Cover paper (Agenda Paper 12)

In this session, the IASB discussed the following maintenance and consistent application topics:

• Analysis of feedback received in response to exposure draft Annual Improvements to IFRS Accounting Standards—Volume 11:
• Use of a hyperinflationary presentation currency by a non-hyperinflationary entity (IAS 21):
  • Disclosure and transition requirements
  • Due process requirements

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

Annual Improvements to IFRS Accounting Standards—Hedge Accounting by a First-time Adopter (Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards): Analysis of feedback (Agenda Paper 12A)

This paper analysed the feedback on hedge accounting by a first-time adopter. The IASB proposed to amend IFRS 1:B5-B6 to improve the consistency of these paragraphs with the requirements in IFRS 9 and to add cross-references to improve the accessibility and understandability of IFRS Accounting Standards.

Staff recommendation

The staff recommended that the IASB finalise the proposal with no changes.

IASB discussion

One IASB member preferred not to reference accounting manuals of large accounting firms as this could imply that the aim of the IASB is to conform to existing practice. The staff clarified that the reference to the accounting manual of large accounting firms is merely to demonstrate there is no diversity in practice.

IASB decision

All IASB members agreed with the staff recommendation.

Annual Improvements to IFRS Accounting Standards—Gain or Loss on Derecognition (Amendments to IFRS 7 Financial Instruments: Disclosures): Analysis of feedback (Agenda Paper 12B)

This paper analysed the feedback on gain or loss on derecognition. The IASB proposed to amend paragraph IFRS 7:B38 to update an obsolete cross-reference.

Staff recommendation

The staff recommended that the IASB finalise the proposal with no changes.

IASB discussion

No IASB member raised a comment on the paper.

IASB decision

All IASB members agreed with the staff recommendation.

Annual Improvements to IFRS Accounting Standards—Introduction and Credit Risk Disclosures (Amendments to Guidance on implementing IFRS 7): Analysis of feedback (Agenda Paper 12C)

This paper analysed the feedback on introduction and credit risk disclosures. The IASB proposed to amend IFRS 7:IG1 to add a statement clarifying that the guidance does not illustrate all the requirements in IFRS 7. The IASB also proposed to amend IFRS 7:IG20B to simplify its wording.

Staff recommendation

The staff recommended that the IASB finalises the proposed amendment to IFRS 7:IG1 with a minor wording change and the proposed amendment to IFRS 7:IG20B with no changes.

IASB discussion

No IASB member raised a comment on the paper.

IASB decision

All IASB members agreed with the staff recommendation.

Annual Improvements to IFRS Accounting Standards—Disclosure of Deferred Difference between Fair Value and Transaction Price (Amendments to Guidance on implementing IFRS 7): Analysis of feedback (Agenda Paper 12D)

This paper analysed the feedback on disclosure of deferred difference between fair value and transaction price. The IASB proposed to amend IFRS 7:IG14 to improve its consistency with IFRS 7:28.

Staff recommendation

The staff recommended that the IASB finalise the proposal with a minor wording change.

IASB discussion

No IASB member raised a comment on the paper.

IASB decision

All IASB members agreed with the staff recommendation.

Annual Improvements to IFRS Accounting Standards—Derecognition of Lease Liabilities (Amendments to IFRS 9 Financial Instruments): Analysis of feedback (Agenda Paper 12E)

This paper analysed the feedback on derecognition of lease liabilities. The IASB proposed to amend IFRS 9:2.1(b)(ii) to add a cross-reference to IFRS 9:3.3.3. The purpose of that proposed amendment is to resolve potential confusion for a lessee applying the derecognition requirements in IFRS 9.

Staff recommendation

The staff recommended that the IASB finalise the proposal with no changes.

IASB discussion

IASB members asked the staff to highlight that this is a narrow-scope annual improvement, and it is not intended to address concerns raised by respondents in relation to the interaction between IFRS 9, IFRS 16 and IFRS 15. In addition, some IASB members asked the staff to clarify that the proposed amendments do not affect the existing modification requirements of IFRS 16 but this amendment is merely to confirm that extinguishments of lease liabilities are in scope of IFRS 9.

