The podcast discusses:

• Primary financial statements;
• Comprehensive review of the IFRS for SMEs;
• Maintenance and consistent application;
• Subsidiaries that are SMEs;
• Financial instruments with characteristics of equity; and
• Post-implementation review of IFRS 9

The podcast (15 minutes) can be accessed through the press release on the IASB website.

The detailed notes taken by Deloitte observers at the meeting are available here.

The post-implementation review process for IFRS 10, IFRS 11, and IFRS 12 was officially added to the IASB's agenda in September 2019. The IASB has been gathering information to determine the scope of the review and to identify the main questions that need to be answered before the implementation of IFRS 10, IFRS 11, and IFRS 12 can be assessed.

The information gathered so far indicates that many stakeholders believe that the standards work, however, IASB stakeholders have also indicated that there are areas where the standards to their mind might still benefit from improvements. Based on this feedback, the Board agreed the following matters be examined further in the RFI:

IFRS 10 Consolidated Financial Statements provides a single consolidation model that identifies control as the basis for consolidation for all types of entities. The following areas might warrant further investigation:

• power over an investee, including relevant activities, rights that give an investor power over an investee and control without a majority of voting rights;
• the link between power and returns, including principal and agent and non-contractual agency relationships;
• investment entities, including criteria for identifying an investment entity and subsidiaries that are investment entities; and
• accounting requirements for
  • transactions that give rise to a change in ownership; and
  • the partial acquisition of a subsidiary that does not constitute a business.

IFRS 11 Joint Arrangements establishes a principle-based approach for the accounting for joint arrangements, in which the parties recognise their rights and obligations arising from the arrangements. The following areas might warrant further investigation:

• collaborative arrangements outside the scope of IFRS 11;
• classification of joint arrangements; and
• accounting requirements for joint operations.

IFRS 12 Disclosure of Interests in Other Entities combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. There were relatively few comments on IFRS 12 requirements and feedback was mixed. Therefore, the RFI aims to establish to what extent the requirements assist an entity to meet the objective of the standard.

After the comment period ends, the IASB will consider the comments received along with information gathered through other consultation activities. The final conclusions of the IASB will be presented in a report and a feedback statement which will also set out the steps the IASB believes should be taken as a result of the review. The Board could decide to add a standard-setting project to its agenda, consider one or more matters further as part of its research programme, or both. The Board could also decide to take no action.

Comments on the RFI are requested by 10 May 2021. The request for information and a corresponding press release are available on the IASB website. Deloitte has released an Need to Know newsletter outlining the contents of the RFI.

On COVID-19, Ms Lloyd noted that the IASB's approach to dealing with the effects of the pandemic was similar to the FASB’s approach. The IASB published educational material to explain how to apply the existing requirements in IFRSs in the context of COVID-19 and issued one small amendment to IFRS 16. The IASB also reconfigured its work plan to allow for the extra demands that have been put on the stakeholders.

Regarding other important Board developments in 2020, Ms Lloyd pointed out that the IASB finalised amendments to IFRS 17, completed important changes to several standards in response to the IBOR reform, and launched two important consultations — on primary financial statements and on goodwill and impairment.

As an example of important developments to be expected next year, Ms Lloyd noted the agenda consultation the IASB will launch in early 2021. She especially encouraged responding to the consultation as this is an important opportunity for the stakeholders to tell the IASB which standard-setting projects they think are important for the IASB to consider and how the IASB should prioritise its work.

Lastly, Ms Lloyd discussed developments in sustainability reporting and pointed at the Trustees' consultation paper published to assess demand for global sustainability standards and, if demand is strong, to assess whether and to what extent the IFRS Foundation might contribute to the development of such standards.

The full text of the speech is available on the IASB website.

The guide is primarily directed at preparers of larger private and smaller listed company accounts but may be useful to other preparers as well. The guide is not intended to be a comprehensive list of all areas that should be considered. It covers:

• New reporting requirements such as amendments to IFRS Standards.
• Areas of heightened focus including:
  • Going concern and viability.
  • Brexit.  The The ICAEW Financial Reporting Faculty has produced a short guide specifically covering Brexit considerations available on the ICAEW website. 
  • Impairment testing.
  • Non-financial reporting including Streamlined and Energy and Carbon reporting requirements and Section 172 reporting.
  • Reporting of the effects of climate change.
  • Presenting the impact of COVID-19.
  • Disclosures and decisions around dividends.
  • Judgements and estimates disclosures.

Guidance is also provided on planning for the year-end audit and areas that need to be factored into the year-end planning process.

The full guide is available on the ICAEW website.

IAS 37 mandates that the future cost of clean-up be estimated and accounted for using an appropriate discount rate to calculate the present value of these costs. However, the standard does not mandate for businesses to disclose the rate they have used, nor makes clear whether the basis for calculating the discount rate should be an accounting choice.

The ICAS research used a large international sample across the mining, utilities, and oil and gas sectors, and found substantial variations exist in companies’ choice to disclose the discount rate when accounting for decommissioning and environmental liabilities. Furthermore, the research notes that when a company with a decommissioning liability becomes insolvent the clean-up liability remains attached to the asset, which may therefore become less attractive to a potential buyer, and so, if eventually the asset remains unsold, the taxpayer ends up picking up the decommissioning tab. ICAS points out that this scenario is likely to be more frequent in a post-COVID world.

