2019

UK GAAP application for reporting periods ending 31 December 2019

06 Dec, 2019

The table below reflects new and revised UK GAAP financial reporting requirements that need to be considered for financial reporting periods ending on 31 December 2019.

As the revised UK GAAP regime has now been in place for a number of years, preparation of either parent company or subsidiary accounts under either FRS 101 or FRS 102 should now have become a more routine exercise. The FRC has made several changes to FRS 102 as part of its first triennial review of the Standard to deal with issues highlighted in its implementation. The amendments were published in December 2017. More recently amendments to FRS 102 related to multi-employer defined benefit plans have been issued.

The table below reflects new and revised UK GAAP financial reporting requirements that need to be considered for financial reporting periods ending on 31 December 2019. For those reporters who want to understand new UK GAAP application for earlier periods please select one of the following:

Pronouncement Effective date Application for quarters ending 31 December 2019?
1st qtrs.* 2nd qtrs.** 3rd qtrs.*** Full yrs****
FRS 100
Amendments to FRS 102 (first triennial review) Effective 1 January 2019. Early application is permitted provided that all the amendments to FRS 101 as a result of the triennial review are applied at the same time. Mandatory Mandatory Mandatory Mandatory
FRS 101
The amendments are available from when an entity applying FRS 101 first applies IFRS 16 - see note 2. Mandatory Mandatory Mandatory Mandatory
Amendments to FRS 102 (first triennial review)

Effective for accounting periods beginning on or after 1 January 2019. Early application is permitted provided that all the amendments to FRS 101 as a result of the triennial review are applied at the same time

 

Mandatory Mandatory Mandatory Mandatory
Amendments to the Basis for Conclusions FRS 101 Reduced Disclosure Framework

No effective date. No amendments to FRS 101 have been made

N/A (see effective date column) N/A (see effective date column) N/A (see effective date column) N/A (see effective date column)
Amendments to FRS 101 - 2018/19 cycle issued

The amendments take effect for accounting periods beginning on or after 1 January 2021. If an entity applies the recognition, measurement and disclosure requirements of IFRS 17 early, the amendments to FRS 101 are applied at the same time.

# # # #
FRS 102
Amendments to FRS 102 (first triennial review) The effective date for most of the amendments to FRS 102 is for accounting periods beginning on or after 1 January 2019, with early application permitted provided all amendments are applied at the same time. The only exceptions to this are the amendments relating to directors’ loans and the tax effects of gift aid payments, for which early application is permitted separately. Limited transitional provisions are also available. The amendments to disclosure requirements under Section 1A for small entities in the Republic of Ireland are effective for accounting periods beginning on or after 1 January 2017. However, early application is permitted for companies in the Republic of Ireland that apply the Companies (Accounting) Act 2017 is applied from the same date.

Mandatory

 

Mandatory

 

Mandatory

 

Mandatory

 

Amendments to FRS 102: Multi-employer defined benefit plans

The amendments are effective for accounting periods beginning on or after 1 January 2020, with early application permitted.

Optional

Optional

Optional

Optional

'Amendments to FRS 102 – Interest rate benchmark reform'.

The amendments are effective for accounting periods beginning on or after 1 January 2020, with early application permitted.

Optional

Optional

Optional

Optional

FRS 103
Amendments to FRS 102 (first triennial review) Effective for accounting periods beginning on or after 1 January 2019. Early application is permitted provided that all the amendments to FRS 103 as a result of the triennial review are applied at the same time. Mandatory Mandatory Mandatory Mandatory
FRS 104
Amendments to FRS 102 (first triennial review) Effective for accounting periods beginning on or after 1 January 2019. Early application is permitted if an entity also applies the Triennial review 2017 amendments to FRS 101 or FRS 102 for an accounting period beginning before 1 January 2019. Mandatory Mandatory Mandatory Mandatory
FRS 105
Amendments to FRS 102 (first triennial review)
The changes to disclosure requirements in FRS 105 for micro entities in the UK are applicable for accounting periods beginning on or after 1 January 2017; all other amendments to FRS 105 as a result of the triennial review are applicable for accounting periods beginning on or after 1 January 2019. Early application for UK micro-companies is permitted provided that all the amendments to FRS 105 are applied at the same time.

