In addition to giving updates on their respective standard-setting activities at the meeting, the two boards exchanged views on implementation activities regarding the standards on financial instruments, revenue, and leases, technical issues on IFRS 17 and the IASB’s current project on rate-regulated activities. In addition, the AcSB and the OIC discussed two projects of individual interest, specifically, relevance of performance measures and business combinations under common control.

Review the press release on the AcSB's website.

The welcome address by Prof Dieter Truxius, Vice-Chair of the Administrative Board of the ASCG and one of Germany's leading experts in accounting and controlling issues related to German family-owned businesses, already revealed a clear message that would resurface in all speeches and discussions. He noted that the German industry is extremely critical of proposals that might lead to modifying IFRS^® Standards during the EU endorsement process or even after they have been endorsed.

He concluded: "Such trends lead to disparities in international accounting and prevent cross-border comparability of financial statements. Ladies and gentlemen, we should take a firm stand against this trend."

The two ensuing panel discussions showed an interesting combination of panelists. A Member of Parliament, a CFO, an NGO representative, and an auditor discussed "Changing behaviour by requiring ESG information – Where is the boundary of the financial report?". While it was noted by some that a lot of reporting on ESG issues is boilerplate, it was also stated that there was an increased visibility and awareness of information, not only from the outside but also within companies. Whether reporting requirements could and should be used to change behaviour was contested with views ranging from the role financial markets can play to achieve sustainability to the warning against overtaxing reporting with an inflation of additional requirements. Measurability (and therefore auditability) and materiality were also controversely discussed with the difference of materiality to an entity and materiality to society especially noted.

In the concluding panel, the IASB Chairman, a CAO of a digital company, an ESMA representative, and a professor of accounting discussed "Digital reporting vs. Reporting in a digital world". The opening round of questions alone showed the many facets of the topic with some insights of what is already possible proving to be almost scary. Questions around XBRL dominated the discussion on what is currently being done, which saw comments on comparability in connection with block tagging, detailed tagging, and use of XBRL extensions, although it was mentioned that XBRL might not be more than an interim solution. It was also noted that as a result of increasing digitalisation information overload ceases to be so much of a problem and materiality questions might need to be asked differently. However, it was warned that while more and more information can be processed electronically and, therefore, quicker understanding patterns and drivers has not become easier. It was asked whether and when a point comes where we trust machine judgement more than management judgement and whether at some point of time, reporting and consumption of financial information would become a game of "Watson against Watson". One important aspect in the whole discussion was also the question of what is being reported as companies with digital business models have huge amounts of intangibles they cannot show in their financial statements. Accounting for intangibles was clearly identified as an area where current financial reporting needs to evolve.

An informal exchange of opinions between the many national and international guests, which included representatives of the standard-setters from the US, Canada, Australia, Japan, and Hong Kong, concluded the event.

Review a summary of the event, in German, on the ASCG's website.

Per the report, the top three challenges for companies in adopting the TCFD recommendations are identified as (1) ensuring leadership support for enhanced disclosure, (2) revising risk assessment processes, and (3) applying scenario analysis to climate change.

For further details, refer to the report on the CDSB’s website.

Refer to the June 14, 2018 GRI press release for further details.

In addition, on June 28, 2018, the GRI has released two updated standards:

GRI 403: Occupational Health and Safety 2018 – Putting worker health first

GRI 303: Water and Effluents 2018 – From water management to water stewardship

Refer to the June 28, 2018 GRI press release for further details of these updated standards.

The eleven minute webcasts focusses on the "SPPI test", including the amendments made to the IFRS 9 requirements in October 2017.

View the webcast on the Board's website (available as full webcast or in a slides only version).

Here are some highlights from the OSC Whistleblower Program:

• The program was launched in July 2016 and, as of the end of June 2018, has generated approximately 200 tips, an average of about two per week.
• Timely, specific and credible tips about securities-related misconduct can be submitted by one or more individuals, and can be submitted anonymously through counsel. The OSC makes all reasonable efforts to protect whistleblowers’ identities.
• All tips undergo a review process to determine the appropriate course of action. Currently, 22 percent of the total number of tips received (45) are under review.
• Ten per cent of tips (19) warranting further action by the OSC were referred to Enforcement, of which 15 (or 7 per cent) are associated with active investigations. Thirty-five per cent of tips (68) were or are in the process of being shared with another OSC operating branch or another regulator for further action.
• Awards are paid after cases are concluded and all rights to appeal have expired. Investigations and proceedings involving securities-related misconduct can be complex, and may take several years to complete before an award can be made.
• The OSC values whistleblower tips and reviews each one carefully. In some cases, tips may not be actionable, for example, because matters fall outside of the OSC’s jurisdiction.

Review the update on the OSC's website.

Mr. Hoogervorst mentioned that despite the resurgence of protectionism and threats to the rule based trade system of the World Trade Organization, the use of IFRS Standards has progress well. However, there are still some gaps to be filled in the adoption of IFRS Standard in certain jurisdictions.

