This year, the exposure draft does not include proposed amendments that aim at convergence with recent IASB amendments.

Candidates for such amendments would have the the IASB's Definition of Material (Amendments to IAS 1 and IAS 8) and Definition of Business (Amendments to IFRS 3), both issued in October 2018. However, on the definition of material the IPSASB decided not to amend the definition IPSAS 1 and IPSAS 3. Before making standards-level amendments the IPSASB will review the guidance on materiality in its own framework and in doing so will take account of the IASB’s amendments.

On the definition of a business the IPSASB decided not to amend the definition of an operation in IPSAS 40 (which draws on the definition of a business in IFRS 3) as the definition in IPSAS 40 applies to amalgamations as well as to acquisitions while some of the additional guidance in IFRS 3 would only be relevant to acquisitions. The modifications that would be needed to ensure that this guidance does not apply to amalgamations would go beyond the remit of the improvements project. A separate narrow scope project to evaluate the potential impact of the IASB’s revised definition of business on IPSAS 40 may be considered in the future.

Please click to access the exposure draft Improvements to IPSAS, 2019 on the IPSASB website. Comments are requested by 30 September 2019.

The meeting saw the presentation of six academic papers. These have now been finalised and also reflect the responses by academics and standard-setters to the presentations at the forum. We already posted our short summaries of the discussions in November 2018. In December 2018, the IASB made available audio recordings of the presentations and responses. The finalised papers are now available in Abacus Volume 55, Issue 1.

The draft taxonomy reflects the new requirements introduced by the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 requiring quoted and large unquoted companies and LLPs to report on greenhouse gas emissions, energy consumption and energy efficiency. 

The draft is available via Yeti, a live consultation programme enabling  interested parties to submit responses in relation to the SECR taxonomy as and when they wish or apply it in practice. In addition, the FRC has set out some specific questions, including consideration of whether the SECR taxonomy should include the Recommendations of the Task Force for Climate Disclosure (TCFD).

For the press release and access to the draft, click here.

For the final SECR Taxonomy feedback statement published on 12 November, click here.

The update reports on the EFRAG Board meeting on 9 July 2019, the EFRAG Technical Expert Group (TEG) meeting on 3-4 July 2019, the EFRAG Consultative Forum of Standard Setters (EFRAG CFSS) and the EFRAG TEG meeting on 3 July 2019 and EFRAG TEG conference call on 23 July 2019. The update also list publications issued in July 2019:

• EFRAG's final comment letter in response to the IFRS Foundation Exposure Draft Proposed amendments to the IFRS Foundation Due Process Handbook;
• EFRAG's draft comment letter in response to the IASB Exposure Draft ED/2019/4 Amendments to IFRS 17;
• EFRAG's feedback statement on its discussion paper Non-exchange Transfers: A role for societal benefit;
• EFRAG's feedback statement on the EFRAG secretariat working paper FICE Early-Stage Analysis; and
• The European Lab Agenda Consultation.

Please click to download the July EFRAG Update from the EFRAG website.

e CASS Standard was introduced in 2015 to support the Financial Conduct Authority’s regulatory activity and oversight of the CAThe CASS Standard was introduced in 2015 to support the Financial Conduct Authority's regulatory activity and oversight of the CASS sector.

The revisions follow a post implementation review of the standard.  The proposed changes include:

• regulatory changes to the scope of the CASS regime;
• changes to improve the value of reporting to those charged with governance; and
• some streamlining to requirements.

The consultation runs until Friday 27 September 2019.  

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

The 2020 edition of IVS will replace IVS 2017 and consists of five general standards and six asset standards. The general standards offer guidance for all valuation assignments including terms of a valuation engagement, bases of value, valuation approaches and methods, and reporting. The asset standards include requirements related to specific types of assets.

More information is available through the press release on the IVSC website. 