With respect to the Republic of Ireland, the changes to incorporate FRS 105 are applicable to accounting periods beginning on or after 1 January 2017. Earlier application is permitted for companies in the Republic of Ireland that apply the Companies (Accounting) Act 2017 is applied from the same date. All other amendments to FRS 105 as a result of the triennial review are applicable for accounting periods beginning on or after 1 January 2019. Early application of the other amendments is permitted provided that all of these other amendments are applied at the same time.

Requirements (other than disclosure requirements for micro entities)- mandatory

Amendments other than ROI changes to incorporate FRS 105 - mandatory

Requirements (other than disclosure requirements for micro entities)- mandatory

Amendments other than ROI changes to incorporate FRS 105 - mandatory

Requirements (other than disclosure requirements for micro entities)-mandatory

Amendments other than ROI changes to incorporate FRS 105 - mandatory

Requirements (other than disclosure requirements for micro entities)-mandatory

Amendments other than ROI changes to incorporate FRS 105 - mandatoryl

* 1st quarter ending on 31 December 2019 (accounting period began on 1 October 2019).

** 2nd quarter ending 31 December 2019 (accounting period began 1 July 2019).

*** 3rd quarter ending 31 December 2019 (accounting period began 1 April 2019).

**** 4th quarter ending 31 December 2019 (accounting period began 1 January 2019).

# - The amendments take effect for accounting periods beginning on or after 1 January 2021. If an entity applies the recognition, measurement and disclosure requirements of IFRS 17 early, the amendments to FRS 101 are applied at the same time. IFRS 17 has not yet been endorsed for use in the EU.

Note 1 - IFRS 16 is applicable to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2019.

 

New and revised pronouncements as at 31 December 2019

06 Dec, 2019

Our popular summary of new and revised financial reporting requirements, updated for financial reporting periods ending on 31 December 2019. This listing can be used to perform a quick check that new financial reporting requirements such as new and revised accounting standards and interpretations, and amendments to standards and interpretations, have been fully considered in the reporting close process.

The information below reflects developments to 27 January 2020 and will be updated through to 31 March 2020 to reflect new and revised financial reporting requirements that need to be considered for financial reporting periods ending on 31 December 2019. For accounts approved after March 2020, please also refer to subsequent versions of this document for any new and revised IFRSs that have additionally been issued that might require disclosure in the accounts under IAS 8:30.

The information below is organised as follows:

Summary

The table below provides a summary of the pronouncements which will be mandatorily applied by entities for the first time at 31 December 2019, for various quarterly reporting periods. Where an EU entity chooses to prepare financial statements in accordance with IFRSs as issued by the IASB, as well as in compliance with IFRSs as adopted by the EU, that entity should comply with the earlier IASB effective date for those items. The table below provides a summary of these pronouncements, and which reporting periods they apply to:

Pronouncement IASB Effective date* EU effective date* EU Mandatory at 31 December 2019?
1st qtrs.** 2nd qtrs.*** 3rd qtrs.**** Full yrs*****
IFRS 16 Leases 1 January 2019 1 January 2019 Yes Yes Yes Yes
NEW OR REVISED INTERPRETATIONS
IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019 1 January 2019 Yes Yes Yes Yes
Annual Improvements 2015-2017 Cycle 1 January 2019 1 January 2019 Yes Yes Yes Yes
Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)
1 January 2018 1 January 2018 Optional ~ Optional ~ Optional ~ Optional ~
Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) 1 January 2019 1 January 2019 Yes Yes Yes Yes
Prepayment Features with Negative Compensation (Amendments to IFRS 9) 1 January 2019 1 January 2019 Yes Yes Yes Yes
Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) 1 January 2019 1 January 2019 Yes Yes Yes Yes

* Generally annual reporting periods beginning on or after the date indicated, may only apply to first-time adopters in some limited cases (see below for full details).

** 1st quarter ending on 31 December 2019 (accounting period began on 1 October 2019).

*** 2nd quarter ending 31 December 2019 (accounting period began 1 July 2019).

**** 3rd quarter ending 31 December 2019 (accounting period began 1 April 2019).

***** 4th quarter ending 31 December 2019 (accounting period began 1 January 2019).

~ The application of both approaches (overlay approach/ deferral approach) is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied.

More information about these pronouncements, and all new and revised pronouncements, is set out below.

