Mr Cendon and Ms Suzuki will begin their five-year terms on 1 July 2019. They will replace Amaro Gomes and Takatsugu Ochi as their second-term ends on 30 June 2019. For more in­for­ma­tion, see the press release on the IASB’s website.

A summary of the agenda is set out below:

Agenda papers for the meeting are available on the IASB website.

The FRC position paper sets out how Ethical and Auditing Standards will be developed to respond better to the needs of users of audited financial information, following the recent call for feedback.

The paper sets out the issues that will be developed to support a public consultation on the text of revised standards over the summer. It also sets out how the FRC’s work on the standards responds to certain recommendations made by Sir John Kingman in his independent review of the FRC, how proposals are being developed to support the Competition and Market Authority’s Market Study of the UK Statutory Audit Market; and how revisions made to the international Code of Ethics will be incorporated into the FRC Ethical Standard.

The position paper also draws the attention of Public Interest Entity auditors to changes that will take place to UK law in the event that the UK exits the European Union with no deal or transitional period at 11PM on 29 March 2019. An appendix to the paper shows the most important implications of this, which audit firms will need to address. The FRC will also be writing to the Heads of Audit for all UK PIE audit firms, and to the Professional Accountancy Bodies to draw attention to this – the most immediate issues will be a change to the definition of a Public Interest Entity and implications for the provision of certain non-audit services which will be prohibited on a global basis rather than just within the European Union.

A press release and the position paper are available on the FRC website. Our response to the original call for feedback can be found by clicking here. 

The full agenda for the meeting is sum­marised below:

Agenda papers for this meeting are available on the IASB's website.

The Board will consider the remaining topics in its review of concerns raised by stakeholders in relation to IFRS 17 Insurance Contracts: credit cards that provide insurance cover; transition requirements—risk mitigation option; implications for disclosure; and transition requirements. The staff are recommending some changes be made to IFRS 17 and IFRS 9 Financial Instruments. The Board will consider the package of amendments as a whole in its April 2019 meeting.

The staff recommend that the Board proceed to publish an Exposure Draft (in April or May) with proposed amendments to IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement to address the uncertainty introduced by IBOR reform.  Because this is an urgent matter, the comment period would be 45 days.

As part of the Disclosure Initiative the staff have developed two examples they think will help those preparing financial statements avoid explaining their accounting polices using boilerplate or generic descriptions or simply repeating the requirements of IFRS Standards. The examples would be included in the Materiality Practice Statement.

The Board will discuss two remaining issues in relation to the Exposure Draft Classification of Liabilities (as current or non-current). The staff are recommending refinements to the proposal in relation to classification of liabilities with equity-settlement features and classification of loans for which the right to defer settlement is subject to lending conditions that will not be tested until after the end of the reporting period.

The Board will continue its discussions of Business Combinations under Common Control by considering whether to develop a current value approach for all or some transactions that affect non-controlling interest (NCI) in the receiving entity (discussed in the December 2018 Agenda Paper 23) and a different approach, such as a predecessor approach, for transactions that affect lenders and other creditors in the receiving entity but do not affect NCI.

In the Primary Financial Statements project the staff are recommending that the Board require the separate presentation of several items in the primary financial statements (such as, in the statement of financial position, goodwill and investment in “integral” and “non-integral” associates and joint ventures accounted for using the equity method). However, they recommend that entities not be required to present amortisation, depreciation and research and development expenditure in the statement(s) of financial performance. They also recommend that entities be required to provide information about unusual items presented in the statement(s) of financial performance.

The staff will provide an overview of the feedback it has analysed in relation to the Discussion Paper on Financial Instruments with Characteristics of Equity.

The 2015 Agenda Consultation led to a project to consider whether subsidiaries that are SMEs should be permitted to apply IFRS standards with reduced disclosures. The staff paper sets out the objective of the project and provides some background information.

The staff will update the Board on progress in the Extractive Activities project, setting out the more significant developments in extractive activities since the publication of a Discussion Paper by the IASB in 2010. 

The staff recommends that in reviewing and revising the IFRS for SMEs Standard, that it should continue to be aligned with full IFRS Standards. This would mean updating the IFRS for SMEs Standard for new and amended IFRS Standards, while considering whether the changes to IFRS Standards are relevant to SMEs, if the requirements should be simplified and ensuring the outcome is proportionate.

More information

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

Agenda decisions to finalise

The Committee finalised eight tentative Agenda Decisions.

