Introduction

The request for information includes an introductory section that states the objective of the request for information and describes how responses will help the Board in determining its future work programme. The introduction also explains the difference between the IFRS Foundation's five-yearly review of structure and effectiveness that is currently underway and that includes a consultation on sustainability reporting and the IASB's agenda consultation. The IASB's agenda consultation seeks feedback on the priorities of activities within the current scope of the Board’s work, whereas the Trustees’ consultation seeks feedback on a potential expansion in the role of the IFRS Foundation. The IASB is currently working on its management commentary project and could do more on sustainability aspects, should stakeholders wish so, as long as this is connected to financial statements. While there is some connecting middle ground, respondents should not confuse the two initiatives. As the IFRS Foundation Trustees move forward quickly with their initiative, their decisions would be available before the Board makes decisions on its future agenda.

Request for information

The request for information consists of three parts: (1) strategic direction and balance of the Board's activities, (2) criteria for assessing the priority of projects that could be added to the work plan, and (3) financial reporting issues that could be added to the Board’s work plan.

Strategic direction and balance of the Board's activities

Part one of the request for information regarding the strategic direction and balance notes that the IASB's work is currently following six lines:

• New IFRS Standards and major amendments to IFRS Standards
• Maintenance and consistent application of IFRS Standards
• The IFRS for SMEs Standard
• Digital financial reporting and the IFRS Taxonomy
• Understandability and accessibility
• Stakeholder engagement

In this part of the request for views the IASB is seeking stakeholders’ views on whether the Board should increase, leave unchanged or decrease its current level of focus on each line of work. And while there is a little room for additional work, respondents are asked to assume that the Board’s overall level of resources will remain substantially unchanged during the 2022 to 2026 period.

Criteria for assessing the priority of projects that could be added to the work plan

Part two of the request for information regarding criteria for assessing the priority of projects that could be added to the work plan notes that the Board will use a specified list of seven criteria to assess the potential financial reporting issues that could be added to its work plan to develop new IFRS Standards and major amendments to IFRS Standards. They are:

• The importance of the matter to investors
• Whether there is any deficiency in the way companies report the type of transaction or activity in financial reports
• The type of companies that the matter is likely to affect, including whether the matter is more prevalent in some jurisdictions than others
• How pervasive or acute the matter is likely to be for companies
• The potential project’s interaction with other projects on the work plan
• The complexity and feasibility of the potential project and its solutions
• The capacity of the Board and its stakeholders to make timely progress on the potential project

The criteria are derived from the Due Process Handbook and the 2015 Agenda Consultation. The relative importance of any specific criterion will vary depending on the particular circumstances. Generally, the Board will evaluate potential project for its work plan primarily on the basis of whether the project will meet investors’ needs, while also taking into account the costs of producing the information.

Financial reporting issues that could be added to the Board’s work plan

Finally, part three of the request for information regarding financial reporting issues that could be added to the Board’s work plan refers to 22 projects that have frequently been suggested to the Board for consideration. The request for information seeks stakeholders’ views on what priority they would give each of the potential projects — high, medium or low — and whether their prioritisation refers to all or only some aspects included in the project description. Respondents are also invited to suggest additional issues that they believe the Board should add to its work plan for 2022 to 2026.

Appendices

For reasons of readability, some of the information referred to in the request for information has been relegated to appendices:

• Appendix A describes the active projects on the Board’s work plan as of March 2021
• Appendix B describes the 22 financial reporting issues that were frequently suggested to the Board for potential potential inclusion in its work programme
• Appendix C describes additional financial reporting issues that were suggested to the Board by only a small number of stakeholders

Comment deadline and next steps

Stakeholders are invited to provide feedback on the request for information by September 27, 2021. The Board expects to discuss the feedback in the second half of 2021 and to publish a feedback statement summarizing the feedback and announcing the work plan for 2022 to 2026 in the first quarter of 2022.

Additional information

Review the following information on the IASB's website:

• Press release
• Access to the request for information
• Investor Perspective article
• Video with an overview of the Agenda consultation
• Video on the strategic direction and balance of the Board’s activities
• Video on potential projects that could be added to the IASB work plan
• IFRS in Focus newsletter on IAS Plus

Background

The IASB noted constituent concern about the cumulative effect of disclosure requirements introduced by new and revised standards and conducted a research project with the aim of a general review of disclosure requirements.

As a first step, the Board published a discussion paper DP/2017/1 Disclosure Initiative — Principles of Disclosure in March 2017 that contained an appendix with two examples of how existing standards could be re-drafted using the principles described in the DP.

Many respondents to the DP highlighted the ‘checklist’ approach as a significant factor contributing to the disclosure problem and that the Board’s way of developing and drafting disclosure requirements in IFRSs is partly responsible for this as there often are a large number of disclosure requirements without specific disclosure objectives. In addition, disclosure sections are drafted inconsistently.

The Board acknowledged these concerns and decided to pursue a project following a four-step approach:

• Develop draft guidance for the Board to use when developing and drafting disclosure sections;
• Select two standards on which to apply the draft guidance;
• Test the draft guidance by applying it to those standards; and
• Prepare an ED of amendments to those standards.

