Date recorded:

The IASB met on Tuesday 27 and Wednesday 28 April 2021, by video conference.  

FICE: At its February meeting the staff presented papers on Terms and Conditions, Priority on liquidation and potential dilution, to enable the Board to make its decisions on the objectives and principles of the disclosure requirements and disclosures required to meet these objectives. The staff have brought back refinements to the proposals. The Board supported the staff recommendations for requirements to disclose information about key terms and conditions of instruments (including disclosure of debt-like features in financial instruments that are classified as equity, equity-like features in financial instruments that are classified as financial liabilities and debt-like and equity-like features that determine the classification of components of compound financial instruments); and the potential dilution of ordinary shares arising from financial instruments that could be settled by delivering ordinary shares (for example convertible bonds and derivatives on own equity). The Board asked the staff to bring back the recommendations in relation to liquidation (such as its capital structure disaggregated into categories to enable users of the financial statements to understand its capital structure and the quality of different categories of capital, including priority on liquidation) after undertaking additional analysis.

Dynamic Risk Management: At this meeting, the Board discussed the feedback from outreach focused on banks. The main messages are that almost all participants supported the objective of the DRM model, but that as risk management strategy commonly defines the target profile on a risk limit basis, this should be incorporated into the DRM model to better reflect the risk management view. Most participants indicated that the issue of accounting mismatch is still not fully resolved in the DRM model or is inconsistent with accounting practices. All participants were concerned about the potential impact of recognising changes in fair value of derivatives in OCI on the regulatory capital and volatility of the capital. Many participants also commented on implementation costs and change of current practices, users’ need for information about DRM and disclosure of sensitive information. Almost all participants responded positively to the ability to designate a net open risk position or core demand deposits. However, in respect of prepayable assets, most participants suggested that the designation of the layer of nominal amounts instead of a percentage (proportion) of portfolio should be allowed. The Board provided feedback and the staff will develop a plan for the next steps in the project.

Goodwill and Impairment: At this meeting, the Board discussed feedback from users of financial statements and feedback on disclosing information about business combinations, the effectiveness of the impairment test and whether to reintroduce amortisation of goodwill. There was support for enhancing the disclosures for business combinations, including information about subsequent performance of business combinations, but some concerns about the monetary and proprietary costs of doing so. The papers on making a more effective impairment test at a reasonable cost and whether amortisation should be reintroduced were not discussed and are being carried forward to a future meeting. The Board was not asked to make any decisions.

Maintenance and Consistent Application: The Board ratified the Agenda Decision: Configuration or Customisation Costs in a Cloud Computing Arrangement (IAS 38). The staff presented the latest IFRIC Update. Board members did not comment on either matter.

Primary Financial Statements: The Board discussed the principles of aggregation and disaggregation and the roles of the primary financial statements and notes. The Board decided to state more clearly the principle relating to the purpose of disaggregation (i.e. items shall be disaggregated if the resulting disaggregated information is material). The Board also decided to include a reference to understandability in the description of the primary financial statements when considering the role of the primary financial statements and the notes.

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