We comment on the IASB's proposed amendments to IAS 1 and the Materiality Practice Statement

29 Nov, 2019

We have responded to the IASB’s exposure draft ED/2019/6 'Disclosure of Accounting Policies (Proposed amendments to IAS 1 and IFRS Practice Statement 2)'.

Whilst we agree with the IASB's view that it is useful to replace “significant” by “material”, we are concerned that without further guidance, the assessment of whether an accounting policy is material may be driven primarily by quantitative considerations. This is why we suggest that additional guidance is added to IAS 1 to highlight that the assessment of materiality should be based on whether the transaction, other event or condition to which the accounting policy relates is material in size or nature or a combination of both.

Please download the full comment letter here.

ESMA opposes national or regional implementation guidance for IFRSs

28 Nov, 2019

At the 'IFRS & Regulation: Searching for Common Ground' conference convened in Bussels today by the European Financial Reporting Advisory Group (EFRAG), Steven Maijoor, Chair of the European Securities and Markets Authority (ESMA), provided a keynote speech.

In answering the question of "Are IFRS still well-suited to serve European capital markets?”, Mr Maijoor noted the strong relationship between IFRS and building a Capital Markets Union, the role of IFRS in enabling effective accounting enforcement, and the role of IFRS in facing the upcoming challenges and opportunities arising from electronic reporting and sustainability. He especially warned against local interpretations of IFRS:

The principles-based nature of IFRS offers a suitable basis for adapting to the inevitable variety of facts that occur in the reality of business in a diverse jurisdiction such as the EU, while still enabling a sound and consistent approach to both implementation and enforcement. [...] As you will understand, ESMA does not support the issuance of national or regional implementation guidance for IFRS, not only because it would be contrary to the IAS Regulation, but also because it would be potentially detrimental for the much-needed EU-wide consistent application of IFRS. Furthermore, EU or national specific solutions weaken our position as a single, cohesive jurisdiction and makes it less influential in the accounting debate at global level.

However, Mr Maijoor also noted that to continue being relevant, IFRS need to consider how future projections – are already required to be made, for example, in impairment calculations – need to take into account risks arising from aspects relating to sustainability risks and opportunities. He stated that we need to acknowledge that there are a number of economic realities that are not well suited to be recognised via the double entry system of accounting which are nevertheless increasingly important.

Please click to access the full text of Mr Maijoor's speech on the ESMA website.

Regarding the overall event Mr Maijoor spoke at, please see a short summary on the EFRAG website.

IFRS Advisory Council membership update

28 Nov, 2019

The Trustees of the IFRS Foundation have announced appointments and re-appointments to the IFRS Advisory Council effective 1 January 2020.

The Advisory Council is the formal advisory body to the Trustees and the IASB. It advises the IFRS Foundation on its strategic direction, technical work plan and priorities.

The new and reappointed members of the Advisory Council are:

  • Olivia Larmaraud - Acteo and Medef
  • Martin Schloemer - Bayer
  • Ehud Greenberg - BDO
  • Giuseppe Ballocchi - CFA Institute
  • Greig Paterson - Corporate Reporting Users’ Forum
  • Martijn Bos - Eumedion
  • David Grünberger - European Central Bank
  • Isabelle Grauer-Gaynor - European Securities and Markets Authority (ESMA)
  • James Luke - EY
  • Anna Vidal Tuneu - Insurance Europe (European Insurance and Reinsurance Federation)
  • Andrew Chamberlain - International Actuarial Association
  • Leslie Hodder - International Association for Accounting Education and Research (IAAER)
  • Romain Paserot - International Association of Insurance Supervisors (IAIS)
  • Emma Millar - Investment Association
  • Aiko Sekine - Japanese Institute of Certified Public Accountants (JICPA)
  • Bee Leng Tan - Malaysian Accounting Standards Board (MASB) 
  • Osman Sattar - S&P Global Ratings Osman
  • Feng Liu - Xiamen University 

Earlier this year, Carolyn Rogers succeeded William Coen as Secretary General of the Basel Committee on Banking Supervision and has represented the organisation on the Advisory Council since August.