Financial statement considerations in adopting new and revised pronouncements

Where new and revised pronouncements are applied for the first time, there can be consequential impacts on annual financial statements, including:

  • Updates to accounting policies. The terminology and substance of disclosed accounting policies may need to be updated to reflect new recognition, measurement and other requirements, e.g IAS 19 Employee Benefits may impact the measurement of certain employee benefits.
  • Impact of transitional provisions. IAS 8 Accounting Policies, Changes in Estimates and Errors contains a general requirement that changes in accounting policies are retrospectively applied, but this does not apply to the extent an individual pronouncement has specific transitional provisions.
  • Disclosures about changes in accounting policies. Where an entity changes its accounting policy as a result of the initial application of an IFRS and it has an effect on the current period or any prior period, IAS 8 requires the disclosure of a number of matters, e.g. the title of the IFRS, the nature of the change in accounting policy, a description of the transitional provisions, and the amount of the adjustment for each financial statement line item affected
  • Third statement of financial position. IAS 1 Presentation of Financial Statements requires the presentation of a third statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements in a number of situations, including if an entity applies an accounting policy retrospectively and the retrospective application has a material effect on the information in the statement of financial position at the beginning of the preceding period
  • Earnings per share (EPS). Where applicable to the entity, IAS 33 Earnings Per Share requires basic and diluted EPS to be adjusted for the impacts of adjustments result from changes in accounting policies accounted for retrospectively and IAS 8 requires the disclosure of the amount of any such adjustments.

Whilst disclosures associated with changes in accounting policies resulting from the initial application of new and revised pronouncements are less in interim financial reports under IAS 34 Interim Financial Reporting, some disclosures are required, e.g. description of the nature and effect of any change in accounting policies and methods of computation.

 

New or revised standards

The information below can be used to assist with the disclosure requirements under paragraph 30 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, which requires entities to disclose any new IFRSs that are in issue but not yet effective and which are likely to impact the entity

New or revised pronouncement When EU effective

Application at 31 December 2019 to:

1st qtrs 2nd qtrs 3rd qtrs Full yrs

IFRS 16 Leases

IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.
Issued: 13 January 2016 (Summary of IFRS 16, article, IFRS 16 resources)
Applicable to annual reporting periods beginning on or after 1 January 2019

Mandatory Mandatory Mandatory Mandatory

IFRS 17 Insurance Contracts

IFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes IFRS 4 Insurance Contracts as of 1 January 2021.

Issued: 18 May 2017 (Summary of IFRS 17, Article, Newsletter).

Applicable to annual reporting periods beginning on or after 1 January 2021

Not yet endorsed for use in the EU.

 

New or revised interpretations

New or revised interpretation When effective Application at 31 December 2019 to:
1st qtrs. 2nd qtrs. 3rd qtrs 4 qtrs.

IFRIC 23 Uncertainty over Income Tax Treatments

The interpretation sets out how to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates when there is uncertainty over income tax treatments under IAS 12 Income Taxes.

The Interpretation requires an entity to:

  • determine whether uncertain tax positions are assessed separately or as a group; and
  • assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings:
    • If yes, the entity should determine its accounting tax position consistently
      with the tax treatment used or planned to be used in its income tax filings.
    • If no, the entity should reflect the effect of uncertainty in determining its accounting tax position.

Issued: 7 June 2017 (article)

Effective date: annual periods beginning on or after 1 January 2019. Entities can apply the Interpretation either on a fully retrospective or modified retrospective approach (where comparatives are not permitted or required to be restated).

 

Mandatory

Mandatory

Mandatory

Mandatory

Amendments

New or revised pronouncement When effective Application at 31 December 2019 to:
1st qtrs 2nd qtrs 3rd qtrs Full yrs

Editorial Corrections (various)

The IASB periodically issues Editorial Corrections and changes to IFRSs and other pronouncements. Since the beginning of calendar 2012, such corrections have been made in February 2012, July 2012, March 2013, September 2013, November 2013 and March 2014, September 2014, December 2014, March 2015, April 2015, September 2015, December 2015, March 2016, May 2016, September 2016, December 2016, September 2017, November 2017, December 2018, March 2019, May 2019 and December 2019.

Note: For details of these editorial corrections, see our IASB editorial corrections page.

