Comments on Tentative Agenda Decision

IAS 12 Income Taxes—Multiple Tax Consequences of Recovering an Asset (Agenda Paper 2): The staff recommend finalising the agenda decision which confirms that an entity should reflect the distinct tax consequences of recovering the asset's carrying amount under the income tax and capital gain tax regimes.

Research Summary

Supply Chain Financing—Reverse Factoring (Agenda Paper 3): The research summary provides a summary of the prevalence of supply chain financing arrangements, the key terms of reverse factoring arrangements and the accounting for reverse factoring arrangements.

Work in progress (Agenda Paper 4)

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

The full agenda and pre-meeting summaries for the meeting can be found here. We will update this page for any changes to the agenda and our Deloitte meeting notes as they become available. 

The following papers were posted for the March meeting, but were deferred because of the COVID-19 pandemic:

• Financial Instruments with Characteristics of Equity: At the December 2019 Board meeting, the Board discussed the staff’s preliminary analysis on how the fixed-for-fixed requirement in IAS 32 could be clarified. At this meeting the staff recommend that the Board articulate its foundation principle by stating that in a derivative on own equity that meets the fixed-for-fixed condition, the amount of functional currency units to be exchanged with each underlying equity instrument is fixed and does not vary other than (if applicable) with preservation adjustments and passage of time adjustments. The staff also set out recommendations for how the preservation and passage of time adjustments should be expressed.
• Post-implementation review of IFRS 10, 11 and 12: The staff recommend that the Board proceed with the PIR and publish a request for information to gather more information about the application of these Standards.
• Maintenance and Consistent Application: In 2017, the IFRS Interpretations Committee received a question about a particular commodity loan transaction and observed that the transaction may not be captured within the scope of any IFRS Standard. The staff recommend that the Board consider referring to commodity transactions as a potential project in its Request for Information on the 2020 Agenda Consultation.
• Disclosure Initiative—Subsidiaries that are SMEs: In the January 2020 meeting, the Board agreed to move the project from the research programme to the standard-setting programme. The objective is to develop a reduced disclosure IFRS Standard that would apply on a voluntary basis to subsidiaries that are SMEs, adapted from the disclosure requirements of the IFRS for SMEs. The staff expect to start drafting an ED or a DP in Q4 2020.

The new topics are:

Maintenance and Consistent Application:

• Sale and leaseback with variable payments. At its March 2020 meeting, the IFRS Interpretations Committee (Committee) discussed a submission about a sale and leaseback transaction with variable payments. The Committee published a tentative agenda decision but its discussions highlighted that IFRS 16 is not as complete as it could be regarding the subsequent measurement of the lease liability arising in a sale and leaseback transaction. They therefore recommended that the Board make a narrow-scope amendment to IFRS 16. The staff propose amending IFRS 16 to state that for lease modifications or changes in the lease term of a sale and leaseback transaction, the seller-lessee remeasures the lease liability by discounting the revised expected payments for the lease using a revised discount rate.
• Lack of exchangeability. At its November 2019 meeting, the Board decided to propose an amendment to IAS 21 to address the accounting when the spot exchange rate is not observable (because of a lack of exchangeability between two currencies). The staff are recommending a definition of a lack of exchangeability, indicators for assessing exchangeability and disclosure requirements.

Deferred tax related to assets and liabilities arising from a single transaction. In July 2019 the Board published the Exposure Draft Deferred Tax related to Assets and Liabilities arising from a Single Transaction, proposing an amendment to IAS 12 to narrow the scope of the recognition exemption (which affects initial recognition of leases and decommissioning liabilities). The staff will present a summary of feedback received. No decisions are expected at this meeting.

Second comprehensive review of the IFRS for SMEs Standard: The staff will publish a survey on 20 April 2020, with comments to be received by 27 July 2020, for stakeholders who do not have an existing process or do not have sufficient capacity or resources to submit a comment letter.

