The Conceptual Framework session will focus on:

• Summary of tentative decisions
• Liability definition and supporting concepts
• Testing the proposed asset and liability definitions — illustrative examples
• Effects of the proposed changes to the Conceptual Framework on preparers

The insurance contracts session will discuss:

• Methodology - external testing of draft IFRS 17
• Results - external testing of draft IFRS 17
• Level of aggregation
• Experience adjustments
• Transition issues
• Mitigating financial risks reflected in insurance contracts
• Other sweep issues
• Mandatory effective date of IFRS 17

Please click for the updated agenda.

The topics covered during the meeting were the following (numbers in brackets are ref­er­ences to the cor­re­spond­ing para­graphs of the summary):

• Research report Information Needs of Users of New Zealand Capital Markets Entity Reports (1-20): This was a research report from New Zealand. In addition to the research results the ASAF members also discussed the research methodology (small sample, limitations regarding the questions asked), which does not necessarily make the research results applicable in other jurisdictions. ASAF members supplemented the results with insights from their own jurisdictions.
• Rate-regulated activities (20-36): ASAF members discussed to agenda papers on this topic: (i) Research on the economic value of financial information on rate-regulated activities (prepared by Canada) and (ii) Accounting for rate-regulated activities from a conceptual perspective (prepared by Korea). During the discussion of the Canadian paper, ASAF members explained the situation in their respective jurisdictions. ASAF members agreed that it is important for users of financial statements to receive information about the entity’s rights and obligations created by the rate regulation. Where that information should be made availabe (primary financial statements or notes) remained contentious. The Korean paper explored how the Conceptual Framework and IFRS 15 could be used as a starting point for developing a new accounting model to report the financial effects of rate regulation. ASAF members agreed that developing a new accounting model might be useful and thought the Korean approach promising. However, concerns and comments were also voiced.
• Conceptual Framework (37-62): ASAF members discussed the Conceptual Framework project comprehensively. Several papers had been submitted for discussion: (i) a paper on measurement prepared and presented by EFRAG (different ASAF memebrs supported different points raised in this paper), (ii) an IASB staff draft of proposed revisions to the discussion of factors to be considered in selecting a measurement basis (the new wording rather met with resistance from ASAF members), (iiI) an update on the Board’s tentative decisions on presenting info rmation about financial performance, and (iv) a paper on financial performance and measurement prepared by the ASBJ.
• Definition of a business (63-71): ASAF members were informed about the corresponding FASB project and compared it with the IASB exposure draft. They encouraged IASB and FASB to align the wording of their amendments as much as possible and suggested that IASB clarify in the basis for conclusions that even though the IASB wording is different from the FASB wording, it is intended to have the same outcome. Regarding the IASB exposure draft, some inconsistencies and unintended consequences were pointed out.
• Project updates and agenda planning (72-73): ASAF members were updated on current IASB projects. Topics suggested for the agenda of the next meeting were cryptocurrencies, an update on the forthcoming insurance contracts standard, and a general discussion on their research activities.
• Working with National standard-setters (74-78): Discussion of this topic was short and onesided as ASAF members were only asked to identify entities in their jurisdictions that have improved how they communicate in their financial statements and would be willing to be included as examples in a report of the IASB staff. ASAF members asked clarifying questions and pointed out other reports that have been published in this area.
• Feasibility Studies (79-80): This point merely clarified what the IASB staff calls feasibility studies: An informal label to reflect that the staff is looking into whether limited amendments can be achieved with a given approach where implementing the approach is not expected to require extensive drafting.

A full report of the meeting is available on the IASB's website.

EFRAG “welcomes the IASB’s efforts to provide clarity on the definition of a business, and to help distinguish between a business and a group of assets” and supports the proposals.

EFRAG supports the idea of a ‘screening test’, but feels that, as currently drafted, it may, in some instances “result in inappropriate conclusions”.  It indicates that the screening test should only be retained “as a determinative assessment only if its relative simplicity can be maintained while avoiding inappropriate outcomes”.  Should the IASB retain the screening test in the proposed form, EFRAG identifies a number of concerns which it feels should be addressed.  

Regarding the proposed guidance on evaluating whether an acquired process is substantive, EFRAG agrees with having two sets of criteria depending on whether the set of activities and assets has outputs.  However, EFRAG has concerns on the presence of goodwill as an indicator, the guidance on acquired contracts and the role of the organised workforce. 

