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2015 Agenda Consultation — Request for views

Date recorded:

Comment letter and outreach summary — Agenda Paper 24

The purpose of this paper was to provide an analysis of the feedback received in relation to the request for views 2015 Agenda Consultation (RFV). The staff would present in future sessions an analysis of the comments letters received on individual projects and a work plan for discussion by the Board.

The key messages received were:

  • The completion of major projects such as leases (now completed), Insurance, Disclosure Initiative and Conceptual Framework should be a high priority;
  • The Board should focus on its implementation activities rather than on new Standards level projects;
  • The Board should analyse the delays experienced in completing major projects
  • There was support for the research programme; however, there was uncertainty about the strategy, objective and processes of the programme;
  • There were too many narrow-scope amendments and the Board should instead focus its maintenance activities on PIRs of recently issue Standards, and broader reviews of other Standards where a number of issues have arisen;
  • There were mixed views on the timing and areas on which PIRs should focus;
  • There was support for maintaining convergence of Standards
  • The Board should consider improving the quality of drafting in order to reduce re-exposure and implementation issues;
  • Although not considered as part of the key messages received, the activities of the IFRS Interpretations Committee (IC) received the following comments: (i) the IC should subject submissions to a greater initial analysis to filter important issues; (ii) there was a large number of topics rejected; and (iii) agenda decisions were not clear and more detailed of facts and circumstances should be provided.
  • There were also concerns raised in relation to narrow scope amendments because it was considered that: (i) did not address fundamental underlying issues; (ii) could have unintended consequences; and (iii) might not be unjustified if the Board had not gathered enough evidence of diversity in practice.

Further detailed was presented in the agenda paper following the questions raised in the RFV:

  • Q1 Balance between the Boards type of activities
  • Q2 and Q3 The Board’s research programme
  • Q4 Standard level projects
  • Q5 Implementation support and maintenance of IFRS Standards
  • Q6 Level and pace of change
  • Q7 Other comments
  • Q8 Interval between agenda consultations

Discussion

No decisions were made. The staff indicated that the next step would be a paper for the Board about balancing activities; how the message received would affect the work plan; and prioritisation criteria and potential impact on individual research projects. The staff will also be consulting with the Advisory Council in June.

The Chairman indicated that in his view the feedback asked the Board for less Standard setting and the more work on implementation activities, although he was sure about the precise meaning of this request. He also sensed that the Board should focus on the Disclosure Initiative, digital reporting, non-GAAP measures and performance reporting.  None of these projects would require huge system changes, and all would improve the overall effectiveness of fianncial reporting. He also indicated that there appeared to be mixed messages in that there were comments that the Interpretations Committee was dismissing too many agenda items; while the Board was dedicating too much time to narrow scope amendments. He also noted that the questions asked were very generic and the Board should take the leadership in moving forward.

There were also comments from some Board members in that there was a perceived need to improve communication particularly, how around the research projects. It was also noted that the Board should not wait for agenda consultations to initiative new projects; it seemed necessary to act in accordance with the needs derived from the economic environment.  Some comments in the agenda consultation suggested that the Board had not made this point clear.  On that basis, the agenda consultation was more about assessing the balance periodically.

In relation to maintenance activities, there was a concern raised about which party would be responsible for those activities (i.e.  the Board, the Interpretations Committee, or the staff). Some Board members believed that constituents could not be expected to provide an answer to that question. 

Trustees’ Review of Structure and Effectiveness — Agenda paper 24B

The IFRS Foundation (‘the Foundation’) published the consultation document Request for Views—Trustees’ Review of Structure and Effectiveness (‘the RfV’). The RfV contained three main areas on which the Trustees were seeking comments, as follows:  (a) the relevance of IFRS Standards (‘the Standards’); (b) the consistent application of the Standards; and (c) the governance and financing of the Foundation.

The agenda paper provided:

  1. an update on the decisions taken by the Trustees in redeliberations on the RfV (excerpted from Agenda paper 4 from the February 2016 Advisory Council meeting and; 
  2. a summary of the feedback received on the RfV in areas that are relevant to the Agenda Consultation (excerpted from Agenda Paper 4A from the February 2016 Advisory Council meeting).

In relation to the first topic, the agenda paper indicated that the Trustees made decisions in January 2016 on few areas and directed the staff to conduct further analysis on the more complex topics for their May 2016 meeting.

In relation to the second topic, the agenda paper presented a detailed analysis of the feedback received. The main comments presented are:

  • The majority of respondents did not support an expansion in scope to not for profit entities and there was agreement with the Trustees proposal for not expanding its scope to include public sector entities; 
  • There was agreement that the IFRS taxonomy should not dictate the standard-setting process;
  • There was general support for establishing a network of experts to provide advice on technological developments and how the Foundation and or the Board should respond;
  • There was general support for the Foundation’s efforts to encourage consistent applications while it was expressed that the Board should remain focused on setting principle-based standards;
  • There was support for the establishment of TRGs and it was indicated that TRGs should be used for major complex Standards;
  •  In relation to the IFRS Interpretations Committee (IC) activities the comments indicated that it was perceived as slow and unresponsive with a long lag between submissions and decisions and that the IC sometimes did not focus on the underlying causes of the issues considered;
  • There were mixed views on the usefulness of the Education Initiative; and
  • There was general support for the PIRs with suggestions presented to improve its efficiency.

Discussion

No decisions were made. The staff indicated that the Board would meet with the Interpretations Committee in May to discuss the feedback received about the Interpretations Committee.

There was extensive discussion about a concerned raised by one Board member. He pointed out that there were negative comments about the transparency of the drafting process. He indicated that the process should be more open to the public, that would reduce the risk of unintended consequences and it would help to test whether the Standard would work as intended. Several Board members indicated that it would be very difficult to implement; and that there was also a risk that if the process were open, many issues that were discussed and approved by the Board could be re-opened which could also indicate that it was in practice a re-exposure. The Chairman indicated that he believed that the process was already the most transparent process anywhere in the world, and not just among accounting standard setters. The staff noted the option was already open to the Board to have a public fatal flaw review, but that the Due Process Oversight Committee had warned that it should be used with caution.

 

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