As minor editorial corrections, these changes are effectively immediately applicable under IFRS See comment in previous column
Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)
Amends IFRS 4 Insurance Contracts provide two options for entities that issue insurance contracts within the scope of IFRS 4:
  • an option that permits entities to reclassify, from profit or loss to other comprehensive income, some of the income or expenses arising from designated financial assets; this is the so-called overlay approach;
  • an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4; this is the so-called deferral approach.
The application of both approaches is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied.
Issued: 12 September 2016 (article, newsletter)

Overlay approach to be applied when IFRS 9 is first applied. Deferral approach effective for annual periods beginning on or after 1 January 2018 and only available for three years after that date.

 

Optional

Optional

Optional

Optional

Annual Improvements 2015-2017 Cycle
Makes amendments to the following standards:
  • IFRS 3 Business Combinations and IFRS 11 Joint Arrangements - The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.

  • IAS 12 Income Taxes - The amendments clarify that the requirements in the former paragraph 52B (to recognise the income tax consequences of dividends where the transactions or events that generated distributable profits are recognised) apply to all income tax consequences of dividends by moving the paragraph away from paragraph 52A that only deals with situations where there are different tax rates for distributed and undistributed profits.
  • IAS 23 Borrowing Costs - The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.

The amendments are all effective for annual periods beginning on or after 1 January 2019.

Mandatory Mandatory Mandatory Mandatory
Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)
The amendments clarify that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.
The amendments in Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) are:
  • Paragraph 14A has been added to clarify that an entity applies IFRS 9 including its impairment requirements, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.
  • Paragraph 41 has been deleted because the Board felt that it merely reiterated requirements in IFRS 9 and had created confusion about the accounting for long-term interests.
Issued:12 October 2017 (article)
Annual periods beginning on or after 1 January 2019
Annual periods beginning on or after 1 January 2019

Annual periods beginning on or after 1 January 2019

Mandatory

Mandatory

Mandatory

Mandatory

Prepayment Features with Negative Compensation (Amendments to IFRS 9)
The amendments address concerns about how IFRS 9 Financial Instruments classifies particular prepayable financial assets. In addition, the IASB has clarified an aspect of the accounting for financial liabilities following a modification.
The amendments are:

Changes regarding symmetric prepayment options

Under the current IFRS 9 requirements, the SPPI condition is not met if the lender has to make a settlement payment in the event of termination by the borrower (also referred to as early repayment gain).

Prepayment Features with Negative Compensation amends the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments.

Under the amendments, the sign of the prepayment amount is not relevant, i. e. depending on the interest rate prevailing at the time of termination, a payment may also be made in favour of the contracting party effecting the early repayment. The calculation of this compensation payment must be the same for both the case of an early repayment penalty and the case of a early repayment gain.

Clarification regarding the modification of financial liabilities

The final amendments also contain (in the Basis for Conclusions) a clarification regarding the accounting for a modification or exchange of a financial liability measured at amortised cost that does not result in the derecognition of the financial liability. The IASB clarifies that an entity recognises any adjustment to the amortised cost of the financial liability arising from a modification or exchange in profit or loss at the date of the modification or exchange. A retrospective change of the accounting treatment may therefore become necessary if in the past the effective interest rate was adjusted and not the amortised cost amount.
Issued: 12 October 2017 (article)

 

The amendments are to be applied retrospectively for fiscal years beginning on or after 1 January 2019, i. e. one year after the first application of IFRS 9 in its current version. Early application is permitted so entities can apply the amendments together with IFRS 9 if they wish so. Additional transitional requirements and corresponding disclosure requirements must be observed when applying the amendments for the first time.

Mandatory

Mandatory

Mandatory

Mandatory

Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
The amendments in Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) are:
  • If a plan amendment, curtailment or settlement occurs, it is now mandatory that the current service cost and the net interest for the period after the remeasurement are determined using the assumptions used for the remeasurement.
  • In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.

Issued: 7 February 2018 (article)

Annual periods beginning on or after 1 January 2019.

Mandatory

Mandatory

Mandatory

Mandatory

Amendments to References to the Conceptual Framework in IFRS Standards


Together with the revised Conceptual Framework published in March 2018, the IASB has also issued Amendments to References to the Conceptual Framework in IFRS Standards. The document contains amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32. Not all amendments, however update those pronouncements with regard to references to and quotes from the framework so that they refer to the revised Conceptual Framework. Some pronouncements are only updated to indicate which version of the framework they are referencing to (the IASC framework adopted by the IASB in 2001, the IASB framework of 2010, or the new revised framework of 2018) or to indicate that definitions in the standard have not been updated with the new definitions developed in the revised Conceptual Framework.