Next, Mr. Hoogervorst provided an update on the developments in IFRS Standards. The topics he covered included primary financial statements, the implementation of IFRS 17, and wider corporate reporting as well as financial instruments with characteristics of equity, where the IASB has recently issued a discussion paper on this research project.

Review the speech transcript on the Board’s website.

Summary of main proposals

To begin with, the IASB expects many of the existing classification outcomes of IAS 32 to remain unchanged if the approach preferred by the IASB is implemented.

In accordance with the preferred approach proposed by the IASB, equity is a residual that remains if the characteristics of a financial liability are not fulfilled. Accordingly, a financial instrument must be classified as a financial liability if its contractual terms contain an unavoidable obligation:

• a) to transfer cash or another financial asset at a specified time other than at liquidation (timing feature); 
  
  and/or
  
  
• b) for an amount independent of the entity’s available economic resources (amount feature).

The analysis of the timing feature enables the assessment of funding liquidity and cash flows, including whether an enterprise has the economic resources necessary to meet its obligations at maturity and to estimate the need for economic resources at specific times. The timing feature can be specified as a fixed date as another date such as for example dates of coupon or interest payments.

The amount feature, on the other hand, supports the assessment of the balance sheet solvency and returns. This concerns in particular the question of whether an entity has sufficient economic resources to meet its obligations in terms of amount. It is central to the amount feature that a change in the value of the issuer's available economic resources does not limit the amount of the obligation. A simple example is the obligation to repay a loan when it matures: this obligation exists on the merits and in terms of amount, regardless of how the economic resources of the debtor develop. Nevertheless, there may also be changes in the amount of the obligation if, for example, the nominal amount changes due to exchange rates.

In the opinion of the IASB, the component approach already known under IAS 32 should be retained for compound financial instruments that contain both an equity and a liability component. Consequently, the issuer of a non-derivative financial instrument must assess whether it contains both a debt and an equity component. These components would continue to be classified separately as financial liabilities, financial assets or equity instruments.

A puttable instrument that comes puttable exception in IAS 32 would meet the definition of a financial liability if the Board’s preferred approach with timing feature and amount feature is applied. Consequently, the puttable exception would continue to be required under the Board’s preferred approach.

A derivative on own equity would be classified in its entirety. Such a derivative may be classified as an equity instrument, a financial asset or a financial liability in its entirety. The individual legs of the exchange would not be separately classified. A derivative on own equity would be classified as a financial asset or financial liability if:

• a) the derivative requires the entity to deliver cash or another financial asset, and/or contains a right to receive cash, for the net amount at a specified time other than at liquidation - it is net-cash settled (timing feature); or
• b) the 'net amount' of the derivative is affected by a variable that is independent of the entity’s available economic resources (amount feature).

The proposed preferred approach requires consistent accounting for redemption obligations, including NCI puts, and compound instruments with derivative components, e.g. convertible bonds. The IASB sees this as an improvement in the usefulness of financial statements because consistent debt and equity classifications are achieved for similar contractual rights and obligations.

In the opinion of the IASB, additional information on the timing feature is not necessary, as the current presentation and disclosure requirements in other IFRS Standards provide sufficient information to facilitate assessments of funding liquidity and cash flows. In contrast, additional disclosures on the amount feature are required to provide more comprehensive information to users of the financial statements; more detailed breakdowns are required in the balance sheet, the income statement and the revaluation reserve (other comprehensive income) to facilitate the assessment of solvency and return. The IASB proposes a separate disclosure in other comprehensive income for income and expenses from financial liabilities and derivative financial assets or financial liabilities that depend on the company's available economic resources, as well as partially independent derivatives. These amounts are not subsequently reclassified to profit or loss.

In addition, the discussion paper proposes to provide more comprehensive information on the characteristics of issued instruments, such as the ranking of financial liabilities and equity instruments in the event of liquidation.

Annexes to the discussion paper contain a discussion of the two alternative approaches discussed by the IASB, each based on only one of the two features, and a comparison of the classification of selected financial instruments under IAS 32 and under the IASB's preferred approach.

Comments on the discussion paper are requested by January 7, 2019.

Additional information

• Press release on the Board's website
• Discussion Paper DP/2018/1 Financial Instruments with Characteristics of Equity
• IASB Snapshot introducing the DP
• IASB Video: Vice-Chair Sue Lloyd talks about the DP

In addition, the rule removes the requirement for operating companies and funds to post XBRL data on their Web sites.

Review the press release and final rule on the SEC’s website.

Under the final rule, smaller reporting companies “include registrants with a public float of less than $250 million, as well as registrants with annual revenues of less than $100 million for the previous year and either no public float or a public float of less than $700 million.” In view of this new definition of smaller reporting company, the final rule also revises other definitions, such as those for “accelerated filer” and “large accelerated filer,” in an effort to “preserve the existing thresholds in those definitions.”

Review the press release and final rule on the SEC’s website.