Update (Agenda Paper 8)

This paper provided an update on the IASB’s work plan since its last update in May 2022. The purpose of this paper was to provide a holistic view of the IASB’s technical projects to support decisions about whether to add or remove projects, as may be discussed in individual project papers and an assessment of overall progress on the work plan, including project prioritisation and timing.

Completed projects

In February 2022, the IASB completed the Post-implementation Review (PIR) of IFRS 10-12 and concluded that the Accounting Standards are working as intended. The IASB published the Report and Feedback Statement in June 2022.

In July 2022, the IASB published a feedback statement summarising the feedback on the Request for Information (RFI) and the IASB’s activities and work plan for 2022 to 2026.

New projects

In May 2022, the IASB decided to add a high-priority project to clarify particular aspects of the requirements for assessing a financial asset’s contractual cash flow characteristics, based on feedback on the PIR of the classification and measurement requirements in IFRS 9.

In July 2022, the IASB decided to add a standard-setting project to its research pipeline to clarify the requirements in IFRS 9 for modifications of financial assets and liabilities and applying the effective interest method.

Regarding PIRs:

• In July 2022, the IASB began the PIR of the impairment requirements in IFRS 9
• The staff will present its plan to begin the PIR of IFRS 15 at this meeting
• The staff will present its updated considerations of when to begin the PIRs of the hedge accounting requirements in IFRS 9 and of IFRS 16 at this meeting

Expected Final Amendments in 2022

The IASB issued the amendments Lease Liability in a Sale and Leaseback in September 2022. It further expects to issue the amendments Non-current Liabilities with Covenants in November 2022.

Consultation documents

In September 2022, the IASB published IASB/ED/2022/1 Third edition of the IFRS for SMEs Accounting Standard. The comment period ends on 7 March 2023.

The agenda paper did not ask the IASB to make any decisions.

IASB discussion

One IASB member asked whether the project on sale and leaseback of an asset in a single-asset entity (IFRS 10 and IFRS 16) in the maintenance pipeline could be linked with the project on equity method. The staff confirmed that they are already liaising closely with the equity method project staff and will continue to do so.

Another IASB member asked whether the timing for IASB consultation documents will take the ISSB’s consultation documents into account. The staff confirmed that for the time being the boards will coordinate their consultation documents so not to overwhelm stakeholders with too many consultations at the same time.

Post-implementation reviews – objective and process (Agenda Paper 8A)

Recent deliberations have highlighted that there are different understandings among stakeholders about the objective and outcomes of a PIR. These different understandings have arisen because the IASB has only completed four PIRs since the process started and the description has evolved as the staff have learned.

This purpose of this paper was to provide a clarified description, located in Appendix A of the paper, of the objective and process for PIRs.

The IASB members were asked whether they had any questions or comments on the paper.

IASB discussion

IASB members generally welcomed the document as there was a need for clarification after the PIR of IFRS 10-12. Stakeholders had certain expectations for that PIR that were not met. For example, stakeholders expected that the IASB would revisit some of the decisions it had made during the development of the Standards.

It was noted that application issues raised during the PIR should be submitted to the IFRS Interpretations Committee (IFRS IC). One IASB member highlighted that even before the PIR, stakeholders should be encouraged to submit application issues to the IFRS IC. It should be clarified that there is no need to wait until the PIR has started.

Some IASB members asked whether the document was in line with the IFRS Foundation’s Due Process Handbook (DPHB). The staff replied that the Due Process Oversights Committee had previously confirmed that the document would be in line with the DPHB.

IASB members suggested to incorporate some of the language used in this document in future RFIs to clarify the objective of the PIR.

Timing of the post-implementation reviews of the hedge accounting requirements of IFRS 9 and of IFRS 16 (Agenda Paper 8B)

This paper considered when the IASB should begin the PIRs of the hedge accounting requirements of IFRS 9 and of the requirements of IFRS 16.

Staff recommendation

The staff recommended that the IASB consider in the second half of 2023 when to begin the PIRs of the hedge accounting requirements of IFRS 9 and the requirements of IFRS 16.

Board discussion

PIR of the hedge accounting requirements of IFRS 9

IASB members generally agreed with the staff recommendation. It was noted that most financial institutions still apply the IAS 39 requirements for hedge accounting, presumably because they are waiting for the outcome of the project on dynamic risk management (DRM). However, it is clear that the IASB cannot wait for the DRM standard to be finalised, become effective and be implemented. Therefore, one option could be to do the PIR in two phases, i.e. corporates first and then financial institutions. While postponing the hedge accounting PIR by one year would not provide much help in that regard, it may be useful to ease the pressure on staff resources who are currently working on a multitude of financial instruments projects. In addition, IASB members are not aware of pressing issues with the IFRS 9 hedge accounting requirements.

It was noted that there are some banks, predominantly in Asia, who are applying the hedge accounting requirements of IFRS 9. Consequently, a phased approach may not be necessary.

All IASB members agreed with the staff recommendation.

PIR of IFRS 16

IASB members generally supported to delay the beginning of the PIR to 2023. It was noted that the pandemic had a significant impact on lessors and lessees and therefore it would be good to wait another year to have more evidence how the Standard held up during that stress test. One IASB member disagreed and said, while not disagreeing with the delay, the pandemic should not be cited as a reason as the Standards should be able to withstand crises.

One IASB member said that the delay is necessary as there is not enough data in the real estate industry, but she was not sure that a one-year delay would be enough. The Chair offered a phased approach as a solution, i.e. conducting the PIR for the real estate industry at a later stage. An IASB member disagreed with this. In his view, conducting PIRs at different times for different industries was warranted for the IFRS 9 hedge accounting requirements because of the unique circumstances with DRM, but should not be done for other Standards.

It was also noted that a delay would be beneficial as it would prevent conducting the PIRs of IFRS 15 and IFRS 16 at the same time, which would put a strain on stakeholder resources. It should however be communicated that preparers can already submit application questions to the IFRS IC.

All IASB members agreed with the staff recommendation.