requirements in IFRS Standards", the Handbook states that entities might determine that they need to change an accounting policy as a result of an agenda decision. The Handbook goes on to note: "It is expected that an entity would be entitled to sufficient time to make that determination and implement any necessary accounting policy change."

The additional due process step regarding agenda decisions consist of the Board being asked whether it objects to the agenda decision. Two aspects will be considered:

• Whether the Board objects to the Interpretations Committee’s decision that a standard-setting project should not be added to the work plan; and
• whether the Board objects to the Interpretations Committee’s conclusion that the agenda decision does not add or change requirements in IFRS Standards.

If four or more Board members object, the agenda decision is not published and the Board decides how to proceed.

Review the following additional information on the IASB's website:

• Press release
• Revised Due Process Handbook
• Amended IFRS Foundation Constitution with narrow-scope amendments to reflect the changes to the Due Process Handbook
• Project summary and feedback statement
• Article by Alan Beller, Chairs of the IFRS Foundation Trustees’ Due Process Oversight Committee, on the due process and why it matters

Listen to the recording of the webinar on YouTube.

The report notes that:

• Digital financial reporting presents significant advantages for preparers, auditors, regulators, users and analysts;
• Through a unified labeling system, reports can be tailored to the needs of users; and
• With simple access to detailed information, accountants can focus on advice and assurance.

The report is accompanied by a 25 minute interview with IASB Board member Ann Tarca, who recently delivered a speech discussing the benefits and costs of digital reporting.

Review the report and the interview on the CAANZ's website.

The revisions are designed to further clarify and explain the SASB’s approach to standard-setting, including its principles, processes, and practices. One of the reasons the SASB decided to revise these documents is that the Board is of the view that the existing documents do not reflect the global perspective of the SASB. The documents also contain an outdated mission statement as well as outdated assumptions, definitions, and data.

Comments are requested by November 30, 2020.

Review the consultation documents on the SASB's website.

Previously, Ms. McCord served as the acting chief accountant and deputy chief accountant in the Division.

Review the press release on the SEC’s website.

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

Research projects

• Dynamic Risk Management — Core model outreach is now expected in October 2020 (previously Q4 2020).

Other projects

• IFRS Taxonomy Update — 2020 General Improvements and Common Practice — A proposed IFRS Taxonomy Update is now expected in October 2020 (previously Q4 2020).
• IFRS Taxonomy Update — Common Practice (IAS 19 Employee Benefits) — The timing of a proposed IFRS Taxonomy Update is now expected in October 2020 (previously Q4 2020).

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

In our comment letter on the consultation draft, we especially note two points:

• The IIRC should especially focus on collaboration with framework and standard-setters to achieve a consolidated and comprehensive system of standards and to achieve connectivity between non-financial and financial reporting standards; and
• the IIRC should support deeper engagement between the IIRC and the Trustees of the IFRS Foundation to create a clearer path towards a single system with connected oversight of standards for all forms of corporate reporting while also advocating for a broadening of the Trustees’ remit.

We also note that the subject of assurance has not been included in the consultation. We believe the IIRC should play an important role in enhancing the ‘assurance readiness’ of the Framework.

Review our comment letter here.