Cover Paper (Agenda Paper 31)

At its June 2022 meeting, the IASB agreed on a project plan for redeliberating the Exposure Draft Subsidiaries without Public Accountability: Disclosures (ED) towards developing an IFRS Accounting Standard (Standard).

At the April 2023 meeting, the IASB continued its redeliberations of the feedback on aspects of the proposed disclosure requirements and language in the draft Standard.

Feedback on proposed disclosure requirements (Agenda Paper 31A)

This agenda paper set out the approach to developing the proposed disclosure requirements and analysing the feedback on the proposed disclosure requirements.

Feedback on proposed disclosure requirements

Disclosure objectives

In developing the proposed disclosure requirements, the IASB excluded disclosure objectives included in IFRS Accounting Standards because including them might result in eligible subsidiaries being compelled to provide the same disclosures as if they had not applied the draft Standard

Most of the respondents who commented on disclosure objectives agreed with excluding the disclosure objectives from the draft Standard for the reasons set out in the Basis for Conclusions (BC) on the ED. However, some respondents disagreed; they said that disclosure objectives are helpful in achieving ‘fair presentation’ as required by IAS 1, and not having them could compromise the reliability and completeness of the information required to enable the users of the financial statements to make informed decisions

Whilst acknowledging the views of respondents that support retaining the disclosure objectives, an eligible subsidiary applying the draft Standard is not prohibited from providing disclosures required by IFRS Accounting Standards to comply with the fair presentation requirements in IAS 1. The IASB’s view was that including the disclosure objectives may compel an eligible subsidiary to provide the same disclosures as if they had not applied the draft Standard, which would be contrary to the project objective

Guidance on applying the proposed disclosure requirements

Guidance on how to apply a disclosure requirement in IFRS Accounting Standards is typically located either together with the relevant disclosure requirement or immediately after the disclosure requirement

In developing the proposed disclosure requirements, the IASB did not include guidance on how to apply the proposed disclosure requirements because:

• The IASB proposed disclosure requirements only in the draft Standard. In applying the new Standard, an eligible subsidiary is applying IFRS Accounting Standards and therefore would refer to the applicable IFRS Accounting Standard for guidance on how to apply the disclosure requirement. Adding guidance on proposed disclosure requirements would lengthen the new Standard and duplicate guidance already available in IFRS Accounting Standards
• Recognition, measurement and presentation requirements in other IFRS Accounting Standards remain applicable and will not be changed by the new Standard

Relief from providing comparative information

The IFRS for SMEs Accounting Standard does not require comparative information to be presented for some disclosures, specifically on the reconciliation of the movements of certain assets and liabilities.

The relief was provided to avoid lengthy note disclosures that would repeat a prior year disclosure and would be available from prior year financial statements. Such relief was deemed appropriate for users of non-publicly accountable entities.

Feedback on individual proposed disclosure requirements

Many respondents commented on individual proposed disclosure requirements in the draft Standard. Comments received included deleting, adding, and clarifying the proposed disclosure requirements in the draft Standard. For each IFRS Accounting Standard, the analysis is summarised in a table in the agenda paper.

Staff recommendation

The staff recommended that the IASB:

• Does not revise the draft Standard to include:
  • Disclosure objectives
  • Guidance on how to apply the disclosure requirements in the new Standard
• Retain the relief from providing comparative information proposed in the draft Standard
• Retain the proposed disclosure requirements in the draft Standard for IFRS Accounting Standards analysed in the paper, subject to recommendations in the table in the agenda paper to the individual proposed disclosure requirements.

IASB discussion

All IASB members supported the staff recommendations regarding not including disclosure objectives and disclosure requirements in the new standard. Some members expressed concern that the decision may impact other new standards to be developed. IASB members agreed that they should remain flexible regarding the inclusion of the “Disclosure objectives and the guidance” in other new standards.

One IASB member expressed concern relating to the potential confusion that may be caused by not providing comparative information in the event that an entity changed its accounting policy. Other IASB members pointed out that IAS 8 required reporting entities to provide comparative information when the accounting policy changes.