EFRAG also agrees with using illustrative examples but highlights that these should have a greater focus on guidance that requires significant judgement.  EFRAG also encourages a converged approach by the IASB and FASB regarding the proposals. 

On accounting for previously held interests, EFRAG is supportive:

• of the IASB’s proposal to clarify the accounting for previously held interests in the assets and liabilities of a joint operation when an entity obtains control over a joint operation that meets the definition of a business; and
• of the proposed accounting for previously held interests in respect to the transactions described in paragraph B33C of the ED on the amendments to IFRS 11 Joint Arrangements. 

The press release and final comment letter are available on the EFRAG website.

On Monday 14 November, the IASB will discuss topics raised by respondents and to consider what changes, if any, should be made to the final Practice Statement (‘PS’) related to its project on disclosure initiative: materiality.

On Tuesday 15 November, the IASB will discuss elements of the draft IFRS 17, Insurance Contracts, which include level of aggregation, experience adjustments, transition issues, mitigating financial risks reflected in insurance contracts, sweep issues, and effective date. In addition, the IASB will be provided with a summary of research work on primary financial statements and discuss IFRS implementation issues.

On Wednesday 16 November, the IASB will discuss its financial instruments with characteristics of equity project. Specifically, the IASB will receive a summary of discussions to date and discuss the exception of paragraphs 16A–16D of IAS 32. In addition, the IASB will discuss topics related its conceptual framework project, which include liability definition and support concepts as well as the effects of the proposed changes to the conceptual framework on preparers.

Our pre-meet­ing summaries are available on our meeting note page and will sup­ple­ment them with our popular meeting notes after the meeting.

In light of the expected impact and importance of the implementation of IFRS 9, ESMA highlights the need for consistent and high-quality implementation of IFRS 9 and the need for transparency on its impact to users of financial statements. The statements addresses the following topics:

• Transparency on implementation and effects of IFRS 9;
• Specific considerations for financial institutions/credit institutions;
• Illustrative timeline and good practices of disclosures for financial institutions; and
• Next steps.

Please click to download the press release and the IFRS 9 public statement from the ESMA website.

In July 2016, ESMA published a similar statement on the application of IFRS 15. ESMA expects that the statements will be taken into account and reflected in the 2016 and 2017 annual and 2017 interim financial statements.

In February 2016 the Department for Business, Innovation and Skills (the predecessor of BEIS) published a consultation on the implementation of the EU Non-financial Reporting Directive (the Directive) in the UK, which is required by EU law to occur by 6 December 2016.  Despite the result of the referendum on the UK's membership of the EU, government policy is to continue to implement EU legislation in accordance with EU law until the UK formally leaves the EU.

The consultation sought views on a variety of topics, regarding both the implementation of the Directive and other questions relating to UK non-financial reporting. In response to the feedback received, BEIS has set out the following plans for further action.

• The consultation document proposed implementation of the requirements of the Directive in place of the non-financial elements of the current UK strategic reporting framework for large quoted companies, and the extension of these new requirements to include large unquoted public interest entities (PIEs). It also proposed two options for smaller quoted companies (those within the scope of the non-financial elements of the current UK strategic reporting framework but not the scope of the Directive): retention of the existing requirements; or removal of the existing requirements. Neither of these options were favoured by more than a handful of respondents, with a significant proportion proposing as a third option the application of the new requirements to smaller quoted companies as well. This would create a single regime for all entities rather than requiring implementation of a dual approach. In response to the feedback BEIS is pressing ahead with the first option, as they do not wish to 'gold-plate' EU requirements. However, smaller quoted companies will be given the option to apply the requirements applicable to large quoted companies if they wish to do so.
• There was little appetite from respondents for reporting non-financial information in a separate report outside the existing annual report, so BEIS will not pursue this option any further. Respondents did, however, express interest in allowing flexibility in the placement of detailed supporting information, as long as the relevant information is still included in the annual report.
• Although some respondents were in favour of requiring mandatory third-party verification of the information reported, the majority were not, so BEIS will not make such verification mandatory.
• Respondents were generally in favour of promoting digital reporting and so the Government will look to clarify legislation concerning sending annual reports electronically and to encourage innovative digital reporting.
• Two approaches to redefining 'senior managers' as currently defined in the strategic report's gender reporting requirements were proposed by respondents. The Government will explore these approaches with business and other stakeholders.
• The Government will consider further various other suggestions for regulatory reform received from respondents.