Meeting ac­tiv­i­ties included the following:

Trustees’ meeting

• Executive session:
• Report of the Executive Director — The Trustees received a report from the Executive Director Lee White on ac­tiv­i­ties since the last meeting.
• Strategy review — The Trustees discussed key challenges for the Foundation, the support for consistent application of IFRS Standards, timeliness, and sustainability reporting.
• Gov­er­nance issues — The Trustees viewed a presentation from the IFRS Foundation Advisory Council and discussed its role in providing strategic advice.
• Op­er­a­tions analysis — The Trustees received a presentation on managing the Foundation’s brand.
• Future meetings — Trustees confirmed that their next meetings would be in Brussels in February 2020, Seoul in June 2020, and New Delhi in October 2020.
• Committee reports — The Trustees discussed reports from the Business Process and Technology Committee, Audit and Finance Committee, the Human Capital Committee, the Nom­i­nat­ing Committee, and the DPOC. (A report of the DPOC meeting is attached to the meeting summary.)
• IASB Chairman’s report — The Chair of the IASB provided the Trustees with a general update on the IASB’s technical ac­tiv­i­ties, es­pe­cially on the proposed amendments to IFRS 17, the IBOR reform, simplification of accounting for goodwill, and management commentary.
• Meetings in Munich — The Trustees met with members of German accounting standard setter (the DRSC).

The full report on the IFRS Foun­da­tion trustees’ and DPOC meeting is available on the IASB’s website.

The guidance, which was previously updated in 2016 and 2018, is designed to assist companies and their investors in the interpretation of the regulations.

An updated version of the guidance has been issued as a result of the implementation of the revised Shareholder Rights Directive (SRD II).  Key changes include:

• Regulatory definitions for the employee comparator group and directors that are required when calculating percentage change in pay.
• Discussion of measures taken to avoid or manage conflicts of interest in relation to determination, review and implementation of the remuneration policy.
• Extension of coverage to include those considered to be CEO or deputy CEO, even where they are not appointed as directors.

The updated guide is available on the Practical Law website here.

IBOR Reform: The staff summarised the feedback from comment letters and discussed additional issues for consideration before finalising the proposed amendments. The IASB plans to hold an additional meeting in late August to discuss the project. No decisions were made in this session.

Classification of Liabilities as Current or Non-current: The Board considered liabilities with equity-settlement features as well as transition and early application requirements.

Primary Financial Statements: The Board discussed potential amendments to IAS 34, whether to include special provisions for management performance measures and subtotals that are similar to gross profit, how to classify interest and dividends in the statement of cash flows and how earnings per share should reflect management performance measures. The Board gave the staff permission to begin preparing the Exposure Draft.

Goodwill and Impairment: The Board gave the staff permission to begin preparing the Discussion Paper.

Rate-regulated Activities: The Board decided to include an exception in IFRS 3 for rate-regulated activities. They also discussed the regulatory agreement period and incentive schemes. The Board gave the staff permission to begin preparing the Exposure Draft.   

Disclosure Initiative: The Board decided to add specific disclosure objectives to the requirements in IAS 19.

Dynamic Risk Management: The staff demonstrated how the DRM model is designed to operate. The Board considered some operational simplifications and decided that the application of the model should be optional. The Board also discussed the areas of focus for disclosure.   

Financial Instruments with Characteristics of Equity—Summary of feedback: The Board continued to discuss feedback on the Discussion Paper, focusing on presentation of financial liabilities; presentation of equity instruments and disclosure; contractual terms; users of financial statements and the overall objective, scope and challenges. No decisions were made.

Comprehensive review of the IFRS for SMEs Standard: The Board plans to issue a Request for Information (RFI) in the second half of 2019. At this meeting the Board decided to propose changes to the IFRS for SMEs Standard to reflect IFRS 3, IFRS 10 and IFRS 15. For IFRS 11, the Board decided to retain the current requirements of the IFRS for SMEs Standard. The Board also decided to propose a range of amendments to IFRS Standards and IFRIC Interpretations that have been published since the last review.