All appointments take effect 1 January 2020 and are for a three-year period.

In addition, the Trustees noted that the following members are stepping down from the Council at the end of 2019: Jens Freiberg, Laura Ramírez, Lothar Weniger, Jürgen Kirchhof, Surya Subramanian, Etty Wulandari, Olav Jones, Micheline Dionne, Holger Daske, Abdulrahman Fahd Almosad, Jee In Jang, Hidetake Ishihara, Xinyuan Chen, Suresh Senapaty.

Joanna Perry will complete her term as the Advisory Council Chair at the end of this year. An announcement regarding the appointment of a new Chair is to be made in due course.

The press release announcing the new appointments can be found on the IASB's website.

IFRS Interpretations Committee holds November 2019 meeting

28 Nov, 2019

The IFRS Interpretations Committee met in London on 26 November 2019 to discuss six issues, including three new interpretation requests. We have posted Deloitte observer notes for the technical issues discussed during this meeting. New Issues

New Issues

The Committee discussed three new issues.

For two of the issues the Committee decided to publish a tentative agenda decision saying that the relevant Standard provides adequate guidance.  

  • IFRS 15 Revenue from Contracts with Customers—Presentation of player transfer payments (Agenda Paper 6): The Committee identified the presentation requirements when a football club transfers a player to another club—i.e. when it would recognise a gain or loss applying IAS 38 and when it would recognise revenue, applying IFRS 15, from the sale of inventory.
  • IAS 12 Income Taxes—Tax consequences under multiple tax regimes (Agenda Paper 7): In some tax jurisdictions, the manner in which an entity recovers the carrying amount of an asset—for example, whether it recovers the asset through use or through sale—determines the tax consequences that follow from such recovery. The Committee decided that IAS 12 provides adequate guidance for deferred taxes when the recovery of the carrying amount of an asset gives rise to multiple tax consequences.

IFRS 16 Leases—Sale and leaseback with variable payments (Agenda Paper 5): The Committee decided that if an entity sells an asset and leases it back with variable payments it must measure the ROU asset to determine the amount of gain or loss to be recognised at the transaction date. However, the Committee decided to ask the staff for more analysis on the subsequent accounting.   

Agenda Decision to finalise

IFRS 16 Leases—Lease term and useful life of leasehold improvements (Agenda Paper 4): The Committee decided, by a vote of 7 to 6, to finalise the Agenda Decision. The Chair noted that this “could be a very real case where people need sufficient time” to make any changes, as a result of the Agenda Decision.

Committee Input to the IASB

The IASB is seeking input from the Committee on two projects.

  • Agenda Consultation (Agenda Paper 2): Committee members provided the staff with their views on priority projects, with intangible assets standing out as a project many members thought should be given high priority.  
  • Post-implementation review of IFRS 10, 11 and 12 (Agenda Paper 3): The IASB has started a PIR of IFRS 10, 11 and 12. The Committee will discussed the agenda decisions published in relation to these Standards along and other application issues.

Work in progress (Agenda Paper 11)

There are no new matters that have not yet been presented to the Committee.

More information

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

IASB issues podcast on latest Board developments (November 2019)

28 Nov, 2019

The IASB has released a podcast, featuring IASB Chair Hans Hoogervorst and Board member Darrel Scott as well as communications team member Kasia Gilewska, to discuss the deliberations at the November 2019 IASB meeting and other developments.

The 12-minute podcast features discussions related to financial instruments on the following topics:

  • Proposed amendments to IFRS 17;
  • Management commentary;
  • Targeted standards-level review of disclosures;
  • Lack of exchangeability;
  • Annual improvements to IFRSs 2018–2020; and
  • Subsidiaries that are SMEs

The podcast can be accessed through the press release on the IASB website. More information on the topics discussed is available through our comprehensive notes taken by Deloitte observers at the November IASB meeting.