IASB decision

All IASB members agreed with the staff recommendation.

Annual Improvements to IFRS Accounting Standards—Transaction Price (Amendments to IFRS 9 Financial Instruments): Analysis of feedback (Agenda Paper 12F)

This paper analysed the feedback on transaction price. The IASB proposed to amend IFRS 9:5.1.3 and Appendix A of IFRS 9 to clarify the use of the term ‘transaction price’.

Staff recommendation

The staff recommended that the IASB finalise the proposals with no changes.

IASB discussion

No IASB member raised a comment on the paper.

IASB decision

All IASB members agreed with the staff recommendation.

Annual Improvements to IFRS Accounting Standards—Determination of a ‘De Facto Agent’ (Amendments to IFRS 10 Consolidated Financial Statements): Analysis of feedback (Agenda Paper 12G)

This paper analysed the feedback on determination of a ‘de facto agent’. The IASB proposed to remove from IFRS 10:B74 an inconsistency with IFRS 10:B73.

Staff recommendation

The staff recommended that the IASB finalise the proposal with a minor wording change.

IASB discussion

One IASB member asked the staff to amend IFRS 10:B74 to say “… A party might also be a de facto agent when those that direct the activities of the investor have the ability to direct that party to act on the investor’s behalf…” rather than “… a de facto agent of the investor…” because this is consistent with the description of de facto agent in IFRS 10:B73.

IASB decision

All IASB members agreed with the staff recommendation.

Annual Improvements to IFRS Accounting Standards—Cost Method (Amendments to IAS 7 Statement of Cash Flows): Analysis of feedback (Agenda Paper 12H)

This paper analysed the feedback on ‘cost method’. The IASB proposed to amend IAS 7:37 to remove a reference to ‘cost method’ that is no longer defined in IFRS Accounting Standards.

Staff recommendation

The staff recommended that the IASB finalise the proposals with no changes.

IASB discussion

One IASB member asked the staff to clarify that this amendment does not affect how ‘cost’ is interpreted in IAS 27.

IASB decision

All IASB members agreed with the staff recommendation.

Annual Improvements to IFRS Accounting Standards—Effective date and due process (Agenda Paper 12I)

This paper asked the IASB whether it agrees with the staff recommendation with respect to the effective date for the amendments and sets out the steps in the IFRS Foundation Due Process Handbook that the IASB has taken in developing the amendment. In addition, this paper asked the IASB to confirm that it is satisfied that it has complied with the due process requirements and asks whether any IASB member intends to dissent from the amendments.

Staff recommendation

The staff recommended that the IASB require an entity to apply the amendments to IFRS 1, IFRS 7, IFRS 9, IFRS 10 and IAS 7 for annual reporting periods beginning on or after 1 January 2026, with earlier application permitted and to finalise the amendments without re-exposure.

IASB discussion

One IASB member asked the staff to clarify whether the amendments will be applied retrospectively.

IASB decision

All IASB members agreed with the staff recommendations regarding the effective date of the annual amendments.

All IASB members agreed with the steps taken in the IFRS Foundation Due Process Handbook in developing the amendment.

All IASB members confirmed that it is satisfied that it has complied with the due process requirements.

There are no IASB members intending to dissent from the amendments.

Use of a Hyperinflationary Presentation Currency by a Non-hyperinflationary Entity (IAS 21)—Disclosure and transition requirements and other matters (Agenda Paper 12J)

At its December 2023 meeting, the IASB tentatively decided to propose narrow-scope amendments to IAS 21. The proposed amendments would provide a new translation method for presenting the financial information of a non-hyperinflationary entity in a hyperinflationary presentation currency that would improve the usefulness and comparability of the reported financial information.

The purpose of this meeting was to discuss remaining aspects of the proposed amendments and ask the IASB for permission to begin the process for balloting the exposure draft proposing these amendments.

