Rate-regulated Activities

The Board supported the recommendation that the model should apply the same measurement requirements for regulatory liabilities and regulatory assets. The Board supported the other staff recommendations subject to (i) the development of further guidance to help entities assess which measurement method would provide the best outcome; and (ii) consideration that not all timing differences would be subject to the thought-process developed to assess significant financing components.

Management Commentary

The staff gave an update on the project to revise the Management Commentary Practice Statement. The membership of the Management Commentary Consultative Group was announced on 10 July 2018. An Exposure Draft for a revised Practice Statement can be expected in 2020.

Business Combinations under Common Control

The staff gave an oral update of the project, including feedback from the recent ASAF meeting.

Conceptual Framework

This Board discussed a paper analysing when and how preparers of financial statements should refer to the new Conceptual Framework for assistance in developing accounting policies. No decisions were made.  

Implementation

The Board supported the IFRS Interpretations Committee’s proposal to amend IAS 37 to specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’.

The Board supported the staff recommendation to start a narrow-scope project to address commodity loans. The Board also decided to ask the Interpretations Committee to consider how an entity should apply existing IFRS requirements to holdings of cryptocurrencies, mining and ICOs.

Goodwill and Impairment

The Board discussed how to focus its work on the Goodwill and Impairment research project and decided to identify improvements to the disclosure requirements; pursue changes to the value in use calculations; not to characterise impairment testing as assessing whether the carrying amount of acquired goodwill is recoverable; and not to remove differences between accounting requirements for internally-generated intangible assets and those for intangible assets acquired in a business combination. 

Disclosure Initiative

This session covered five topics: Definition of Material; Targeted Standards-level Review of Disclosures—Guidance for the Board—Drafting Disclosure Requirements; Accounting Policy Disclosure; Location of Information; Technology and Digital Reporting Considerations.

• The Board decided to complete the proposal to amend the definition of material so as to make the changes effective for periods beginning on or after 1 January 2020.

• In relation to the guidance for the Board on how to draft disclosure requirements, the Board made several decisions about when to use prescriptive language, ways to improve consistency of wording and how to organise the disclosure requirements within a Standard. The Board decided to use IAS 19 Employee Benefits and IFRS 13 Fair Value Measurement to test the new approach.
• The Board had reservations about amending IAS 1:117–124 to require entities to disclose their material accounting policies rather than their significant accounting policies and asked the staff for some examples. The Board will develop related guidance and examples for inclusion in the Materiality Practice Statement.
• The Board decided not to develop requirements about IFRS information outside the financial statements or non-IFRS information inside the financial statements.
• The Board decided that its guidance should include relevant matters to consider when developing and drafting disclosure objectives and requirements. The broader implications of technology on financial reporting will be considered as part of the IFRS Foundation’s Technology Initiative.

Accounting Policies and Accounting Estimates

The Board received an update of progress on its Exposure Draft Accounting Policies and Accounting Estimates (Proposed amendments to IAS 8). While some respondents to the ED said the proposed amendments would improve clarity others questioned whether the benefits of finalising the proposed amendments would outweigh the costs of doing so. The staff have consulted with the Accounting Standards Advisory Forum and, as a next step, will seek the advice of the IFRS Interpretations Committee.

Emerging Economies Group Update

The meeting concluded with an update of the most recent meeting of the IASB’s Emerging Economies Group.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

Below is an analysis of all changes made to the work plan since our last analysis on 22 June 2018.

Research projects

• Business Combinations Under Common Control — The expected date of the decision paper is push into the second half of 2019.
• Disclosure Initiative — Principles of Disclosure — This project is now in the summary stage.
• Discount Rates — This project is now in the summary stage which is expected to be completed in the fourth quarter of 2018.
• Financial Instruments With Characteristics of Equity — This project is now in the feedback stage which is expected to be completed in the first half of 2019.
• Post-Implementation Review of IFRS 13 Fair Value Measurement — A feedback statement is now expected in the fourth quarter of 2018.
• Share-Based Payment — This project is now in the summary stage which is expected to be completed in September 2018.

