The topics discussed at the meeting included:

• Primary financial statements:
  
  • Defined subtotals in the statement(s) of financial performance;
  • Management performance measures; and
  • Disaggregation.
• Financial instruments with characteristics of equity (FICE):
  
  • Additional disclosures, including priority of issued financial liabilities and equity instruments on liquidation, the maximum potential dilution of ordinary shares, and terms and conditions that affect the timing and amount of cash flows of the financial instruments issued by the entity;
  • Expanded statement of changes in equity, which will show how total comprehensive income of an entity is attributed between different classes of equity instruments; and
  • Presentation in other comprehensive income (OCI) of income and expenses from particular types of financial liabilities i.e. those that have the amount feature that is not independent of the entity’s available economic resources.
• Management commentary:
  • Objective of management commentary;
  • Applying materiality in preparing management commentary; and
  • Principles for preparing management commentary.
• Goodwill and impairment:
  • Additional disclosures at acquisition date;
  • Why do users need information on the subsequent performance of the acquired business?; and
  • Additional disclosures about subsequent performance.

The next CMAC meeting will take place on 21 March 2019.

For more information, see the meeting page and the meeting summary on the IASB's website.

Please see the press release on the IVSC website for membership of the new Board.

The Climate Disclosure Standards Board (CDSB) and the Carbon Disclosure Project (CDP) have jointly conducted a review of corporate disclosure of climate change and environmental information across Europe. Their report First Steps: Corporate climate & environmental disclosure under the EU Non-Financial Reporting Directive provides evidence of reporting practices of 80 companies, indicates what information companies are currently disclosing and whether companies are implementing the recommendations of the G20 Task Force on Climate-related Financial Disclosures (TCFD). The press release on the CDSB website offers a short summary and access to the full report.

CDP has published a call by European investors urging EU policymakers to upgrade corporate reporting rules. The signatory investors call on EU policymakers to: (i) align corporate reporting with the recommendations of the TCFD to mitigate financial risk; (ii) create a level playing field across the EU by implementing consistent corporate reporting requirements like those of financial reporting; (iii) standardise sector-specific reporting metrics that increase comparability and consistency and enable tracking progress against public policy targets and clearly defined time horizons; and (iv) address the shortcomings of the European corporate reporting legislative framework by stressing policy coherence between investor duties and corporate reporting. Please click to access the statement here.

Principles for Responsible Investing (PRI) and the International Corporate Governance Network (ICGN) have launched a discussion paper on corporate ESG reporting arguing that despite growing consensus that the integration of relevant ESG factors into company value creation models and corporate reporting is important, listed companies and organisations providing reporting standards have yet to coalesce on an approach to the treatment and inclusion of ESG factors in company disclosure and reporting. The press release on the PRI website offers a short summary and access to the full discussion paper.

The United Nations Environment Programme Finance Initiative (UNEP FI) has announced a partnership with 16 of the world’s largest insurers to develop a new generation of risk assessment tools designed to enable the insurance industry to better understand the impacts of climate change on their business. The pilot group will develop analytical tools that they will use to pioneer insurance industry climate risk disclosures that are in line with the recommendations of the TCFD. Please click for more information on the UNEP FI website.

The Global Reporting Initiative (GRI) announces that its free digital reporting tool has been upgraded to make navigation easier and keeping progress more visual. Please click for more information on the GRI website.

GRI also announces that the GRI Standards are now also available in Arabic. More information can be found here.

The Saïd Business School, University of Oxford, offers a debate on "Should FASB and IASB be responsible for setting standards for nonfinancial information?" at the Oxford Union on 11 December 2018. A Green Paper focussing on the arguments for and against the FASB and the IASB setting standards for nonfinancial information has been released in preparation for the debate and can be downloaded here.

The idea was expected to result in something similar to the UK FRC Financial Reporting Lab, however, the solution found differs quite considerably as regards structure and remit. ​

EFRAG is now organising a high-level conference on Tuesday 5 March 2019 on corporate reporting and the role of the Lab. Please click for more information on the EFRAG website.

In January 2018, the Charity Commission selected a random sample of 106 sets of accounts of charities with an income of over £500,000, for period ends in the year ended 31 December 2016. It reviewed each trustees’ annual report and accounts to assess whether:

• The charity had explained its reserves policy, as required.
• The charity’s stated level of reserves was correct, based on its guidance.

