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February 2021

AcSB and ASBJ hold joint meeting

Feb 02, 2021

On February 2, 2021, the Canadian Accounting Standards Board (AcSB) and the Accounting Standards Board of Japan (ASBJ) held a joint meeting by video conference. The meeting was the second bilateral meeting between the two standard-setters.

At the meeting, the AcSB and the ASBJ both introduced their respective responses to the COVID-19 pandemic. They also discussed specific technical topics in which both Boards have interest, including primary financial statements, goodwill and impairment, and rate regulated activities. The two standard-setters plan to continue to exchange views.

Review the press release on the ASBJ'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.

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.

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 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.

IASB posts recordings of recent webinars on academics and the post-implementation reviews of IFRS 9 and IFRS 16

Feb 03, 2021

On February 3, 2021, the International Accounting Standards Board (IASB) posted the recordings of its recent webinars on identifying research opportunities by academics in IFRS 9, "Financial Instruments" and IFRS 16, "Leases".

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

Review the press release on the IASB’s website.

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

IASB will propose to extend practical relief on rent concessions

Feb 04, 2021

In a supplementary meeting held earlier today, the IASB discussed extending the practical relief in IFRS 16, which permits lessees not to assess whether particular rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and, instead, to account for those rent concessions as if they were not lease modifications.

Among other conditions, the 2020 amendments to IFRS 16 permits a lessee to apply the practical expedient only to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2021. Stakeholders have pointed out, however, that the ongoing significance and protracted effects of the pandemic were not envisaged at the time the Board developed the practical expedient, as in many jurisdictions the ongoing effects of the pandemic are at least as significant now as they were in May 2020.

The IASB followed this line of argument and decided to propose to extend the relief to reductions in lease payments originally due on or before 30 June 2022 (with one Board member dissenting). The exposure draft to be published will propose retrospective application, which means that a lessee who has applied the initial expedient might possibly be required to reverse lease modification accounting for rent concessions that did not qualify because of the original time limit.

Given the urgency of the matter and with permission of the Trustees, the exposure draft will have a 14-day comment period. Final amendments are expected by the end of March 2021.

IFAC and IIRC set out a vision for accelerating integrated reporting assurance

Feb 26, 2021

On February 26, 2021, the International Federation of Accountants (IFAC) and the International Integrated Reporting Council (IIRC) launched a new joint initiative, “Accelerating Integrated Reporting Assurance in the Public Interest”.

The Initiative recognizes that new thinking is required to determine what comprises integrated report assurance and how to best deliver it, given integrated reporting’s broad and forward-looking focus on value creation. The Initiative, which will be rolled out in installments, is designed to heighten awareness of key issues, drive constructive conversation with and among key stakeholders, and encourage providers and users of assurance services in particular to lend their voices to the effort.

The first installment sets out what integrated reporting assurance involves for organizations, auditors, and others. This installment also addresses the difference between the two types of assurance - limited and reasonable - and what is required of auditors and organizations to strive for reasonable integrated reporting assurance.

Review the press release on the IFAC's website.

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