The exposure draft published today includes the draft guidance as well as proposed amendments to IFRS 13, Fair Value Measurement and IAS 19, Employee Benefits that result from applying the draft guidance to those standards. 

Draft guidance and suggested changes

The exposure draft ED/2021/3 Disclosure Requirements in IFRS Standards — A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19) is made up of three blocks: the draft guidance for the IASB to apply when developing and drafting disclosure requirements in IFRSs in future; proposed amendments to IFRS 13; and proposed amendments to IAS 19.

Draft guidance

As one of the main reasons for the perceived disclosure problem was the 'checklist' mentality, the IASB decided to develop an approach that would shift the focus to the use of judgement and to determining whether the objective behind the disclosures has been met by the entity.

To this end, the the Board proposes to use overall disclosure objectives in future that that describe the overall information needs of users of financial statements and specific disclosure objectives that describe the detailed information needs of users of financial statements. An entity would then need to apply judgement to identify items of information for each specific disclosure objective by considering whether the information is relevant or irrelevant and whether it helps the entity to communicate effectively. For the overall disclosure objectives, the IASB would use more prescriptive language, while for the information needed to meet specific disclosure objectives it would typically use less prescriptive language.

The draft guidance is not a standard. However, once finalized, the Board will apply the guidance in developing and drafting disclosure sections of IFRSs in the future. The Board expects that the broad application of the guidance will have a significant effect on the behaviour of entities, auditors and regulators. Instead of checking whether a specific piece of information required by an IFRS has been provided, auditors and regulators will have to use judgement to assess compliance. Compliance will be achieved if the information provided effectively meets the disclosure objectives in the entity’s case.

Proposed amendments to IFRS 13

In line with the draft guidance, the Board proposes an overall disclosure objective that requires an entity to disclose information that shows

• the significance of the assets and liabilities measured at fair value;
• how the fair value measurements have been determined; and
• how changes in those measurements affect the entity’s financial statements.

Specific disclosure objectives would then regard the fair value hierarchy, measurement uncertainties, possible alternative fair value measurements, and drivers of change in fair value measurements. The proposed amendments also note the kind of information needed to meet the disclosure objectives. In addition, the specific disclosure requirements also cover disclosures regarding assets and liabilities not measured at fair value in the statement of financial position but for which fair value is disclosed in the notes.

Proposed amendments to IAS 19

The overall disclosure objectives proposed for IAS 19 distinguish between defined benefit plans and define contribution plans. For defined benefit plans, the overall disclosure objective requires an entity to disclose information that shows enables users of financial statements to evaluate the uncertainties associated with the entity’s involvement in its defined benefit plans and to assess the effect that the defined benefit plans have on the financial performance, financial position and cash flows of the entity. For defined contribution plans, the overall disclosure objective requires requires an entity to disclose information that enables users of financial statements to understand the effect that defined contribution plans have on the financial performance and cash flows of the entity.

While the Board does not propose specific disclosure objectives for defined contribution plans, the proposed specific disclosure objectives for defined benefit plans include amounts in the primary financial statements relating to defined benefit plans, the nature of, and risks associated with, defined benefit plans, expected future cash flows relating to the defined benefit obligations at the end of the period, future payments to members of defined benefit plans that are closed to new members, measurement uncertainties associated with the defined benefit obligation, and drivers of change in the amounts in the statement of financial position relating to the defined benefit plans. The proposed amendments also note the kind of information needed to meet the disclosure objectives.

In addition, the proposed amendments also touch on  multi-employer plans and defined benefit plans that share risks between entities under common control as well as other types of employee benefit plans.

Comments on the draft guidance and the proposed changes are requested by October 21, 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.

Additional information

• IASB press release including a short explanatory video
• IASB exposure draft
• IASB basis for conclusions
• IASB Snapshot overview of the exposure draft

The working group is intended to provide structured engagement with initiatives focused on enterprise value reporting with a view to facilitating consolidation and reducing fragmentation in sustainability reporting standards. The working group will be chaired by the IFRS Foundation and include participation by the IASB, given the need for connectivity with financial reporting. IOSCO will participate in the group as an observer.

Members of the working group are

• The Financial Stability Board’s Task Force on Climate related Financial Disclosures (TCFD);
• the Value Reporting Foundation representing the intended merger of the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB);
• the Climate Disclosure Standards Board (CDSB); and
• the World Economic Forum (WEF).

Throughout the process, the working group will also engage closely with the Global Reporting Initiative (GRI) and CDP.

The first meeting of the working group is expected to take place in April 2021.

Review the press release on the IASB's website.

The feedback received on the first three questions that was discussed by the Trustees in February 2021 already indicated that there is a need for a global set of internationally recognised sustainability reporting standards and for the IFRS Foundation to play a role in the development of these standards.

Also in February 2021, the IOSCO Board issued a statement noting IOSCO's intention to work with the IFRS Foundation in developing a plan to establish a new board for setting sustainability reporting standards that meet the needs of the capital markets.

Based on the further discussion of the feedback to the consultation and encouraged by the IOSCO statement, the Trustees have now concluded on the strategic direction and further steps in their initiative.