IASB decision

The IASB decided to revise the proposed disclosure requirements in the ED by removing from the ED:

• Paragraph 25(a), proposed under the subheading IFRS 1
• Paragraphs 55 and 60, proposed under the subheading IFRS 7
• Paragraph 44 of IFRS 7—some IASB members pointed out that this disclosure objective and the requirements were included in both the full IFRS Standard and the IFRS for SMEs Accounting Standard. If the new Standard removes this paragraph, it may result in entities which apply “full IFRS” and “IFRS for SMEs” having to provide certain disclosures, while entities applying the new Standard would not be required to make such disclosures. IASB members suggested that the staff reconsider
• Paragraphs 47 and 48 of IFRS 7—all IASB members agreed with the staff recommendation to delete those paragraphs. Some IASB members suggested that the reason for deleting those paragraphs should not be that the financial instruments reclassifications are expected to be very infrequent. Some transactions can happen infrequently but are still very important
• Paragraphs 62, 66 and 67 of IFRS 7—all IASB members agreed with the staff recommendation to delete those paragraphs. Some members suggested that the new Standard could include some wording in line with full IFRS Standards, such as for entities which have financing as their main business activities, certain information should be provided
• Paragraph 81, proposed under the subheading IFRS 13
• Paragraph 145, proposed under the subheading IAS 12
• Paragraph 185(k), proposed under the subheading IAS 34

The IASB tentatively decided to revise the proposed disclosure requirements in the ED by adding to the new Standard:

• Paragraphs 33(c) and 41(d) of IFRS 5
• Paragraph 39 of IFRS 7
• Paragraph 26 of IAS 24
• Paragraphs 130(d)(i) and (iii), 134(d)(iv)-(v) and 134(e)(iv)-(v) of IAS 36
• Paragraph 79(e) of IAS 40

13 out of 14 IASB members voted in favour of the staff recommendation not to revise the draft Standard to include disclosure objectives and guidance on how to apply the disclosure requirements.

13 IASB members voted in favour of retaining the relief from providing comparative information proposed in the draft Standard.

All IASB members voted in favour of retaining the proposed disclosure requirements in the draft Standard for IFRS Accounting Standards analysed above.

Updating the language of the disclosure requirements (Agenda Paper 31B)

This agenda paper discussed the language and structure of the disclosure requirements and whether they should be the same as in IFRS Accounting Standards. The staff argued that this will facilitate application and translation and will also address concerns of some respondents that they would need to understand the IFRS for SMEs Accounting Standard to apply the draft Standard.

The staff performed an initial comparison between the language used in the draft Standard and in the relevant paragraphs of the applicable IFRS Accounting Standards. The staff believed that in most cases updating the language is straightforward. However, some of the disclosure requirements in the IFRS for SMEs Accounting Standard are based on an older version of the relevant IFRS Accounting Standard or depart from the requirements in the IFRS Accounting Standard for other reasons. In such cases, the updated approach may require deleting or substantially editing the proposed disclosure requirement in the draft Standard.

Staff recommendation

In drafting the disclosure requirements in the new Standard, the staff proposed using the language in the full IFRS Accounting Standards and only adjusting the language to make the disclosure requirements more consistent and understandable by:

• Adapting the structure of the requirements where disclosure objectives or other aspects of the requirements have not been retained in the new Standard
• Using a consistent term for the same concept (for example, ‘reporting period’)
• Updating language to be consistent with the latest IFRS Foundation style (for example, using ‘table’ rather than ‘tabular format’)
• Using standard phrasing for disclosure requirements (for example, ‘an entity shall disclose’)
• Updating references to specific paragraphs to include a reference to the applicable IFRS Accounting Standard or a reference to the relevant paragraph in the new Standard

The staff also considered the impact of the modified approach on disclosure requirements proposed in the draft Standard that were based on disclosure requirements in the IFRS for SMEs Accounting Standard that were not derived from requirements in the latest full IFRS Accounting Standard.

The staff recommended deleting these disclosure requirements according to the modified approach. The staff may discuss other challenges in updating the language in staff papers for future IASB meetings.

IASB discussion

The IASB discussed how to implement its tentative decision to update the language in IFRS Accounting Standards for the disclosure requirements in the prospective Standard.

IASB decision

The IASB was not asked to make any decisions. The IASB will continue discussing the feedback on the ED.