The review found that nearly 97% of charities sampled had included at least a reference to their reserves policy in their trustees’ annual report.  However, more than a third of the charities’ explanations of their reserves policies did not provide all of the basic information required. The level of reserves held was the most common omission.

The review also found that, based upon the calculations of the Charity Commission, less than a quarter of the charities in its sample had stated the correct figure in their trustees’ annual report. The review indicates that this was in part because a third of the charities in the sample did not include a figure for reserves.

The Charity Commission reminds charities that providing a clear explanation of the reasons why reserves are needed, setting out the basis for working out the level of reserves required and stating the level of reserves held is more than just meeting a reporting requirement. It indicates that the process of developing a reserves policy and then explaining it in the trustees’ annual report gives confidence that the trustees have assessed both the risks that their charity faces and the charity’s ability to manage their financial impact.

To help charities, the Charity Commission highlights that it has published guidance (link to Charity Commission website) which explains what reserves are and sets out the steps that trustees should follow in developing and explaining a reserves policy.

A press release and the full review are available on the Charity Commission website.

Of the list with 25 potential issues around IFRS 17 that were first discussed in October 2018, the staff has grouped 13 into six agenda papers for the meeting. The papers are (all links to the IASB website):

• AP2A: Presentation of insurance contracts on the statement of financial position
• AP2B: Discount rates, risk adjustment and OCI option
• AP2C: Variable fee approach
• AP2D: Business combinations
• AP2E: Future cash flows in the measurement of reinsurance contracts held
• AP2F: The treatment of accounting estimates in interim financial statements

The Staff recommends to amend the requirements in IFRS 17 for the presentation of insurance contracts on the statement of financial position as discussed in AP2A, but not to amend the requirements in IFRS 17 for the other topics discussed in AP2A–2F. 

The full agenda for the meeting can be found here. We will post any updates to the agenda, our comprehensive pre-meeting summaries as well as observer notes from the meeting on this page as they become available.

Continuing discussions

The Committee continued its discussions from September on whether, some, cloud computing arrangements create an intangible asset. The Committee decided not to take the matter onto its Agenda and issue a tentative Agenda Decision to that effect.

In September, the Committee finalised an Agenda Decision IAS 21 The Effects of Changes in Foreign Exchange Rates—foreign exchange restrictions. At this meeting the Committee provided feedback on a proposal by the staff to amend IAS 21 to provide additional guidance on estimating an exchange rate.

New issues

IFRS 11 Joint Arrangements—Output received by a joint operator. The Committee decided that when the output a joint operator receives in a reporting period is different from the output to which it is entitled, the joint operator recognises revenue that depicts the transfer of output to its customers in each reporting period, ie revenue recognised applying IFRS 15.

IFRS 9 Financial Instruments—Physical settlement of contracts to buy or sell a non-financial item. The Committee decided that when an entity contracts to buy or sell a non-financial item in the future at a fixed price, it is not appropriate at the time of physical settlement for an entity to (a) reverse the accumulated gain or loss previously recognised in profit or loss on the derivative, and (b) recognise a corresponding adjustment to either revenue (in the case of a sale contract) or inventory (in the case of a purchase contract).

IAS 23 Borrowing Costs—Revenue recognised over time. The Committee decided that borrowing costs would not be capitalised when the borrowings relate to the construction of a residential multi-unit real estate development for which revenue is recognised over time.

IFRS 9 Financial Instruments—Credit enhancement in ECL measurement. The Committee decided that if a credit enhancement is required to be recognised separately by IFRS Standards, an entity cannot include the cash flows expected from it in the measurement of ECL.

IFRS 9 Financial Instruments—Presentation of contractual interest. The Committee decided that the reversal of the unwinding of discount is presented as a reversal of credit impairment when the asset is cured.

The Committee decided not to take any of these issues onto its agenda and tentative Agenda Decisions to that effect will be published shortly (each with a 60-day comment period).

Other work in progress

The staff are analysing a request in relation to subsurface rights.