Article on IFRSs and climate-related disclosures

28 Nov, 2019

IASB member Nick Anderson has issued an article discussing how existing requirements within IFRSs relate to climate change risks and other emerging risks.

In the article In Brief: IFRS Standards and climate-related disclosures, Mr Anderson provides an overview intended to help investors understand what already exists in the current requirements and guidance on the application of materiality, and how it relates to climate and other emerging risks.

Aspects he considers are:

  • Board guidance on how to make materiality judgements
  • Applying IFRS Practice Statement 2 Making Materiality Judgements to climate-related and emerging risks
  • Financial reporting considerations when applying IFRS Standards
  • Disclosing climate-related and other emerging risks in the financial statements
  • Management commentary: providing context to the financial statements
    Summary: materiality judgements should serve investors’ information needs

The article notes that Mr Anderson's thoughts have been inspired by work from the Australian Accounting Standards Board (AASB) and Audit and Assurance Board (AUASB).

Please click to access the article on the IASB website.

Report on the autumn 2019 IFASS meeting

27 Nov, 2019

A report has been issued summarising the discussions at the meeting of the International Forum of Accounting Standard Setters (IFASS) held in London on 1 and 2 October 2019.

As reported earlier, among the topics discussed at the meeting was the UK endorsement of IFRSs post EU-exit.

The full list of topics discussed at the meeting was:

  • Extractive activities
  • UK developments:
    • Replacement of the FRC by ARGA
    • Proposals for endorsing IFRSs for the UK post-Brexit
  • International financial reporting for non-profit organisations
  • IPSASB update
  • Government grant receivables and government grant income under IAS 40
  • ESG and intangibles
    • KASB research
    • IASB proposals related to ESG and intangibles in the project on management commentary
  • Connecting with stakeholders through use of technology
  • Goodwill
    • FASB invitation to comment on identifiable intangible assets and subsequent accounting for goodwill
    • Issues identified during KASB and ASBJ research
  • Application of IFRS 16 — Italian experiences
  • Call for volunteers to assist in academic research

The meeting was the first under the new IFASS Chair Mr. Yasunobu Kawanishi (Accounting Standards Board of Japan, ASBJ).

The next meeting of the IFASS will take place in Washington on 6-7 April 2020.

Please click for the full report from the meeting.

Agenda for the December 2019 ASAF meeting

27 Nov, 2019

The International Accounting Standards Board (IASB) has released an agenda and meeting papers for the meeting of the Accounting Standards Advisory Forum (ASAF), which is to be held at the IASB's offices in London on 17 December 2019.

The agenda for the meeting is summarised below:

Tuesday, 17 December (09:00-16:15)

  • Agenda Consultation
    • Potential financial reporting priorities for the Board to discuss in the request for information
  • Post-implementation review of IFRS 10, IFRS 11, and IFRS 12
    • Matters to be discussed in the post-implementation review and scope of the review
    • Matters identified in the Asia Oceania region
  • Accounting for intangible assets
    • KASB presentation on the research project on exploring a way to complement financial statements with a separate statement which identifies core intangibles and presents their value
  • IFRS 17 Insurance Contracts
    • Overview of the feedback on the exposure draft Amendments to IFRS 17
  • Agenda planning

For more information, please see the agenda and meeting papers on the IASB's website.

November 2019 IASB meeting notes posted

26 Nov, 2019

The IASB met on 19–20 November 2019 to discuss seven topics. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

Amendments to IFRS 17 Insurance Contracts: In June 2019 the Board issued ED/2019/4 Amendments to IFRS 17. The staff summarised the feedback from the comment letters on the ten questions in the ED and summarised comments on areas for which amendments to IFRS 17 were considered but not proposed. The Board supported the staff’s plan for redeliberations.

