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August

BIS calls IFRS 17 a "welcome development"

03 Aug 2020

The Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) has published a paper 'Accounting standards and insurer solvency assessment' dealing with IFRS 17 'Insurance Contracts'.

Most of the 20 jurisdictions surveyed for the paper expressed the belief that IFRS 17 will contribute to financial stability through greater transparency as the current international accounting standards for insurance contracts permit a variety of approaches, which complicate comparison between insurers’ financial results. The paper states:

Overall, IFRS 17 is a welcome development. It is aimed at improving global comparability with respect to the structure of liability valuation and transparency in insurer balance sheets, thus benefiting policyholders, investors and, ultimately, financial stability.

Please click to access the paper on the BIS website.

Consultation paper on a new ESG disclosure standard

20 Aug 2020

The CFA Institute, a global association of investment professionals, is developing a voluntary, global industry standard to provide greater product transparency and comparability for investors by enabling asset managers to clearly communicate the ESG-related features of their investment products.

In that context the CFA Institute published a consultation paper that defines ESG-related features as components or capabilities of investment products that can be combined in different ways to meet different investor needs. It identifies the following six ESG-related features:

  • ESG integration;
  • ESG-related exclusions;
  • Best-in-class;
  • ESG-related thematic focus;
  • Impact objective; and
  • Proxy voting, engagement and stewardship.

The features are expected to serve as a backbone of the standard in that they are a mechanism to connect investor needs and disclosure requirements.

The CFA Institute seeks input on the consultation paper from the wider investment community to help shape an exposure draft, which is expected to be released in May 2021.

Responses on the consultation paper are requested by 19 October 2020. The paper, a response form for providing comments, and volunteer opportunities in connection with developing the new standard are available on the CFA Institute website.

 

EFRAG outreach event in the context of the endorsement process of IBOR Phase 2

03 Aug 2020

The issuance of final amendments as result of the IASB project on 'IBOR reform and the effects on financial reporting — Phase 2' is expected in August. Given the urgency of the endorsement and the accelerated consultation process, the European Financial Reporting Advisory Group (EFRAG) has organised a public outreach event on 7 September 2020 to collect additional views from constituents on the draft endorsement advice EFRAG plans to publish at the end of August (shortly after the publication of the amendments by the IASB).

Please click for more information and registration for the event on the EFRAG website.

EFRAG publishes July 2020 issue of 'EFRAG Update'

04 Aug 2020

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during July 2020.

The update reports on the EFRAG Board conference call on 6 July and webcast meeting on 16 July, the EFRAG TEG webcast meeting on 1-2 July, 8 July and a conference call on 6 July and the EFRAG TEG and EFRAG CFSS webcast meeting on 1 July.  The publication also covers the activities of the European Reporting Lab.

The update also lists EFRAG publications issued in July including:

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

FRC and IASB release joint webinar on General Presentation and Disclosures Exposure Draft

27 Aug 2020

The joint webinar held by the Financial Reporting Council (FRC) with the International Accounting Standards Board (IASB) on the General Presentation and Disclosures Exposure Draft (ED/2019/7) has been released.

The FRC has published a recording of the joint webinar with the IASB on the General Presentation and Disclosures Exposure Draft, which was held on 6 August 2020. The comment period closes on 4 September 2020 and the FRC's draft comment letter can be found here.

Further information can be found here and the webinar is available here.

 

 

 

 

FRC issues statement on application of Accounting for Lease Modifications (Amendment to IFRS 16 - Covid-19-Related Rent Concessions)

24 Aug 2020

The Financial Reporting Council (FRC) has confirmed it will not pursue regulatory action in the Accounting for Lease Modifications (Amendment to IFRS 16 – Covid-19-Related Rent Concessions) before adoption by the EU.

In May 2020, the International Accounting Standards Board (IASB) published 'Covid-19-Related Rent Concessions (Amendment to IFRS 16)' which provides practical reliefs for preparers accounting for Covid-19-related rent concessions.

This amendment is effective for annual reporting periods beginning on or after 1 June 2020, but may also be applied early; however, the amendment is still subject to EU endorsement, which is expected to complete during Autumn 2020, and EU law is still applicable in the United Kingdom during the transition period following EU exit.   

Both the European Securities and Markets Authority (ESMA) (per statement on 21 July 2020) and the Financial Conduct Authority (FCA) (per statement on 18 August 2020) have also confirmed that they will not ‘prioritise supervision action’ relating to issuers’ decisions on whether or not to apply the reliefs that the amendment provides for, noting that where issuers’ use the reliefs, they will diverge from IFRS 16 as currently endorsed by the EU.

The FRC will similarly not pursue regulatory action against companies taking advantage of the reliefs permitted by the amendment.  The reliefs apply for both annual and interim accounts. If companies use the reliefs permitted by the IFRS 16 amendment, they are expected to disclose this in the notes to their financial statements. 

The FRC reminds directors of the need to ensure that the impact of applying this amendment, prior to EU adoption, on the lawfulness of any distributions is carefully considered. It also expects auditors to comply with all their obligations, for example, any requirement to report under s837 of the Companies Act 2006.