• IFRS 11 Joint Arrangements — Sale of output by a joint operator. 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, i.e. revenue is recognised by applying IFRS 15.
• IFRS 11 Joint Arrangements — Liabilities in relation to a joint operator's interest in a joint operation. IFRS 11 requires a joint operator to recognise its liabilities, which will include those for which it has primary responsibility including when an operator is the primary obligor for a lease contract.
• IAS 38 Intangible Assets — Customer's right to access the supplier's software hosted on the cloud. In a cloud-computing arrangement for which the customer does not receive a software asset, the customer receives a service and the arrangement does not contain a lease.
• IFRS 9 Financial Instruments — Physical settlement of contracts to buy or sell a non-financial item. 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. 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 — Application of the highly probable requirement in a cash flow hedge relationship. In a cash flow hedge, a forecast transaction can be hedged if, and only if, it is highly probable. This requires consideration of the uncertainty over both the timing and magnitude of the forecast transaction. Furthermore, in the fact pattern analysed, forecast energy sales cannot be specified solely as a percentage of sales during a period.
• IFRS 9 Financial Instruments — Credit enhancement in ECL measurement. 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 expected credit losses.
• IFRS 9 Financial Instruments — Presentation of contractual interest. The reversal of the unwinding of discount is presented as a reversal of credit impairment when the asset is cured.
• Additional statement. IFRIC Update will include a statement that:
  
  The process for publishing an Agenda Decision might often result in explanatory material that provides new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained. Because of this, an entity might determine that it needs to change an accounting policy as a result of an Agenda Decision. It is expected that an entity would be entitled to sufficient time to make that determination and implement any change (for example, an entity may need to obtain new information or adapt its systems to implement a change).

New issues

The Committee will discussed three new issues. In each case the Committee decided not to develop an Interpretation or amendment but instead publish a tentative Agenda Decision.

• IFRS 15 Revenue from Contracts with Customers—Costs to fulfil a contract.  When revenue is recognised over time (in this case from a property sale, using the output method to measure progress) any costs incurred to fulfil the performance obligation are recognised as an expense when they are incurred.
• IFRS 16 Leases—subsurface rights. When a contract between a land owner and another party gives the other party the right to place an oil pipeline in a specified underground space for 20 years, with the land owner retaining the right to use the surface area of the land above the pipeline, that contract contains a lease.
• IAS 19 Employee Benefits—Effect of a potential discount on plan classification. The existence of a potential discount on the contribution an entity is obliged to make to a post-employment benefit plan, if the ratio of plan assets to plan liabilities exceeds a set level, does not preclude the plan from being a defined contribution plan.

Continuing discussions

Holdings of a cryptocurrency. The Committee decided to publish a tentative Agenda Decision stating that a cryptocurrency does not meet the definitions of cash or a financial asset but does meet the definition of an intangible asset. Accordingly, IAS 38 Intangible Assets applies to holdings of a cryptocurrency, unless the cryptocurrency is held for sale in the ordinary course of business—in which case IAS 2 Inventories applies.

Future discussions

The staff are working on potential amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates to provide more guidance when a spot exchange rate is not observable.

The staff have also received a request in relation to a foreign currency hedge of a non-financial asset. The staff are in the process of analysing the matter.

More information

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

The purpose of the call is to seek the approval of the DPOC for a shortened comment period for the forthcoming exposure draft on the IBOR reform and its effects on financial reporting.

In addition, the DPOC will discuss a question on the review of the due process handbook and education material carried forward from the DPOC meeting in January.

Please click to access the agenda and the papers for the call on the IASB website.

The proposals have been made following a number of high profile corporate failures where the auditor’s report failed to highlight concerns about the prospects of entities which collapsed shortly after. Additionally findings of the FRC Enforcement cases have raised concerns about the quality of audit. The FRC indicates that in proposing these revisions, requirements on UK auditors will be significantly stronger than those required by international standards.

The consultation proposes:

• auditors make greater effort to more robustly challenge management’s assessment of going concern, thoroughly test the adequacy of the supporting evidence, evaluate the risk of management bias, and make greater use of the viability statement;
• improved transparency with a new reporting requirement for the auditor to provide a conclusion on whether management’s assessment is appropriate, and to set out the work they have done in this respect; and
• a stand back requirement to consider all of the evidence obtained, whether corroborative or contradictory, when the auditor draws their conclusions on going concern.

The press release and exposure draft are available on the FRC website. Comments are requested by 5pm on Friday 7 June 2019.

More in­for­ma­tion about the issues is set out below:

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

Meeting activities included the following:

• 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 a global environment scan and considered the key strategic themes that now face the Foundation.
  • Governance issues — The Trustees reviewed and approved the business case for improvements to the Foundation’s business process and technology
  • Operations analysis — The Trustees received presentations on the work plan for the Asia-Oceania Office and on the Foundation’s People Strategy.
  • Future meetings — Trustees confirmed that their next meetings would be in Munich in June 2019, New York in October 2019, and Brussels in early 2020.
  • Committee reports — The Trustees discussed reports from the 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 IFRS 17 and possible amendments to the standard, the IBOR reform, accounting for goodwill, and primary financial statements.
• Meetings in Kuala Lumpur — The Trustees met with members of the Asian-Oceanian Standard Setters Group and also discussed the work of the IFRS Foundation Advisory Council with its chair Joanna Perry. They also held a stakeholder dinner which was co-hosted by the Malaysian Accounting Standards Board.

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