Implementation matters:

  • Lack of Exchangeability (IAS 21): In June 2019, the IFRS Interpretations Committee discussed the difficulties in applying IAS 21 when a currency suffers from an extreme long-term lack of exchangeability and when a foreign operation has not been able to access foreign currencies using the available legal exchange mechanisms, such as with the Venezuelan Bolivar. The Board concluded that this matter is widespread, could have a material effect on those affected and it is necessary to amend IAS 21 to address the matter.  
  • Annual Improvements: The Board published ED/2019/2 Annual Improvements to IFRS Standards 2018–2020 in May 2019. The Board discussed the comments received: Subsidiary as a First-time Adopter (Amendment to IFRS 1); Fees Included in the ‘10 per cent’ Test for Derecognition of Financial Liabilities (Amendment to IFRS 9); Lease Incentives (Amendment to Illustrative Examples accompanying IFRS 16); Taxation in Fair Value Measurements (Amendment to IAS 41).
  • Cryptoassets: The Board was given updated information the staff has obtained by monitoring developments on holdings of cryptocurrencies or initial coin offerings and decided that the staff should continue to monitor developments.

Primary Financial Statements

During the drafting of the ED to replace parts of IAS 1, the staff concluded that it did not have sufficient guidance from the Board on how gains and losses from disposal or impairment of integral associates and joint ventures should be classified. The Board decided that they should be presented together with the share of profit or loss, and impairment losses and reversal of impairment, from those investments.

IFRS 3 reference to the Conceptual Framework: In May 2019, the Board published ED/2019/3 Reference to the Conceptual Framework, which proposed amendments to IFRS 3. The Board discussed the comments received. All respondents supported updating the references in IFRS 3, albeit with some disagreement about aspects of the ED. No decisions were made, although several Board members emphasised that out of scope items identified by respondents should not compromise the project timeline.

Management Commentary: The Board decided to include guidance in the revised Practice Statement about an entity’s business model.

Disclosure Initiative: The Board continued looking at the disclosure requirements in IAS 19 and IFRS 13. In particular it decided to propose changes to those Standards so that some requirements use prescriptive language (shall) and others use less prescriptive language (such as ‘shall consider’ or ‘will normally disclose’).

Subsidiaries that are SMEs: The objective of this project is to consider providing disclosure relief for subsidiaries that are SMEs. The Board decided that the project proceed based on the original scope (i.e. considering only subsidiaries that are SMEs) but consider later whether the scope can be expanded without significantly affecting the conclusions already reached.

IBOR Reform and the Effects on Financial Reporting: The October papers stated that the staff would bring the hedge accounting issues arising in Phase 2 for discussion with the Board at this meeting. That discussion was not on the November agenda.

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

We comment on five IFRS Interpretations Committee tentative agenda decisions

25 Nov, 2019

We have published our comment letters on IFRS Interpretations Committee tentative agenda decisions related to IAS 21, IAS 29, IFRS 15, and IFRS 16, as published in the September 2019 IFRIC Update.

More in­for­ma­tion about the issues is set out below:


Agenda decision supported?

More in­for­ma­tion

IAS 29 — Translating a hyperinflation foreign operation


IFRS 15 — Training costs to fulfil a contract

Yes; however, we are concerned that the request received by the Committee indicates a potential ambiguity on the IFRS Standard (IAS 38 vs IFRS 15) that applies to certain costs and that, without further clarity, inappropriate analogies may be drawn to the tentative agenda decision.

IAS 21 and IAS 29 — Presenting comparative amounts when a foreign operation first becomes hyperinflationary

Yes and believe it would be useful if the agenda decision confirmed how the requirements of IAS 21 paragraph 42(b) apply to comparative amounts in interim and annual financial statements when the entity has a foreign operation that becomes hyperinflationary and the entity’s financial statements are presented in the currency of a non-hyperinflationary economy.

IFRS 16 — Definition of a lease — Shipping contract

Yes and suggest some editorial changes.

IAS 21 and IAS 29 — Cumulative exchange differences before a foreign operation becomes hyperinflationary

Yes and suggest some editorial changes.

Click to access all our comment letters to the IASB, IFRS Foun­da­tion, and IFRS In­ter­pre­ta­tions Committee. 

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