Staff recommendation

Disclosure requirements

The staff recommended:

• requiring an entity that translates the results and financial position of a foreign operation that has a non-hyperinflationary functional currency into a hyperinflationary presentation currency to disclose summarised financial information about that foreign operation;
• requiring an entity within the scope of the proposed amendments to disclose the fact that the entity’s financial statements (or results and financial position of the entity’s foreign operation) and corresponding figures for previous periods have been translated at the closing rate at the date of the most recent statement of financial position; and
• requiring an entity whose presentation currency ceases to be hyperinflationary to disclose that fact.

Transition and early application

The staff recommended:

• requiring an entity that already applies IFRS Accounting Standards to apply the amendments retrospectively in accordance with IAS 8 when that entity first applies the proposed amendments;
• exempting an entity that already applies IFRS Accounting Standards from disclosing the information required applying IAS 8:28(f) when that entity first applies the proposed amendments;
• not providing transition relief for first-time adopters; and
• permitting an entity that already applies IFRS Accounting Standards to apply the proposed amendments earlier than the effective date and to require an entity that applies the amendments for an earlier period to disclose that fact.

Presentation currency becoming or ceasing to be hyperinflationary

The staff recommended:

• not including specific requirements to address situations in which an entity’s presentation currency becomes hyperinflationary; and
• if an entity’s presentation currency ceases to be hyperinflationary, requiring the entity to apply IAS 21:39(b) prospectively to income and expenses arising after the end of the previous reporting period (i.e. the entity would not retranslate income and expenses arising before the end of the previous reporting period).

IASB discussion

IASB members were generally supportive of the staff recommendation. Some IASB members particularly liked that the disclosure requirements contain an embedded objective that serves as a ‘catch all’ for cases in which the specific disclosures do not provide sufficient information. One IASB member suggested to use the disclosure requirements in IFRS 12 as a starting point and top up as needed. In particular, he suggested that the materiality principle from IFRS 12 should be repeated for this amendment. The staff replied that the general materiality principle in IAS 1 applies. However, the IASB member thought it should be specifically mentioned in this amendment as it is also specifically mentioned in IFRS 12, and it should be clear that there is no difference between the two. The staff acknowledged the concern but also wanted to ensure that preparers have sufficient flexibility as to how to present the information. One IASB member suggested to include in the basis for conclusions to the amendments an explanation why the materiality principle is not repeated in the disclosure requirements for the amendments.

Other IASB members weighed in on this discussion and said that they agree that whether information should be presented in an aggregated or disaggregated form should be governed by materiality. They also emphasised that repetition of information should be avoided. If similar information is required by other standards, such as IFRS 5, IFRS 8 or IFRS 12, that information does not need to be repeated. If it is not presented in the same location, preparers should add a cross-reference to the relevant information instead of repeating the information. One IASB member suggested to disaggregate by currency and not by subsidiary.

IASB members did not raise any comments on the topic of transition and early application.

On presentation currency becoming or ceasing to be hyperinflationary, one IASB member suggested to ensure that consistency with IAS 29 is maintained. The staff confirmed that they will do that.

IASB decision

13 of the 14 IASB members voted in favour of the staff recommendations on disclosure requirements.

All IASB members voted in favour of the staff recommendations on transition, early application and presentation currency becoming or ceasing to be hyperinflationary.

Use of a Hyperinflationary Presentation Currency by a Non-hyperinflationary Entity (IAS 21)—Due Process requirements (Agenda Paper 12K)

In this paper, the staff explained the steps in the IFRS Foundation Due Process Handbook that the IASB has taken in developing the proposed amendments to IAS 21, sought the IASB’s permission to begin the process for balloting the forthcoming exposure draft (ED), and asked whether any IASB member plans to dissent from the proposals in the forthcoming ED.

This paper was not discussed as the staff wanted the IASB to discuss a paper first on how any amendments to IAS 21 would affect the forthcoming IFRS 19 Subsidiaries without Public Accountability: Disclosures. That paper will be discussed at a future meeting.