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Part I - IFRS

Hyperinflationary economies - updated IPTF watch list available

Jan 27, 2020

IAS 29 "Financial Reporting in Hyperinflationary Economies" defines and provides general guidance for assessing whether a particular jurisdiction's economy is hyperinflationary. But the IASB does not identify specific jurisdictions. The International Practices Task Force (IPTF) of the Centre for Audit Quality (CAQ) monitors the status of "highly inflationary" countries. The Task Force's criteria for identifying such countries are similar to those for identifying "hyperinflationary economies" under IAS 29.

The IPTF's discussion document for the November 19, 2019 meeting is now available and states the following view of the Task Force:

Countries with three-year cumulative inflation rates exceeding 100%:

  • Argentina
  • South Sudan
  • Sudan
  • Venezuela
  • Zimbabwe

Countries with projected three-year cumulative inflation rates exceeding 100%:

  • Islamic Republic of Iran

Countries where the three-year cumulative inflation rates had exceeded 100% in recent years:

There are no countries in this category for this period.

Countries with recent three-year cumulative inflation rates exceeding 100% after a spike in inflation in a discrete period:

  • Angola
  • Suriname

Countries with projected three-year cumulative inflation rates between 70% and 100% or with a significant (25% or more) increase in inflation during the current period

  • Democratic Republic of Congo
  • Liberia
  • Yemen

The IPTF also notes that there may be additional countries with three-year cumulative inflation rates exceeding 100% or that should be monitored which are not included in the analysis as the necessary data is not available. An example cited is Syria.

The full list, including exact numbers, detailed explanations of the calculation of the numbers, and observations of the Task Force is available on the CAQ website. We also offer the overview of the IPTF's assessment of hyperinflationary jurisdictions at the end of our summary of IAS 29.

SEC publishes document on cybersecurity and resiliency

Jan 27, 2020

On January 27, 2020, the Securities and Exchange Commission Commission's Office of Compliance Inspections and Examinations (OCIE) issued examination observations related to cybersecurity and operational resiliency practices taken by market participants.

The document discusses best practices for enhancing cybersecurity preparedness and operational resiliency. Topics addressed include the following:

  • Governance and risk management
  • Access rights and controls
  • Data loss prevention
  • Mobile security
  • Incident response and resiliency
  • Vendor management
  • Training and awareness

Review the press release and cybersecurity page on the SEC’s website.

IBC discusses Big4 report on reporting sustainability information at WEF

Jan 24, 2020

In January 2020, at the World Economic Forum (WEF), the chief executive officers of many of the world’s largest companies expressed support for aligning on a core set of metrics and disclosures in their annual reports on the non-financial aspects of business performance such as greenhouse gas emissions and strategies, diversity, employee health and well-being and other factors.

The International Business Council (IBC) of the WEF discussed a proposal prepared by the Forum in collaboration with the Big Four accounting firms – Deloitte, EY, KPMG and PwC – titled Toward Common Metrics and Consistent Reporting of Sustainable Value Creation. The proposal recommends a set of core metrics and recommended disclosures. The intent is for the metrics to be reflected in the mainstream annual reports of companies on a consistent basis across industry sectors and countries.

The proposed metrics and recommended disclosures have been organized into four pillars that are aligned with the UN Sustainable Development Goals (SDGs) and principal Environmental, Social, and Governance (ESG) domains. They are:

Principles of Governance Planet People Prosperity
aligned with SDGs 12, 16 and 17 aligned with SDGs 6, 7, 12, 13, 14 and 15 aligned with SDGs 1,3, 4, 5 and 10 aligned with SDGs 1, 8, 9 and 10
focuses on a company’s commitment to ethics and societal benefit looks at the themes of climate sustainability and environmental responsibility examines the roles human and social capital play in business focuses on business contributions to equitable, innovative growth

The metrics are drawn, wherever possible, from existing standards and disclosures such as GRI, SASB, TCFD, CDSB and others. Instead of reinventing the wheel by creating a new standard, they aim to amplify and elevate the rigorous work that has already been done by these initiatives, bringing their most material aspects into mainstream reports on a consistent basis.

Adoption of such recommended universal metrics and disclosures by IBC companies is intended to be a catalyst for greater alignment and synergy among existing ESG standards and ultimately a system-wide solution, such as a generally accepted international accounting or other reporting standard drawn from best practice.

Review the Consultation Draft Toward Common Metrics and Consistent Reporting of Sustainable Value Creation from the WEF's website.

IASB finalizes amendments to IAS 1 to clarify the classification of liabilities

Jan 23, 2020

On January 23, 2020, the International Accounting Standards Board (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 based on the contractual arrangements in place at the reporting date.

 

Background

The issue was originally addressed as part of the annual improvements project 2010 -2012 cycle. Exposure Draft ED/2012/1 Annual Improvements to IFRSs (2010—2012 Cycle), published in May 2012, proposed amendments to IAS 1.73 to clarify that a liability is classified as non-current if an entity expects, and has the discretion, to refinance or roll over an obligation for at least twelve months after the reporting period under an existing loan facility with the same lender, on the same or similar terms. During 2013, however, the IASB decided not to finalise the amendment, but instead pursue a narrow-scope project to refine the existing guidance in IAS 1 on when liabilities should be classified as current.

In February 2015, the Board published its proposals in the Exposure Draft  ED/2015/1 Classification of Liabilities (Proposed amendments to IAS 1). The Board discussed feedback on the ED from December 2015 to September 2019, pausing the project between 2016 and 2018 while it finalised revisions to the definition of a liability in the Conceptual Framework. As a result of these discussions, the Board made no fundamental changes to the proposed amendments but decided to clarify some aspects of them.