The full outcome document can be obtained from the UK Government website.  Draft regulations have also been laid which can be obtained here.

The impact assessment looked at qualitative and quantitative aspects and provided the following results:

Qualitative aspects

• The smaller banks surveyed are lagging behind in their preparation compared to larger banks.
• The involvement of some key stakeholders in IFRS 9 implementation seems limited at the current stage.
• Many respondents plan to perform parallel runs to test the implementation of IFRS 9, but it seems that this testing may be more limited than originally envisaged due to there being insufficient time between the completion of the building of the systems and initial application of IFRS 9.
• Banks are generally looking to leverage off existing definitions, processes, systems, models and data used for regulatory and credit risk management purposes in order to implement IFRS 9 impairment requirements, although new models and/or adjustments to existing models will be necessary.
• Data quality and availability are the most significant challenges for banks responding to the survey and they expect to use different (internal and external) sources of data.
• Overall, the impact of the change in classification and measurement requirements does not seem very significant for most banks.
• The interpretation and application of some key elements of IFRS 9 impairment requirements are challenging and have to be finalised in many cases.
• Available practical expedients of IFRS 9 will be used by banks.
• 75% of the banks included in the survey anticipate that IFRS 9 impairment requirements will increase volatility in profit or loss.

Quantitative aspects

• The total estimated impact of IFRS 9 is mainly driven by the impairment requirements and only to a lesser degree by the classification and measurement requirements of IFRS 9.
• The estimated change in provisions varies from portfolio to portfolio and different factors could influence the impact of IFRS 9 in percentage terms on own funds.
• The reclassification of financial instruments between categories may also have an impact on own funds.
• The estimated increase of provisions compared to the current levels of provisions under IAS 39 is 18% on average and up to 30% for 86% of respondents.
• In terms of the estimation of the total quantitative impact of IFRS 9, CET1 and total capital ratio are estimated to decrease, on average, by 59 bps and 45 bps respectively.

The full report can be accessed on the EBA website. The EBA also announces that it will be conducting a second exercise to assess the impact at a later point of time, when more reliable and precise information can be provided by respondents as a result of their ongoing efforts to implement IFRS 9.

The agenda for the meeting is sum­marised below:

Agenda papers for the meeting are currently being made available on the IASB's website.

The report features existing activities and initiatives within the profession that support the goals and poses questions for professional accountancy organisations and professional accountants to consider.

The eight goals identified are:

• Goal 4: Quality education
• Goal 5: Gender equality
• Goal 8: Decent work and economic growth
• Goal 9: Industry, innovation, infrastructure
• Goal 12: Responsible consumption and production
• Goal 13: Climate action
• Goal 16: Peace and justice and strong institutions
• Goal 17: Partnership for the goals

The report can be accessed through the press release on the IFAC website.

Please click through for the notes relating to the following issues:

Item for continuing consideration:

• IFRS 9 and IAS 39 — Fees and costs included in the 10 per cent test for derecognition of financial liabilities

Finalisation of draft agenda decisions:

• IAS 12 — Expected manner of recovery of intangible assets with indefinite useful lives
• IAS 32 — Written put option over NCI

Deliberations of comments received:

• Draft IFRIC IAS 12 — Uncertainty over income tax treatments

New issues:

• IFRS 10 — Investment entity consolidation
• IFRS 9 — Modification/ exchange gains/ losses of financial liabilities that do not result in derecognition
• IFRS 9 — Impact of symmetric ‘make whole’ and fair value prepayment options on assessment of the ‘solely payments of principal and interest on the principal amount outstanding’ (SPPI) condition
• IFRS 5/IFRS 9/IAS 39 — Application of IFRS 9/ IAS 39 relating to transactions of a subsidiary when the subsidiary is held for sale (including application of the business model assessment requirements in IFRS 9)
• Commodity loans (an issue not falling into any particular standard)

Issue on hold:

• IAS 28 — Assessment of significant influence: Fund manager acting as an agent and holding own investments in the fund

Post implementation review:

• IFRS 13 Fair Value Measurement

Administrative session:

• Work in progress

The preliminary and unofficial notes taken by Deloitte observers for the entire meeting are also available.