Main­te­nance projects

• Accounting Policies and Accounting Estimates (Amendments to IAS 8) — A decision on the project is expected in October 2018.
• Accounting Policy Changes (Amendments to IAS 8) — The expected date of the exposure draft is narrowed to the fourth quarter of 2018.
• Classification of Liabilities (Amendments to IAS 1) — A decision on the project is now expected in September 2018.
• Costs Considered in Assessing Whether a Contract Is Onerous (Amendments to IAS 37) — New entry to the workflow with an exposure draft expected to be issued in the fourth quarter of 2018.
• Definition of a Business (Amendments to IFRS 3) — The expected issuance of IFRS amendments is now September 2018.
• Disclosure Initiative — Targeted Standards-Level Review of Disclosures — This project is now in the exposure draft stage.
• Improvements to IFRS 8 Operating Segments (Amendments to IFRS 8 and IAS 34) — A feedback statement is now expected in the fourth quarter of 2018.

Standard-setting projects

• Management Commentary — An exposure draft is now expected in the first half of 2020.
• Rate-Regulated Activities — The issuance of a discussion paper or exposure draft is now expected in the second half of 2019.

Other projects

• IFRS Taxonomy Update — Common Practice (IFRS 13) — A proposed update is now expected in September 2018.

The above is a faithful com­par­i­son of the IASB work plan at 22 June 2018 and at 20 July 2018. For access to the current IASB work plan at any time, please click here.

The Code along with revised Guidance on Board Effectiveness was published on 16 July and is effective for periods commencing on or after 1 January 2019.

A press release and the letters are available on the FRC website.

An event to launch the Code was held on 18 July and a transcript of a speech made by Stephen Haddrill, Chief Executive of the FRC, which discusses key elements of the new Code, is also available on the FRC website.

In our response to the consultation, we also note that if reducing local GAAP differences were to be considered a priority in the EU and if feasibility studies show that obstacles can be overcome, we would favour initiatives that would gradually allow closer or fuller convergence with IFRS. This could take place through amendments to the Directives or the IAS Regulation allowing companies to voluntarily adopt IFRS in individual or consolidated financial statements, rather than leaving this to the discretion of Member States to decide whether or not this option is granted to the companies in their jurisdiction.

Please click to download the full comment letter here (cover letter with main messages first, followed by completed questionnaire).

An agenda and details on how to register for the meeting can be found on the EFRAG website.

This webcasts discusses the Board’s preferred approach and classification of non-derivative financial instruments.

Future webcasts in the series will cover:

• Clas­si­fi­ca­tion of de­riv­a­tives on own equity.
• Clas­si­fi­ca­tion of compound in­stru­ments and re­demp­tion oblig­a­tion arrange­ments.
• Pre­sen­ta­tion of equity in­stru­ments.
• Pre­sen­ta­tion of financial li­a­bil­i­ties.

For more information, see the press release on the IASB’s website and the webcast on the IFRS Foundation’s YouTube channel.

Key findings of the survey include:

Previously, Mr Liikanen has worked in various leadership positions which included serving as Governor of the Bank of Finland, Governor of the International Monetary Fund, and member of the Governing Council of the European Central Bank.

For more information, see the press release on the IASB’s website.

One of the questions in the fitness check relates to whether it is still appropriate that the IAS Regulation prevents the European Comission (EC) from modifying the content of IFRS as issued by the IASB. ESMA notes that the EC has only recently sought feedback on this question twice (2013 and 2015) and both times the great majority of stakeholders cautioned against introducing such a possibility. The letter adds:

In line with its prior positions, ESMA strongly disagrees with this recommendation, most notably because any European-specific adjustments to IFRS would defy one of the key objectives of the IAS Regulation, namely that financial reporting standards applied by listed issuers are accepted internationally and are truly global standards. In addition, we believe that modifications to IFRS at the European level would hinder the capacity of European companies to compete for financial resources on equal terms in global capital markets. In our view, the different levels of commitment to require IFRS as issued by the IASB around the globe is not a justification for introducing carve-ins. On the contrary, Europe should show leadership in reaffirming its commitment to IFRS. This in turn would increase its ability to influence the development of IFRS, which the EU should continue to actively do as part of the IASB’s due process. 

ESMA also states that the current endorsement criteria should not be changed as the current endorsement process already provides the necessary safeguards to the European public good, by providing the possibility for the non-endorsement of a standard, which is not conducive to European public good.

Please click to access the press release on the ESMA website, which offers a quick overview over ESMA's position as well as access to the letter of response and the completed questionnaire.

The 18 minute video Research and Standard setting—How to contribute to the IASB's work can be accessed here.