The report arrives at two recommendations:

• Standard setters should require disclosing the discount rates applied to facilitate comparability and thus allow for users of financial statements and other key stakeholders to see inside the ‘black box’ of accounting for decommissioning liabilities; and
• Preparers should include, and auditors demand, enhanced disclosures, to include not only the discount rate but also undiscounted future estimated cash flows and timing of decommissioning activities, augmented by a comprehensive narrative on the major uncertainties surrounding these items.

Please click to access Black Box Accounting: Discounting and disclosure practices of decommissioning liabilities on the ICAS website.

In September 2020, even before the Trustees launched their sustainability consultation, IFAC had already called for an IASB sister board for setting global sustainability standards.

In response to the Trustees' consultation, IFAC now reiterates its call for an international sustainability standard-setting Board under the IFRS Foundation. The comment letter states (emphasis in original):

The Consultation identifies important and challenging questions that should be considered by the IFRS Trustees — including the scope and sequencing of standards, the approach to materiality, and how to build off existing initiatives. However, in answer to the fundamental issues at stake—is there a need for a global set of internationally recognized sustainability reporting requirements, and should the IFRS Foundation play a leading role through the establishment of a new sustainability standards board (SSB) — IFAC believes, based on extensive stakeholder outreach, that the answer is a resounding “Yes.”

Please click to access the full comment letter on the IFAC website.

The Ministry of Finance of the People's Republic of China has issued CAS 25 (revised) to be part of the IFRS-converged accounting standards for Chinese entities (Chinese Accounting Standards or CAS). The text of the new regulation is converged with IFRS 17 as issued by the IASB except for the mandatory effective date that is staggered over two stages: 1 January 2023 for all Chinese listed insurers and 2026 for all other Chinese insurers. The Chinese text of CAS 25 (revised) is available here.

The Saudi Organization for Certified Public Accountants (SOCPA) has adopted Amendments to IFRS 17 that the IASB issued in June 2020 to address concerns and implementation challenges that were identified after IFRS 17 Insurance Contracts was published in 2017. The SOCPA adoption also includes Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4). Announcements in Arabic regarding the adoption of the IFRS 17 amendments and the IFRS 4 amendments are available on the SOCPA website.

On 24 December 2020, the Institute of Chartered Accountants of India (ICAI) issued for comment an exposure draft of amendments to Ind AS 117 Insurance Contracts that is intended to keep the IFRS-converged accounting standards for Indian entities (Indian Accounting Standards or Ind AS) aligned with IFRSs as issued by the IASB. Comments can be submitted by 24 January 2021. Following receipt of any comments, the ICAI will issue the amended Ind AS 117 for the Ministry of Corporate Affairs to consider its inclusion in the legally mandated Ind AS. The press release on the ICAI website offers access to the exposure draft.

Robert Pozen is a senior lecturer at MIT Sloan School of Management and a non-resident senior fellow at the Brookings Institution.

Kenneth Robinson is a trustee of the Financial Accounting Foundation and a board member of Paylocity and Morgan Stanley.

Erhard Schipporeit is an independent management consultant and is a supervisory board member for several German companies.

In addition, the current IFRS Foundation Trustees Colette Bowe, Teresa Ko, Larry Leva, Michel Madelain, Ross McInnes, Vinod Rai, and Lucrezia Reichlin have been reappointed to serve a second three-year term, also beginning on 1 January 2021.

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

This Taxonomy update includes elements to reflect the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16 introduced by Interest Rate Benchmark Reform — Phase 2 issued in August 2020.

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

The committee discussed the feedback on one tentative agenda decision and four new issues:

Agenda decision to finalise

Supply Chain Financing Arrangements—Reverse Factoring: In June 2020, the Committee published a tentative agenda decision which analyses the presentation of liabilities arising from reverse financing arrangement in the statement of financial position, statement of cash flows and the related disclosure. The Committee decided to finalise the agenda decision with some suggested amendments in the wording.

New issues

IAS 1 Presentation of Financial Statements—Classification of debt with covenants as current or non-current: The Committee members generally agree with the analysis how an entity determine whether it has "the right to defer settlement" when a long-term liability is subject to a condition and its compliance with the condition is tested at dates after the reporting date, applying the amended IAS 1, in the three cases described.

IAS 19 Employee Benefits—Attributing benefit to periods of service: The Committee members agreed the conclusion of the periods of service an entity attributes benefit for a defined benefit plan in a scenario where the amount of the retirement benefit an employee is entitled to depends on the length of services before retirement but raised concerns it deviates from the general views in practice.

IAS 38 Intangible Assets—Configuration or customisation of costs in a cloud computing arrangement: The Committee members agreed with the analysis of the accounting for costs of configuring and customising the suppliers' application software to which it receives access in future and the reference to IFRS 15 for the identification and timing of the services provided by the supplier.

IFRS 9 Financial Instruments—Hedging variability in cash flows due to real interest rates: The Committee members agreed with the conclusion that a hedge of the variability in cash flows arising from the changes in real interest rate based on inflation index cannot be accounted for as a cash flow hedge.

For all of the new issues, the Committee members agreed that the principles and requirements in the relevant Standards provide an adequate basis to determine the appropriate accounting for the issue and that the Committee should publish a tentative agenda decision stating that no further action is required.

More In­for­ma­tion

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