Issued: 29 March 2018 (article)

Annual periods beginning on or after 1 January 2020

Optional

Optional

Optional

Optional

Definition of a Business (Amendments to IFRS 3)

The amendments in Definition of a Business (Amendments to IFRS 3) are changes to Appendix A Defined terms, the application guidance, and the illustrative examples of IFRS 3 only. They:

  • clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs;
  • narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs;
  • add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;
  • remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and
  • add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.

Issued: 22 October 2018 (article/newsletter)


Business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020
Not yet endorsed for use in the EU.

Definition of Material (Amendments to IAS 1 and IAS 8)

The amendments in Definition of Material (Amendments to IAS 1 and IAS 8) clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards.

Issued: 31 October 2018 (article)

 

Annual reporting periods beginning on or after 1 January 2020

Optional

Optional

Optional

Optional

Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

The amendments in Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) clarify that entities would continue to apply certain hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform.

Issued: 26 September 2019 (article)

Annual reporting periods beginning on or after 1 January 2020

Optional

Optional

Optional

Optional

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current

Issued: 23 January 2020 (article)

Annual reporting periods beginning on or after 1 January 2022
Not yet endorsed for use in the EU.

 

 

 

 

 

Videos from the 'IFRS & Regulation: Searching for Common Ground' conference

06 Dec, 2019

On 28 November 2019, the European Financial Reporting Advisory Group (EFRAG) convened the 'IFRS & Regulation: Searching for Common Ground' conference in Bussels.

Two video recordings (on two hours long, one 1.5 hours long) of the conference are now available. The press release on the EFRAG website explains the contents of the recordings and offers access to them.

European Union formally adopts updated references to the Conceptual Framework

06 Dec, 2019

The European Union has published a Commission Regulation endorsing 'Amendments to References to the Conceptual Framework in IFRS Standards'.

The following standards and interpretations are affected by the amendments published by the IASB in March 2018:

  • IAS 1 Presentation of Financial Statements
  • IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
  • IAS 34 Interim Financial Reporting
  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets
  • IAS 38 Intangible Assets
  • IFRS 2 Share-based Payment
  • IFRS 3 Business Combinations
  • IFRS 6 Exploration for and Evaluation of Mineral Resources
  • IFRIC 12 Service Concession Arrangements
  • IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
  • IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
  • IFRIC 22 Foreign Currency Transactions and Advance Consideration
  • SIC-32 Intangible Assets — Web Site Costs

The European Union effective date is the same as the IASB in case of all amendments (1 January 2020).

The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 6 December 2019.

Chairman of the IFRS Foundation Trustees speaks about Big Techs and financial stability

06 Dec, 2019

In a keynote speech given on 3 December in Paris, Erkki Liikanen, Chairman of the IFRS Foundation Trustees, spoke on the question of whether big tech is a threat to financial stability.

Mr Liikanen explained that today, a major push for innovation in global finance is coming from ‘big techs’, companies that are dominant platform providers that offer ubiquitous digital services. He summarised the impact of these big techs neutrally:

  1. The entry of big techs into financial services holds the promise of efficiency gains and can enhance financial inclusion.
  2. Regulators need to ensure a level playing field between big techs and banks, taking into account big techs’ wide customer base, access to information and business models.
  3. Big techs' entry presents new and complex trade-offs between financial stability, competition and data protection.

Based on this, Mr Liikanen offered three observations. Firstly, policymakers need to decide how much to encourage big tech to enter finance — should policies promote big techs’ entry or restrict it? Secondly, big tech tests the regulatory perimeters of data protection, competition policy and now financial regulation. As such, regulation that is fit-for-purpose will require enhanced cooperation among multiple regulatory bodies. And thirdly, we need to recognise the cross-border nature of the big techs and fintechs challenge and respond appropriately. Mr Liikanen also noted that among the initiatives in the field is the work by the IFRS Foundation to consider the accounting for crypto assets under IFRSs.

Mr Liikanen closed his speech by noting: "Innovation is here to stay, and it will bring benefits and it will bring challenges. We need a balanced approach, where we reap the benefits of financial inclusion and efficiency and ensure a level playing field between big techs and banks."