Management Commentary: The discussion will focus on disclosure objectives and the type of information that would support those objectives. The three areas are business model, strategy and resources and relationships.

There will also be an oral update on amendments to IFRS 17 Insurance Contracts.

More information

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

The paper had noted that the hundreds of non-financial information (NFI) reporting initiatives available are leading to confusion and the potential for greenwashing. For an effective response to these global issues and stakeholder demands, NFI reporting needs to be harmonised and interconnected with financial reporting. The paper then explored four approaches how this can be achieved, being (1) an international non-financial reporting standards board within the IFRS structures, (2) regional consolidation, (3) separate governance structure for financial and NFI reporting; and (4) global corporate reporting structure.

The responses so far made available on the Accountancy Europe website (17 responses that can be accessed here) show strong support for approach number four.

Of the large accounting organisations, ACCA very much supports overall the content and conclusions of the paper and agrees that approach 4 represents the best model for setting the standards needed to address the issues at hand. IFAC states that a global approach to international standard-setting is an optimal solution and notes: "IFAC strongly supports a global, versus regional or local, approach to “non-financial” standard setting, including the process of establishing a conceptual framework and standards, for the same reasons international standards were critical for the maturity of financial reporting. A regional or local approach ultimately leads to inefficiency and increased costs — for both companies and investors and might be challenging to retrofit at an international level."

The majority of national standard-setters also support the global approach. The German standard-setter ASCG states: "[W]e do not share the view of those that believe Europe should be first, go regional and create its own non-financial reporting environment. The reporting requirements are primarily targeting companies that are sourcing, selling and doing business beyond Europe's borders" and the Dutch standard-setter DASB believes that for any global initiative, clear support of major national and international stakeholders and jurisdictions is essential and notes that approach four may be most appropriate given the fact that also the United Nations have made promising progress in developing their SDGs.

The sustainability and integrated reporting organisations, apart from promoting their own standards and frameworks, favour global solutions as well. The CDSB warns that a "regional approach may not be the best method to develop a global standard. This problem is further exacerbated by the issue that jurisdictions outside of Europe may be hesitant to adopt regional concepts", GRI notes that a "globalized system will unlock the value of the information by easing comparability and analysis while minimizing reporting burden", and the IIRC comments: "We endorse the approach taken by Accountancy Europe in encouraging dialogue between stakeholders that will lead to a globally coordinated solution involving many different constituents on an inclusive basis."

Responses from academia offer careful analysis of all approaches and general statements in the paper. One comment letter notes: "Approach 4 has much greater potential with respect to global acceptance. It is unrealistic to expect global adoption of an approach that is designed and controlled locally. [...] This is especially important for NFI because the underlying challenges are global. [...] By creating barriers to global acceptance, Approach 2 risks undermining the EU’s policy ambition in this regard. Conversely, if the EU were to initiate, promote and support Approach 4, and commit to adopting the resulting standards (with appropriate endorsement process), then it would be in a strong position to ensure that the specific implementation of Approach 4 would reflect the EU’s views, against criteria such as public accountability and balanced member ship of the standard-setting body."

The responses from audit firms all support a global solution as well. Our Deloitte comment letter notes: "We agree that there is a need for a global solution in view of the global flow of capital and the urgent need to address issues such as climate change which have no borders. We urge capital market regulators and multi-lateral authorities to engage urgently in putting a robust global systemic solution in place."

The topics discussed at the meeting included:

• Primary financial statements — Overview over the ED and preliminary views of the members
• IASB update
• Goodwill and impairment — Overview of the Board’s preliminary views that will be included in the discussion paper and GPF members’ views on the feedback process for the project and areas of focus during the comment and outreach period
• Disclosure initiative: Targeted standards-level review of disclosures in IAS 19 and IFRS 13 — next steps in the project

The next GPF meeting will be held jointly with the CMAC on 18 and 19 June 2020.

