Disclosure initiative — Subsidiaries without public accountability: Disclosures

Date recorded:

Project direction and plan for redeliberations (Agenda Paper 31)

In July 2021, the IASB published Exposure Draft ED/2021/7 Subsidiaries without Public Accountability: Disclosures which sets out the IASB’s proposal for a new IFRS Accounting Standard that would permit an eligible subsidiary to apply reduced disclosure requirements when applying IFRS Accounting Standards.

This paper asked the IASB to decide the project direction. In particular, the staff asked whether the IASB should proceed with its proposals set out in the ED and thus develop a final IFRS Accounting Standard. If yes, the staff suggested a plan for deliberating the feedback on the ED.

Staff recommendation

The staff recommended the IASB proceeds with its proposals and develops a final IFRS Accounting Standard. If the IASB agrees to proceed to develop a final IFRS Accounting Standard, the staff also recommended that the IASB address the matters the staff have identified based on the feedback received in response to the ED. These matters relate to the objective and scope of the Standard, how disclosure requirements were developed, proposed disclosure requirements, and applying the draft Standard.

The staff also recommended that the IASB does not to publish a ‘catch-up’ ED that considers amendments to (and new) IFRS Accounting Standards issued after 28 February 2021 before finalising the Standard.

IASB discussion

IASB members generally expressed support to continue with the project. They acknowledged the concerns raised in the comment letters but believed they can be addressed. One IASB member noted that one concern was the interaction of the draft Standard with local regulation and that the staff proposed to discuss this. The IASB member warned that examining all local regulations would be time-consuming. The staff responded that they would utilise ASAF for this and, potentially, also the World Standard-Setters forum. Another IASB member picked up on that by cautioning that any work to be done on this should be generic and high-level rather than addressing individual jurisdictional concerns. The Chairman agreed but also said that the IASB should not end up in a situation where the draft Standard is not adopted because of local barriers.

One IASB member commented on the staff’s intention to redeliberate the feedback on the approach of how the disclosure requirements are developed. He said it was too late in the process to change the approach. The staff confirmed that they would only make refinements with regard to the language used in the requirements rather than fundamentally changing the approach. An IASB member commented in response to this that the staff should keep in mind that the approach was chosen because of cost-benefit concerns.

One IASB member asked whether the redeliberations about structure and form of the Standard would also challenge its status as an IFRS Accounting Standard. The staff confirmed that this was merely about discussing concerns from respondents and the IASB and the staff have always anticipated that this would be an IFRS Accounting Standard.

On whether a catch-up ED needs to be published, IASB members seemed to agree with the staff recommendation so not to delay the publication of the new Standard. Some IASB members said that it should be signalled to stakeholders that once the Standard is issued, a catch-up ED would be published very soon after. This sparked a discussion on what the process would be for this Standard when deliberating disclosures in another project. There seemed to be a consensus that there is a need to think about this Standard right away when thinking about disclosures in a project, but there were two options to bring the reduced disclosures into this Standard. One would be as a consequential amendment in the final document of the project. The second option would be a periodical catch-up ED for this Standard.

One IASB member asked to clarify in the Standard that disclosure requirements of full IFRS that are not replaced by the Standard still apply in full. When considering whether a catch-up ED is needed, he was confused as to which requirements would apply if the approach was to do no catch-up ED for the new requirements.

IASB decision

All IASB members supported the staff recommendation.

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