Please click to access the full text of Mr Liikanen's speech on the IASB website.

Pre-meeting summaries for the December IASB meeting

06 Dec, 2019

The IASB will meet in London on 11–12 December 2019 to discuss nine topics. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. For each topic to be discussed, we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

Amendments to IFRS 17 Insurance Contracts: The Board is continuing its discussions about ED/2019/4 Amendments to IFRS 17. At this meeting the staff are recommending that the Board make decisions about the amendments that the staff identified in November did not require significant redeliberation. The staff have also made recommendations about insurance acquisition cash flows and reinsurance contracts held.

IBOR Reform and the Effects on Financial Reporting: The staff recommend that IFRS 9 and IAS 39 be amended to allow entities to continue a hedging relationship (i.e. no derecognition) when modifications to the interest rate benchmark on which a financial instrument’s contractual cash flows are based are a direct consequence of IBOR reform and are done on an economically equivalent basis.

Accounting Policies and Accounting Estimates (Amendments to IAS 8): The staff are requesting permission to prepare the final amendments to IAS 8. They will apply to annual periods beginning on or after 1 January 2022 and are expected to be published in the first half of 2020.

Implementation matters:

Onerous Contracts: The Staff are requesting permission to prepare the final amendments to IAS 37. They will apply to annual periods beginning on or after 1 January 2022 and are expected to be published in the first half of 2020.

Annual Improvements: The Staff are requesting permission to prepare the final amendments for annual improvements to IFRS 1 (subsidiary as a first-time adopter), IFRS 9 (fees Included in the ‘10 per cent’ test for derecognition of financial liabilities and IAS 41 (taxation in fair value measurements). The amendments will apply to annual periods beginning on or after 1 January 2022. The amendment to the illustrative example accompanying IFRS 16 takes effect when it is published. Staff do not expect to publish the package of amendments until the second quarter of 2020.

IFRS 3 reference to the Conceptual Framework: The staff recommend that the Board confirm the proposal to add, within the section headed ‘Exception to the recognition principle’, an exception to the recognition principle for liabilities and contingent liabilities within the scope of IAS 37 or IFRIC 21. They also recommend that the Board clarify that updating the reference to the Conceptual Framework does not change IFRS 3 requirements for recognition of assets and liabilities whose fair values are subject to measurement uncertainty.

Subsidiaries that are SMEs: The Chair of the Australian Accounting Standards Board will give a presentation on their proposal for a simplified disclosure standard, similar to the one the IASB is looking to develop. (It is an information-only session).

Business Combinations under Common Control: The staff recommend that the acquisition method, as set out in IFRS 3, be required for transactions that affect non-controlling shareholders of the receiving entity. However, the receiving entity should recognise any excess of the fair value of the acquired identifiable net assets over the consideration transferred as an increase in the receiving entity’s equity (contribution), not as a gain on a bargain purchase in profit or loss.

SME Standard review and update: The staff are seeking approval to prepare the Request for Information, with a comment period of 180 days. 

Financial Instruments with Characteristics of Equity: The Board will begin its discussion about classifying financial instruments that will, or may, be settled in the issuer’s own equity instruments (both derivative and non-derivative instruments). In particular, the staff will explore what clarifications could be made to the underlying principle of the fixed-for-fixed condition.

More information

Our pre-meeting summaries are available on our December meeting notes page and will be supplemented with our popular meeting notes after the meeting.

December 2019 IASB meeting agenda posted

03 Dec, 2019

The IASB has posted the agenda for its next meeting, which will be held at its offices in London on 11–12 December 2019. There are nine topics on the agenda.

The Board will discuss the following:

  • Implementation matters
  • Accounting policies and accounting estimates
  • Financial instruments with characteristics of equity
  • Amendments to IFRS 17 Insurance Contracts
  • IFRS 3 reference to the Conceptual Framework
  • IFRS for SMEs review and update
  • IBOR reform and the effects on financial reporting
  • Subsidiaries that are SMEs
  • Business combinations under common control

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.

Agenda and slides for the upcoming MCCG meeting

03 Dec, 2019

The IASB's Management Commentary Consultative Group will be meeting on 13 December 2019 in London. An agenda for the meeting is now available.

The meeting will focus on topics for further input, an overview of the staff’s current proposals, and supporting the adoption of the Practice Statement.

The agenda and slides for the meeting are available on the IASB's website.

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.

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