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

Below is an analysis of all changes made to the work plan since our last analysis on 18 April 2020.

Standard-setting projects

• Disclosure initiative — Subsidiaries that are SMEs — The Board will decide whether to publish a discussion paper or an exposure draft as next step in this project in the fourth quarter of 2020 (previously no date given)
  

Maintenance projects

• Accounting policy changes — The Board will decide on the future project direction in June 2020 (previously May 2020)
• Classification of liabilities — Effective date — A project newly added to the work plan to defer the effective date effective date of the January 2020 amendments to IAS 1 to 2023; an exposure draft is expected in May 2020
• Deferred tax related to assets and liabilities arising from a single transaction — The Board was expecting to discuss exposure draft feedback in June 2020; the entry has now been changed to a decision of the future project direction (no date given)
• IBOR reform and its effects on financial reporting — Phase 2 — Discussion of the feedback on the April 2020 exposure draft is now expected to occur in June 2020 (previously third quarter of 2020)
• IFRS 16 and COVID-19 — Feedback on the exposure draft published earlier today is expected to be discussed in May 2020
• Lease liability in a sale and leaseback — A project newly added to the work plan; an exposure draft is expected in the third quarter of 2020

Research projects

• Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — the entry has been changed from research review  to request for information; the date remains unchanged as fourth quarter of 2020

Other projects

• Due Process Handbook review — The revised handbook is now expected in June 2020 (previously April 2020)

The above is a faithful comparison of the IASB work plan at 18 April 2020 and at 24 April 2020. For access to the current IASB work plan at any time, please click here.

Below is an analysis of all changes made to the work plan since our last analysis on 27 March 2020.

Standard-setting projects

• The Board extended the consultation period for the Exposure Draft General Presentation and Disclosures until 30 September 2020
  

Maintenance projects

• Changes in accounting policies and estimates — Final amendments are now expected in the fourth quarter of 2020 (previously no date given)
• Amendments to IFRS 17 'Insurance Contracts' — Final amendments are now expected in June 2020 (previously second half of 2020)
• Deferred tax related to assets and liabilities arising from a single transaction — The discussion of exposure draft feedback is now expected in June 2020 (previously second quarter of 2020)
• Disclosure initiative — Accounting policies — The last work plan stated that feedback to the exposure draft would be discussed (no date given); this has now changed to final amendments to be expected in  the fourth quarter of 2020 without redeliberations having occurred yet
• Disclosure initiative — Disclosure review — An exposure draft is now expected in the first half of 2021 (previously second half of 2020)
• IBOR reform and its effects on financial reporting — Phase 2 — An exposure was published on 9 April 2020; discussion of the feedback received is expected to occur in the third quarter of 2020
• IFRS 16 and COVID-19 — A project newly added to the work plan; an exposure draft is expected "by 27 April 2020"
• The Board extended the consultation period for the Request for Information Comprehensive Review of the IFRS for SMEs Standard until 27 October 2020

Research projects

• Business combinations under common control — A discussion paper is now expected in the third quarter of 2020 (previously second quarter of 2020)
• Dynamic risk management — Outreach on the core model is now expected in the second half of 2020 (previously second quarter of 2020)
• Extractive Activities — Research findings will now be discussed in June 2020 (previously second quarter of 2020)
• Goodwill and impairment — The feedback received on the discussion paper will be discussed in the first half of 2021 (previously second half of 2020); the consultation period for the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment has been extended until 31 December 2020
• Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — in the last work plan, the research review was announced for April 2020; this has now been given an entry "fourth quarter of 2020" although the Board will actually discuss the feedback at the upcoming Board meeting

Other projects

• 2020 Agenda Consultation — A request for information is now expected in the first half of 2021 (previously second half of 2020)

The above is a faithful comparison of the IASB work plan at 27 March 2020 and at 18 April 2020. For access to the current IASB work plan at any time, please click here.