Click here for the press release on the FRC website.

HM Treasury publishes 2020/2021 sustainability reporting guidance for public sector annual reports

24 Aug 2020

HM Treasury has published guidance to assist those in the public sector in meeting sustainability reporting requirements for 2020/2021.

The guidance sets out the minimum requirements that must be met, provides some best practice examples and also indicates the underlying principles that should be adopted in preparing the information for reporting on sustainability within the annual reports and accounts.

The guidance is applicable to all central government bodies that fall within the scope of the Greening Government Commitments (i.e. departments, non-ministerial departments, agencies and non-departmental public bodies) and which produce annual reports and accounts in accordance with HM Treasury's Government Financial Reporting Manual (FReM). These bodies are required to report on sustainability (unless exempt from doing so).

The press release and guidance are available on HM Treasury website.

IASB announces fourth webinar on PFS ED

07 Aug 2020

In December 2019, the IASB published the exposure draft of a new standard 'General Presentation and Disclosures' that is intended to replace IAS 1 'Presentation of Financial Statements'. The IASB is introducing the exposure draft in a series of webinars.

The fourth and final webinar in this series will be held on 21 August 2020. It will explain the Board’s detailed proposals for management performance measures. The webinar will last approximately 60 minutes and will include a question-and-answer session. More information is available here.

IASB announces webinar on the second comprehensive review of the IFRS for SMEs Standard

03 Aug 2020

The IASB will be holding two repeated live webinars on 17 August 2020 (09:00 and 15:00 (BST)) to discuss the second comprehensive review of the IFRS for SMEs Standard.

The webinars will be hosted by IASB Board Member Darrel Scott and the IASB’s technical staff. Participates are allowed to submit question prior to the webinars.

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

IASB finalises phase 2 of its IBOR reform project

27 Aug 2020

The International Accounting Standards Board (IASB) has published 'Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)' with amendments that address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates. The amendments are effective for annual periods beginning on or after 1 January 2021, with earlier application permitted.

 

Background

Interbank offered rates (IBORs) are interest reference rates, such as LIBOR, EURIBOR and TIBOR, that represent the cost of obtaining unsecured funding, in a particular combination of currency and maturity and in a particular interbank term lending market. Recent market developments have brought into question the long-term viability of those benchmarks.

The IASB addressed the issues in a project split into two phases: Phase 1 dealt with pre-replacement issues (issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark). This part of the project was concluded on 26 September 2019 by publishing Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7).

Phase 2 of the project dealt with replacement issues, therefore, the amendments published today address issues that might affect financial reporting when an existing interest rate benchmark is actually replaced. This part of the project has been concluded by the issuance of today's amendments.

 

Changes

The changes in Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) relate to the modification of financial assets, financial liabilities and lease liabilities, specific hedge accounting requirements, and disclosure requirements applying IFRS 7 to accompany the amendments regarding modifications and hedge accounting.

  • Modification of financial assets, financial liabilities and lease liabilities. The IASB introduces a practical expedient for modifications required by the reform (modifications required as a direct consequence of the IBOR reform and made on an economically equivalent basis). These modifications are accounted for by updating the effective interest rate. All other modifications are accounted for using the current IFRS requirements. A similar practical expedient is proposed for lessee accounting applying IFRS 16.
  • Hedge accounting requirements. Under the amendments, hedge accounting is not discontinued solely because of the IBOR reform. Hedging relationships (and related documentation) must be amended to reflect modifications to the hedged item, hedging instrument and hedged risk. Amended hedging relationships should meet all qualifying criteria to apply hedge accounting, including effectiveness requirements.
  • Disclosures. In order to allow users to understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as well as the entity’s progress in transitioning from IBORs to alternative benchmark rates, and how the entity is managing this transition, the amendments require that an entity discloses information about
    • how the transition from interest rate benchmarks to alternative benchmark rates is managed, the progress made at the reporting date, and the risks arising from the transition;
    • quantitative information about non-derivative financial assets, non-derivative financial liabilities and derivatives that continue to reference interest rate benchmarks subject to the reform, disaggregated by significant interest rate benchmark;
    • to the extent that the IBOR reform has resulted in changes to an entity’s risk management strategy, a description of these changes and how is the entity managing those risks.

The IASB also amended IFRS 4 to require insurers that apply the temporary exemption from IFRS 9 to apply the amendments in accounting for modifications directly required by IBOR reform.

The IASB has come to the conclusion that the application of all proposed amendments is mandatory. It also assessed that the nature of the proposed amendments is such that they can only be applied to modifications of financial instruments and changes to hedging relationships that satisfy the relevant criteria and, as such, no specific end of application requirements needed to be specified.

 

Effective date and transition

The amendments are effective for annual periods beginning on or after 1 January 2021 and are to be applied retrospectively. Early application is permitted. Restatement of prior periods is not required, however, an entity may restate prior periods if, and only if, it is possible without the use of hindsight.

 

Additional information

Please click for:

In addition to the amendments, the IASB has also published a corresponding proposed IFRS Taxonomy update (comments requested by 28 September 2020).

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.