The new Sustainability Standards Board (SSB) to be set up would

• focus on information that is material to the decisions of investors, lenders and other creditors;
• initially focus its efforts on climate-related reporting, while also working towards meeting the information needs of investors on other ESG matters;
• build upon the well-established work of the Financial Stability Board’s Task Force on Climate related Financial Disclosures (TCFD), as well as work by the alliance of leading standard-setters in sustainability reporting focused on enterprise value; and
• work with standard setters from key jurisdictions to issue standards that provide a globally consistent and comparable sustainability reporting baseline, while also providing flexibility for coordination on reporting requirements that capture wider sustainability impacts.

The Trustees also announced that they will consider the prototype climate-related financial disclosure standard published in December 2020 as a potential basis for the new board to develop climate-related reporting standards.

As regards further steps, the Trustees note that they

• intend to publish a feedback statement that summarizes the responses received to their consultation paper, and how that feedback informed their decisions;
• will publish for public comment the proposed changes to the Foundation’s constitution necessary to formalize establishment of a new board, including its composition; and
• will continue to engage with the IFRS Foundation Monitoring Board regarding the proposed changes.

The Trustees underline that they remain on track to make a final determination about a new board in advance of the November 2021 United Nations COP26 conference.

Review the Trustees' full announcement on the IASB's website.

The new TEG will be tasked with reviewing and assessing technical recommendations focused on enterprise value creation that will be developed the working group recently set up by the IFRS Foundation to prepare for a potential international Sustainability Standards Board (SSB). The working group's tasks also include planned work to further refine the prototype climate-related disclosure standard, its content, and industry-specific metrics. IOSCO has been invited to join the IFRS Foundation working group as an observer.

Review the announcement of the new TEG on the IOSCO's website.

The statement stresses that the responsibility for developing and maintaining high-quality standards lies with the IASB and especially welcomes the recent IASB educational material on the topic of going concern disclosures as the topic is likely to be relevant for a larger number of public companies for 2020 and 2021 financial reporting periods in many jurisdictions.

IOSCO highlights that is important for investors to receive high-quality information about the existence of material uncertainties that may cast significant doubt on an entity’s ability to continue as a going concern. IOSCO also notes that it is important for investors to receive complete information about significant judgements that management may have exercised in determining the entity’s ability to continue as a going concern.

In conclusion, IOSCO reminds issuers, audit committees, and external auditors of the important role each plays in providing investors with high-quality, reliable, timely, and transparent financial information, especially in times of heightened uncertainty.

Review the full statement on the IOSCO's website.

The paper notes that currently there is no shortage of opinions when it comes to how, and even if, to proceed with the standardization of ESG disclosures and reporting. However, the IVSC notes, regardless of the path taken by standard setters, ESG factors represent fundamental considerations to inform valuation analysis. Therefore, steps to begin incorporating ESG considerations into valuation practice are critical for the relevance, and therefore the sustainability, of the profession.

Review the paper on the IVSC's website.

Listen to a recording of the webinar (30 minutes) on the IASB's website.

The 2021 taxonomies reflect accounting standards updated during the past year as well as improvements related to two SEC final rules and other enhancements. In addition, the FASB has finalized the 2021 DQC Rules Taxonomy.

Review the press release on the FASB's website.

Below is an analysis of all changes made to the work plan since our last analysis on February 19, 2021.

Stan­dard-set­ting projects

• Disclosure Initiative — Subsidiaries that are SMEs — The issuance of an exposure draft is now expected in Q3 2021 (previously H2 2021).
• Disclosure Initiative — Targeted Standards-level Review of Disclosures — This project is now in the exposure draft feedback stage and discussions on the feedback is expected in H1 2022. The exposure draft was issued on March 25, 2021.
• Rate-regulated activities — The comment letter deadline has been extended to July 30, 2021.

Main­te­nance projects

• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) — The issuance of IFRS amendments is now expected in May 2021 (previously Q2 2021).
• IFRS 16 and COVID-19— This project expects to issue IFRS amendments in March 2021.
• Lease Liability in a Sale and Leaseback — Feedback to the exposure draft will now be discussed in May 2021 (previously Q2 2021).

Research projects

• Extractive Activities — The decision of the project’s direction is now expected in May 2021 (previously Q2 2021).
• Goodwill and Impairment — The discussion of the feedback on the discussion paper will continue in April 2021 (began in March 2021).
• Second Comprehensive Review of the IFRS for SMEs Standard — The next project step will be the issuance of an exposure draft (no date given).

Other projects

• IFRS Taxonomy Update — 2020 General Im­prove­ments and Common Practice — This project is removed from the work plan due to the issuance of the IFRS taxonomy update on March 24, 2021.
• IFRS Taxonomy Update — Amend­ments to IFRS 17, IFRS 4 and IAS 16 — This project is removed from the work plan due to the issuance of the IFRS taxonomy update on March 24, 2021.
• IFRS Taxonomy Update — Common Practice (IAS 19 Employee Benefits) — This project is removed from the work plan due to the issuance of the IFRS taxonomy update on March 24, 2021.

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