Management Commentary: The Board considered how to apply the Conceptual Framework’s qualitative characteristics to information presented in management commentary as well as how to make relevance and materiality judgements. 

Business Combinations under Common Control (BCUCC): The staff presented their analysis of the implications of potential equity investors in BCUCC and the measurement approaches that could be applied.

Implementation Matters: The Board was asked for any feedback on the June meeting of the IFRS Interpretations Committee.   

Joint session with the FASB: The middle day of the IASB meeting had been set aside for a joint meeting with the FASB. The Boards updated each other on projects each Board is working on separately: Segments (FASB); Primary Financial Statements (IASB); Financial Performance Reporting (FASB); Financial Instruments with Characteristics of Equity (IASB); Distinguishing Liabilities from Equity (FASB); IBOR reform (both); Goodwill and Impairment (IASB); Identifiable Intangible Assets and Subsequent Accounting for Goodwill (FASB); Disclosure Initiative (IASB); Disclosure Framework (FASB); and Implementation: Revenue and Leases (FASB).

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

The ITCG discussed the following:

• IFRS Taxonomy supporting materials.
• Strategy for the IFRS Taxonomy.
• Interaction between electronic reporting and the Board’s work on primary financial statements.
• IFRS Taxonomy content — review of common reporting practice.
• Interaction between electronic reporting and the Board’s work on the review of disclosures.

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

Background

The feedback on the Board's DP on Principles of Disclosure suggested that guidance is required to assist entities in determining which accounting policies to disclose. It was noted that the application of materiality is key to deciding which accounting policies to disclose, however IAS 1 Presentation of Financial Statements does not refer to materiality but states that ‘[a]n entity shall disclose its significant accounting policies' without the Board providing a definition for the term ‘significant’.

Therefore, the Board decided to develop amendments to paragraphs 117-122 of IAS 1 to require entities to disclose their material accounting policies rather than their significant accounting policies. To support this amendment the Board has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2 Making Materiality Judgements to accounting policy disclosures.

Suggested changes

ED/2019/6 Disclosure of Accounting Policies proposes to amend paragraphs 117-122 of IAS 1 in the following ways:

• Paragraph 117 of IAS 1 would be amended to require an entity to disclose its material accounting policies instead of its significant accounting policies;
• Paragraphs 117A-D of IAS 1 would be added to explain how an entity can identify a material accounting policy (for example an accounting policy has changed during the reporting period, was chosen from alternatives allowed in IFRSs, was developed in accordance with IAS 8 in the absence of an IFRS that specifically applies, relates to an area of significant judgement and assumption, or reflects unique entity-specific application of an IFRS);
• Paragraph 122, which requires an entity to make disclosures about ‘other judgements’, would be retained but would see a minor amendment to replace the reference to ‘significant accounting policies’ with the reference to ‘material accounting policies’.

The Board has also developed additional guidance to be included in the Materiality Practice Statement for entities to use when applying the four-step materiality process to accounting policy disclosure. This additional guidance is supported by two new examples that highlight the need to focus on information that is useful to users of financial statements and demonstrate how the application of the four-step materiality process can address the issues of: i) boilerplate or generic information being disclosed in accounting policies that are material to the financial statements; and ii) instances in which accounting policy disclosures contain only information that repeats the requirements of IFRSs. 

Comments on the proposed changes are requested by 29 November 2019.

Effective date and transition

The exposure draft does not contain a proposed effective date as the IASB intends to decide on this after exposure. The proposed amendments would be applied prospectively and early adoption would be permitted.

Dissenting opinion

Board member Martin Edelmann dissented from issuing the exposure draft. Mr Edelmann does not believe that materiality is a concept that should be applied to accounting policies as accounting policies differ from other information in the financial statements. He is also concerned that the application of the concept to accounting policies might lead to a loss of important information.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• Our UK Accounting Plus Project page on Disclosure initiative — Accounting policies
• Our Need to Know on this exposure draft