More information

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

The meeting saw the presentation of six academic papers, responses by academics and standard-setters as well as panel discussions. We have already posted our short summaries of the discussions in November. Please click to access the IASB's audio recordings here (the panel discussions were obviously not recorded).

The recommendations called for action from all stakeholders and importantly included a target of 33% representation of women on FTSE 350 Boards and FTSE 350 leadership teams (comprising the executive committee and the direct reports to the executive committee) by the end of 2020.

The third report highlights that the number of women on FTSE 100 boards has exceeded 30% for the first time (it is 30.2% up from 27.7% last year), there are more women on the boards of the FTSE 250 companies (it is 24.9% up from 22.8% last year) and women on FTSE 100 Executive Committees has passed 21%, again for the first time ever.

However the report indicates that the number of women in FTSE 350 Chair roles remains "flat" at 22 and the number of women in CEO roles is even lower at just 12, down from 15 this time last year.

Whilst the number of all-male boards is only 5 this year (down from 10 last year), the report does highlight that there are still 75 companies in the FTSE 350 which have only one woman on their board which the report calls "disappointing".  It indicates that "if each of these companies were to improve their gender balance in 2019 by adding one woman to their board, this would take the FTSE 350 almost half way to achieving the 33% target".

Looking forwards, the report states "if progress continues at a similar rate, the FTSE 100 is 'on track' to achieve the 33% target for Women on Boards by 2020".  However it notes that "elsewhere a step change is needed in pace, which means half of all available appointments in the next two years - both Boards and leadership teams - need to go to women to achieve the 33% target".

A press release and the full report are available on the BEIS website.

Mr Liikanen began by reviewing the history of how the EU decided to adopt IFRS instead of adapting them into EU GAAP. He noted the importance of that decision and how most of the world has followed suit. He then stated:

All things considered, the IFRS project has been a success at an international level. Is it also viewed as a success at an EU level? The answer to that is provided by the EU Fitness Check.

He went on to praise the EU fitness check, mentioning high participation within — and outside of — the EU. He explained that the number of external comments could be attributed to (1) many non-EU domiciled companies and investors having interests in the EU and being impacted by EU policies; and (2) the EU's approach to corporate reporting — particularly IFRS Standards — is "highly influential in shaping the policies of other jurisdictions".

Mr Liikanen described the financial reporting perspective of the EU fitness check, mentioning that "the report shows that things are working well". He acknowledged that not everything is perfect, but highlighted that there is not much support for substantive change:

Most respondents felt that IFRS Standards are effective, helping to reduce the cost of capital and increase investments within the EU. Few believed that the Standards have led to procyclicality and short-termism, while most believed that the EU’s policy on IFRS Standards has promoted more integrated capital markets in the EU and internationally. This is encouraging feedback and shows the importance of our Standards to the EU’s Capital Markets Union project and the wellbeing of the global economy more broadly.

He also discussed the fitness check results related to the 'carve-in' mechanism proposed to modify IFRS Standards in the EU. Mr Liikanen reported that three quarters of all respondents supported the status quo of a restricted endorsement process and argued against carve-ins. He did acknowledge that a minority of respondents argued for the carve-in mechanisms; he provided their perspective that it would help the EU exert greater influence on the IASB's standard-setting process. He explained:

This topic of influence is an important one and should not be dismissed. Every major jurisdiction sets out to influence the international agenda, and this is naturally relevant also for the EU. The EU signed up to IFRS Standards from the very beginning, has been a strong and vocal supporter of IFRS Standards as the global standard, and the EU has endorsed pretty much every standard the IASB has ever issued. So, I completely understand the desire to be highly influential in a process to create standards that are mandated for use across the EU.

The question is how best to exert that influence. To collect views, to analyse concerns, to present them well and to win the argument through logic and reason. The EU has a great deal of experience in this area, because that is how its own internal decision-making works.

Mr Liikanen said that many people see carve-ins as an 'opt-out' clause from international IFRS system, of which the EU is a major player. He emphasised that he sees the fitness check as an endorsement that the system is working well as-is. He opined that "the best way for the EU to influence the IASB is through the quality of its work and the persuasiveness of its arguments".

The full text of Mr Liikanen's speech is available on the IASB's website. For more information, see our March 2018 story on the release of the fitness test consultation document as well as our November 2018 story providing a summary of fitness test responses.