 

Amendments

The amendments in Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) affect only the presentation of liabilities in the statement of financial position — not the amount or timing of recognition of any asset, liability income or expenses, or the information that entities disclose about those items. They:

  • clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period and align the wording in all affected paragraphs to refer to the "right" to defer settlement by at least twelve months and make explicit that only rights in place "at the end of the reporting period" should affect the classification of a liability;
  • clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability; and
  • make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

 

 

Effective date and transition

The amendments are effective for annual reporting periods beginning on or after January 1, 2022 and are to be applied retrospectively. Earlier application is permitted.

 

Additional information

Review the press release on the IASB's website.

 

FRC Lab report shows need for improved workforce reporting

Jan 20, 2020

On January 20, 2020, the Financial Reporting Lab of the UK Financial Reporting Council (FRC) issued a report that reveals that reporting on workforce-related issues needs to improve to meet investor needs.

The Lab’s report provides practical guidance and examples on how companies can provide improved information to investors. It encourages companies to think of the workforce as a strategic asset and explain how it is invested in. Alongside the report, the Lab also published a summary of the report covering questions companies should ask themselves about their reporting on workforce matters.

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

Global accountancy bodies call for improved SDG disclosures

Jan 20, 2020

In January 2020, the International Federation of Accountants (IFAC), the Association of Chartered Certified Accountants (ACCA), the Institute of Chartered Accountants of Scotland (ICAS), the Chartered Accountants Australia and New Zealand (CA ANZ), the International Integrated Reporting Council (IIRC) and the World Benchmarking Alliance have jointly published a report calling for improved UN Sustainable Development Goals (SDG) disclosures.

The report follows on the consultation paper Recommendations for SDG Disclosures and considers feedback from the consultation. The recommendations for SDG Disclosure are designed to be both used in conjunction with existing reporting frameworks and neutral with respect to them. The recommendations are also SDG specific, recognising the complexity and interconnectedness of the sustainable development issues that the SDGs address.

Review the following information on the IIRC's website:

AcSB Exposure Draft – General Presentation and Disclosures

Jan 15, 2020

On January 15, 2020, the Accounting Standards Board (AcSB) released an exposure draft that corresponds to the International Accounting Standards Board's (IASB) exposure draft of a new standard "General Presentation and Disclosures" that is intended to replace IAS 1, "Presentation of Financial Statements". Comments are requested by June 30, 2020.

The AcSB would like input from Canadian respondents on the following additional question regarding the proposed amendments:

  • The IASB has developed the proposed amendments in accordance with its due process for application around the world. Assuming the Exposure Draft proposals are finalized and approved by the IASB in accordance with its due process, do you think that the proposals are appropriate for application in Canada? If not, please specify which aspects of the proposals, and what circumstances, make the accounting requirements proposed in the Exposure Draft inappropriate.

Review the press release and exposure draft on the AcSB's website.

Summary of the December 2019 MCCG meeting

Jan 13, 2020

On January 13, 2020, the International Accounting Standards Board (the Board) published a summary of the Management Commentary Consultative Group (MCCG) meeting held on December 13, 2019.

The meeting focused on topics for further input, an overview of the staff’s current proposals, and supporting the adoption of the Practice Statement.

The topics for further input were:

  • information on intangibles and ESG matters in management commentary;
  • the meaning of ‘management’s view’;
  • the entity’s purpose; and
  • guidance on narrative coherence.

Review the press release and summary on the Board's website.

AcSB and ASBJ hold joint meeting

Jan 13, 2020

On January 13, 2020, the Accounting Standards Board (AcSB) and the Accounting Standards Board of Japan (ASBJ) held a joint meeting in Toronto. The meeting was the first bilateral meeting between the two standard-setters.

At the meeting, the AcSB and the ASBJ both introduced their respective financial reporting frameworks and activities, and exchanged views on the opportunities for cooperation. They also discussed specific technical topics in which both Boards have interest, including insurance, revenue recognition and leases. The two standard-setters plan to continue to exchange views.

Review the press release on the ASBJ's website.

ICAS report on fair value measurement of financial instruments

Jan 13, 2020

In 2019, the Institute of Chartered Accountants of Scotland (ICAS) released a report examining the preparation and evaluation of fair value measurements for financial instruments reported in the financial statements.

ICAS joined forces with the International Association of Accounting Education and Research (IAAER) and the International Audit and Assurance Standard Board (IAASB) to commission qualitative research on the valuation of financial instruments. Previous research had been done from the perspective of auditors, but this research focuses on the perspective of the valuation specialist.

While the report notes no distinct differences across geographical regions, it analyses pressure points and potential conflicts in the four phases of the production of fair value measurements reported in financial statements: 1) project acquisition and planning; 2) scoping, valuation approach, and methodology; 3) estimate preparation and relationship management; and 4) negotiations and final estimate reporting.

The report does include some policy recommendations for regulators, standard-setters, and other stakeholders:

  • Auditors and regulators should consider the relative advantages and disadvantages of adopting the independent estimate approach as best practice when evaluating clients’ fair value measurements;
  • Standard-setters should consider strengthening auditor awareness of the effects of budget and timeline pressures, and scope constraints, and encourage a more collaborative team-based approach between auditors and specialists;
  • Regulators should consider incorporating an evaluation of management’s competence related to fair value measurements as a component of the auditors’ risk assessment process; and
  • Standard-setters should consider enhancing corporate governance by promoting understanding of the subjectivity inherent in fair value measurements among the board and audit committees.

Review the full report on the ICAS' website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.