Cover paper (Agenda Paper 30)

In September 2022, the IASB published exposure draft (ED) Third edition of the IFRS for SMEs Accounting Standard. The ED was open for comment for 180 days, until 7 March 2023.

At the April 2024 IASB meeting, the IASB continued its redeliberations of the proposals in the ED.

This paper was not discussed as it was an overview paper.

Proposed revised Section 23 Revenue from Contracts with Customers—Disclosure requirements (Agenda Paper 30A)

The purpose of this paper was for the IASB to consider feedback received in the ED with regards to revenue disclosure requirements and differences between the proposed requirements and the disclosure requirements for revenue in the forthcoming IFRS 19 to decide whether to change the proposed requirements.

Staff recommendation

The staff recommended that the IASB should:

• require an SME to disclose revenue disaggregated into categories that depict its financial performance and include a list of examples of disaggregation categories that might be appropriate for SMEs to use in the revised Section 23;
• confirm its proposals to require an SME to disclose:
  • the opening and closing balances of receivables, contract assets and contract liabilities from contracts with customers;
  • revenue recognised in the reporting period that was included in the contract liability balance at the beginning of the period; and
  • the closing balances of assets recognised from the costs incurred to fulfil a contract with a customer, by main category of asset;
• withdraw the requirement for an SME to disclose revenue recognised in the reporting period from promises satisfied or partially satisfied in previous periods;
• withdraw the requirement for an SME to disclose the amount of amortisation and impairment losses recognised for assets recognised from the costs incurred to fulfil a contract in the reporting period;
• withdraw the requirement for an SME to provide a quantitative or qualitative explanation of the significance of unsatisfied promises and when they are expected to be satisfied;
• require an SME to disclose a description of the nature of the goods or services that it has promised to transfer, highlighting any promises to arrange for another party to transfer goods or services;
• require an SME to explain the judgements that have a significant effect on the amounts recognised in its financial statements used in determining the transaction price and allocating the transaction price to the promises identified in the contract; and
• remove the requirement for an SME to separately disclose receivables arising from accrued income not yet billed.

IASB discussion

Most IASB members were supportive of the staff recommendation to disclose disaggregated revenue information as SMEs are not required to present segment information and often disclose limited narrative information in their financial statements. Therefore, disaggregated revenue information provides information about the composition of an SME’s revenue that is typically unavailable elsewhere.

Some IASB members raised concerns that the potential costs of requiring SMEs to disclose revenue disaggregated into categories that depict their financial performance would outweigh the benefits.

IASB members agreed with the staff recommendations to remove some of the disclosure requirements for Section 23 given the costs of requiring SMEs to disclose such information will generally outweigh the benefits.

When discussing the judgements that have a significant effect, IASB members debated whether to add requirements to disclose and disaggregate information for revenue recognised at a point in time and over time. IASB members suggested to list such disaggregated information as an example of disaggregation categories that might be appropriate for SMEs to use in the revised Section 23.

IASB decision

All IASB members voted in favour of the staff recommendations, except for the recommendation to withdraw the requirement for an SME to disclose revenue recognised in the reporting period from promises satisfied or partially satisfied in previous periods. For that recommendation, only 11 of the 14 IASB members voted in favour.

Proposed new Section 12 Fair Value Measurement—use of plainer language (Agenda Paper 30B)

The purpose of this paper was to ask the IASB to consider how it might use plainer language to express the requirements in the new and revised sections of the standard using Section 12 Fair Value Measurement as an illustration.

Staff recommendation

The staff recommended that the IASB should:

• consider whether plainer language can be used to express requirements in new and revised sections during drafting of the third edition of the standard; and
• include the IFRS 13 definition of ‘highest and best use’ in the new Section 12.

IASB discussion

IASB members were supportive of the staff recommendation to simplify and express more clearly the language proposed in Section 12. IASB members were also in agreement with the staff recommendation to include the IFRS 13 definition of ‘highest and best use’ in the new Section 12.

Some IASB members were concerned that changing the words may also change the meaning of the requirements. Therefore, they suggested that the staff make sure that changes do not have unintended consequences.

IASB decision

All IASB members voted in favour of the staff recommendation.

Intragroup issued financial guarantee contracts (Agenda Paper 30C)

The purpose of this paper was to ask the IASB to consider feedback received in response to the ED and decide whether to make any changes to the proposed requirements for intragroup issued financial guarantee contracts.

Staff recommendation

The staff recommended that intragroup financial guarantee contracts that are issued at a zero-premium are included in the scope of Section 21 Provisions and Contingencies.

IASB discussion

Most IASB members raised concerns that the simplification proposed by the staff could create inconsistencies given different models are used for intragroup financial guarantee contracts that are issued at a zero-premium and those that are issued with a non-zero-premium.

IASB decision

All IASB members agreed to provide a simplification for intragroup financial guarantee contracts that are issued at a zero-premium but did not decide on which approach to use.