Third agenda consultation

Date recorded:

Cover paper (Agenda Paper 24)

In March 2021, the IASB published Request for Information (RfI) Third Agenda Consultation. The comment period for the RfI ended on 27 September 2021. At this meeting, the IASB continued its discussions of the feedback received on the RfI.

Projects on the current work plan—proposed response to feedback (Agenda Paper 24A)

This paper set out the feedback on the RfI about projects on the IASB’s current work plan and the staff’s proposed response to this feedback.

Feedback received

Some respondents made general comments about the work plan and expressed mixed views:

  • Some said the IASB should firstly finalise the projects currently on its work plan, as these projects were identified as priorities by stakeholders in the 2015 Agenda Consultation, and continue working on post-implementation reviews (PIRs), as required by the Due Process Handbook
  • Some said the IASB should reassess the priority and necessity of projects on its current work plan and determine whether any of those projects should be put on hold or even stopped to free up resources for new, more important projects.

Some respondents wanted to pause or discontinue some projects on the current work plan because, in their view:

  • The issues addressed in the project are not pervasive
  • The projects have made little progress or may not result in significant improvements in financial reporting
  • The projects have lower priority than other potential projects.

In addition to general comments on the work plan, many respondents made specific comments about particular projects on the current work plan. In some cases, many (or most or all) of those respondents who commented on a particular project expressed views in favour of continuing work on that project. For example, some respondents commented on the Primary Financial Statements project, all of which expressed views in favour of continuing that project. However, in other cases, mixed views were expressed, or a few or some respondents suggested that a particular project should be paused or discontinued. For example, some respondents said that the IASB should pause work on the Management Commentary project until the International Sustainability Standards Board (ISSB) begins its standard-setting work.

Staff’s proposed response

Although some respondents suggested that the IASB should reassess the priority of projects on its current work plan, in the staff’s view, in general, the IASB should continue progressing projects on its current work plan because:

  • Reconsidering the prioritisation of projects on the current work plan as part of the Third Agenda Consultation would be problematic
  • There are natural points within a project’s lifecycle at which the IASB considers the project’s future direction (reflection points). Many of the projects that a few or some respondents suggested should be paused or discontinued have reached or will soon reach a reflection point. Those reflection points include:
    • Following the publication of a consultation document (such as a discussion paper or exposure draft)—the IASB considers the feedback on such consultation documents before determining the next steps in a project, including whether to continue, pause or discontinue the project
    • After completing research, when considering whether to move a research project to standard-setting
    • At other points during a project lifecycle when appropriate, such as after conducting stakeholder outreach on specific aspects of a project to help the IASB determine the next steps in that project.

However, the IASB has not discussed two projects on the current work plan for some time. Therefore, the staff have undertaken further analysis of these two projects:

  • Availability of a Refund: In summary, staff are recommending that the IASB withdraw the project from its work plan
  • Provisions—Targeted Improvements: In summary, staff are recommending that the IASB keep this project on its work plan.

Feedback from respondents to the Request for Information about current projects has been passed onto the applicable project teams, to be considered in conjunction with other feedback on those projects.

IASB discussion

IASB members expressed support for the staff’s proposed response with one IASB member saying that despite his best efforts, he could not identify any projects that could be removed from the IASB’s work plan. In general, IASB members found it helpful to revisit this decision when projects come to the reflection points, as the staff called them.

IASB decision

All IASB members supported the staff’s proposed response.

Cross-cutting themes—capacity implications (Agenda Paper 24B)

Based on responses to the RfI and other feedback, the staff have identified three cross-cutting themes that may affect available capacity:

  • Connectivity between the IASB and the ISSB
  • Suggestions that the IASB should partner further with national standard-setters and other regional bodies (NSS)
  • The priority of matters identified in PIRs

Connectivity

The staff think that coordination and resources will be needed to support connectivity with the ISSB, but they do not expect it to dominate the activities of the IASB and its staff. Capacity implications of connectivity between the IASB and the ISSB are uncertain, so the staff need to make a best estimate of the implications and retain flexibility to deal with this uncertainty. The staff expect connectivity to have capacity implications for the IASB’s work on:

  • Some new Accounting Standards and major amendments to Accounting Standards
  • Digital financial reporting
  • Understandability and accessibility of Accounting Standards
  • Stakeholder engagement

The staff do not expect that connectivity with the ISSB will have implications for the IASB’s work on:

  • Maintenance and consistent application of Accounting Standards
  • The IFRS for SMEs Standard

Partnering further with NSS

The IASB has a mutually beneficial partnering relationship with NSS that supports all of the IASB’s main activities. In response to the offer to provide further assistance, the staff look forward to continuing to deepen and broaden this relationship. Specific to new Accounting Standards and major amendments to Accounting Standards, the staff think that further partnering with NSS may be best focused on:

  • Continuing to support the quality of the IASB’s work, for example, through feedback and outreach
  • Expediting the IASB’s standard-setting, for example, during the research phase of a project. The staff do not think these resources would enable the IASB to increase the number of projects that could be added to its work plan for 2022 to 2026. However, in the longer term, this support could allow for faster completion of projects, allowing for more projects to be added to the IASB’s work plan as part of future agenda consultations, if stakeholders’ capacity allows

