Consideration of the re-exposure criteria (Agenda Paper 21A)

Background

This paper set out the re-exposure criteria in the IFRS Foundation Due Process Handbook and asked the IASB to consider whether it should finalise the new Standard without re-exposing it for another round of public comments.

Staff recommendation

The staff recommended that the IASB finalise the new Standard without re-exposing for another round of public comments.

IASB discussion

IASB members agreed with the staff recommendation not to re-expose for another round of public comments because, although there have been changes to the ED, the changes have not been fundamental changes and stakeholders have been provided with the opportunity to give their feedback. In addition, many IASB members do not believe new information will be obtained from re-exposing the new Standard and if re-exposed, it could create significant delays in finalising the new Standard.

IASB decision

All IASB members agreed with the staff recommendation to finalise the new Standard without re-exposing for another round of public comments.

Transition and effective date (Agenda Paper 21B)

Background

This paper set out the staff analysis and recommendations on the proposals in the ED for transition and the effective date of the new Standard.

Staff recommendation

The staff recommended that the IASB require an entity to apply the new Standard for annual periods beginning on or after 1 January 2027 with early application permitted and to apply the new Standard retrospectively in accordance with IAS 8.

The staff recommended the IASB confirm the proposal in the ED to require an entity to present each of the headings and subtotals required by the new Standard in condensed financial statements in interim financial reports in the first year of application of the new Standard.

Furthermore, the staff recommended that the IASB introduce a transition requirement that requires an entity to disclose a reconciliation for each line item in the statement of profit or loss applying the requirements in IAS 1 and the new Standard for the annual period immediately preceding the date of initial application of the new Standard and permit, but not require, this disclosure for the reporting period when the new Standard is first applied or for earlier comparative periods presented. This disclosure would be required instead of the disclosure requirement in IAS 8:28(f).

Lastly, the staff recommended the IASB to require an entity that has not applied the new Standard before its effective date and presents subtotals which are labelled the same as required subtotals in the new Standard, to disclose the fact that subtotals presented may not be the same as subtotals had the requirements in the new Standard been applied.

First-time adopters of IFRS Accounting Standards would be required to apply the transition requirement in paragraph 118 of the ED to present each of the headings and subtotals required by the new Standard in condensed financial statements provided in interim financial reports for part of the period covered by its first IFRS financial statements.

IASB discussion

Some IASB members expressed the concern that for some entities, the first application of the new Standard would be a set of condensed interim financial statements. Furthermore, some IASB members said there may not be sufficient time for preparers to adopt the new Standard at 1 January 2027 in addition to the new climate reporting requirements that preparers will need to adopt. Other IASB members believed 1 January 2027 is a realistic date and preparers will have sufficient time to adopt the new Standard. Some IASB members said that is it unlikely that many preparers will be early adopting the new Standard. Some IASB members believed this project has been in the works for a long time and is a high priority project for many investors and would therefore an effective date of 1 January 2026.

Some IASB members said that requiring an entity to disclose a reconciliation for each line item in the statement of profit or loss applying the requirements in IAS 1 and the new Standard for the annual period immediately preceding the date of initial application of the new Standard would mean that preparers will need to present a reconciliation by 2026. In addition, many IASB members were concerned this proposal is likely to result in preparers incurring significant incremental costs. Some IASB members questioned how this interacts with the requirements in IAS 34. Some IASB members proposed the staff provide an explicit relief on restating comparatives. It was agreed that the staff will bring back a paper covering this as a sweep issue.

IASB decision

12 of the 14 IASB members agreed with the staff recommendation to require an entity to apply the new Standard for annual periods beginning on or after 1 January 2027 with early application permitted.

All IASB members agreed with the staff recommendation to confirm the proposal in the ED to apply the new Standard retrospectively in accordance with IAS 8.

All IASB members agreed with the staff recommendation to confirm the proposal in the ED to require an entity to present each of the headings and subtotals required by the new Standard in condensed financial statements in interim financial reports in the first year of application of the new Standard.

All IASB members agreed with the staff recommendation to require an entity to disclose a reconciliation for each line item in the statement of profit or loss applying the requirements in IAS 1 and the new Standard for the annual period immediately preceding the date of initial application of the new Standard. This disclosure would replace the disclosure required in IAS 8:28(f) and would be:

1. required for the comparative period immediately preceding the period in which the new Standard is first applied;
2. permitted but not required for the reporting period in which the new Standard is first applied; and
3. permitted but not required for comparative periods presented other than the comparative period specified in subparagraph (a).

Subject to drafting, 11 of the 14 IASB members agreed with the staff proposal to require an entity to disclose the reconciliation described in (c) above for line items in the statement of profit or loss presented in interim financial statements for interim periods in the first year of applying the new Standard.

The IASB members decided to consider whether to provide transitional relief from restating amounts presented to additional comparative periods.

Due process requirements (Agenda Paper 21C)

Background

This paper set out the steps in the IFRS Foundation Due Process Handbook that the IASB has taken in developing the new Standard and asked the IASB to confirm that it is satisfied that all the mandatory due process steps have been taken. This paper requested permission for the staff to begin the balloting process for the new Standard and asked whether any IASB member intends to dissent from the publication of the new Standard.

IASB decision

All IASB members confirmed that all mandatory due process steps have been taken and the staff can begin the balloting process for the new Standard.

No IASB members intend to dissent from the publication of the new Standard.