Priority of matters identified in post-implementation reviews

At its January 2022 meeting, the IASB discussed the approach to prioritising matters identified in PIRs. The IASB’s decision at that meeting could result in the IASB prioritising and responding to more follow-on projects from PIRs than originally estimated in the RfI. This could:

  • Decrease the capacity available for projects that could be added to the IASB’s work plan for 2022 to 2026, assuming no change in the IASB’s current focus on new Accounting Standards and major amendments to Accounting Standards
  • Decrease capacity available for maintenance and consistent application work, assuming no change in the IASB’s current level of focus on that activity

However, similar to connectivity, the capacity implications of follow-on projects from PIRs are uncertain, so the staff need to make a best estimate of the implications and retain flexibility to deal with this uncertainty.

IASB discussion

Connectivity

With regard to connectivity, IASB members agreed with the staff’s analysis that it is too early to assess at this point how much resource is needed. The IASB should therefore retain some flexibility in terms of upcoming projects that overlap with the ISSB. The stakeholders for both Boards may be similar in some cases and their capacity should govern both Boards’ work programmes.

It was mentioned that in the early stages, collaborating with the ISSB will take up more resources than it will take later on as there will be a learning curve. Therefore, any analysis of resources required should be divided into short, medium and long term. One IASB member said that connectivity should be thought about as leveraging synergies rather than imposing a tax.

The Chairman said that to him connectivity was not so much about connecting the standard-setting process, which will be independent for most projects, but to ensure that the resulting IFRS Standards that are published by both Boards are not contradicting each other and do not overlap significantly. He also emphasised that connectivity includes coordination between both Boards to ensure that their common stakeholders are not overburdened. The feedback statement provides an opportunity to explain the IASB’s understanding of the term ‘connectivity’.

NSS

IASB members agreed that NSS should be utilised in several processes, for example when launching consultations or when drafting educational material. Especially once the IFRS for SMEs Standard is updated, NSS can help to facilitate consistent application and also help updating or reviewing the IASB’s 35 modules of educational material on IFRS for SMEs.

PIRs

IASB members warned that the work plan should not be filled up with projects coming out of PIRs, especially not if the overall assessment is that a Standard is working well in practice. The PIR framework that was discussed in the last meeting should be applied rigorously. That also means that some tough decisions are needed about not addressing certain issues rather than keeping up hope among stakeholders that the IASB will eventually address those. The Vice Chair also said that it is important to communicate that a PIR is part of the standard-setting and not part of the maintenance and consistent application programme.

Strategic direction and balance of the IASB’s activities from 2022 to 2026 (Agenda Paper 24C)

This paper discusses staff recommendations on the strategic direction and balance of the IASB’s activities from 2022 to 2026, considering the feedback from respondents to the RfI and the analysis of cross-cutting capacity implications.

Staff recommendations

Most respondents commented on the strategic direction and balance of the IASB’s activities and supported the IASB’s current strategic direction. Many said the current allocation of resources to the IASB’s main activities is about right and suggested some minor modifications to rebalance the level of focus. Based on the staff’s analysis, they recommend that the IASB:

  • Should make only minor changes to the overall balance of its activities from 2022 to 2026:
    • Slightly decrease its current level of focus on new Accounting Standards and major amendments to Accounting Standards
    • Slightly increase its current level of focus on digital financial reporting
    • Slightly increase its current level of focus on understandability and accessibility of Accounting Standards, which will indirectly support maintenance and consistent application of Accounting Standards
  • Should not undertake any other activities within the current scope of its work

IASB discussion

IASB members agreed that the focus on topics should be largely unchanged and welcomed the staff’s recommendation to increase the focus on digital reporting and understandability/accessibility of Accounting Standards. However, there were mixed views as to whether the IASB should state that it intends to slightly decrease its current level of focus on new Accounting Standards and major amendments to Accounting Standards. Decreasing the activity would mean a higher pressure on the maintenance and consistent application programme.

Opponents of explicitly stating the decrease said that this would send the wrong message to constituents given the current full agenda of the IASB. They spoke in favour of only stating the positive (i.e. increase on digital financial reporting and understandability/accessibility of Accounting Standards). However, some IASB members and the staff disagreed by saying that the math needs to add up. If there is an increase in some areas there must be a decrease in others. One Board member thought that was not necessarily the case as the IASB could be more efficient and leverage some ISSB resources and therefore a decrease in accounting activity may not become necessary.

Board decision

All Board members agreed with staff recommendation not to undertake any other activities within the current scope of its work.

9 of the 12 Board members supported the staff recommendation to make the following minor changes to the overall balance of its activities from 2022 to 2026:

  • Slightly decrease its current level of focus on new Accounting Standards and major amendments to Accounting Standards
  • Slightly increase its current level of focus on digital financial reporting
  • Slightly increase its current level of focus on understandability and accessibility of Accounting Standards, which will indirectly support maintenance and consistent application of Accounting Standards

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