Gerard van Santen will represent the Dutch Standard Setter for the remainder of the mandate previously filled by Peter Sampers who will retire from the EFRAG Board.

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

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 group has published a paper that illustrates how their current frameworks, standards and platforms, along with the elements set out by the Task Force on Climate-related Financial Disclosures (TCFD), can be used together to provide a running start for development of global standards that enable disclosure of how sustainability matters create or erode enterprise value.

In their joint statement of intent published in September 2020, the group stressed their willingness and readiness to work with the Trustees of the IFRS Foundation in this area. The paper demonstrates that standard-setting for sustainability-related financial disclosure is a natural extension of the IFRS Foundation’s current role, and provides insight into how such an ambition can be achieved by building on content that already exists.

In the paper, the group of five explain that enterprise value reporting “is not therefore a replacement for sustainability reporting, which serves a broad range of stakeholders, can offer input to public policy design and reveals issues that may emerge as material for economic decision-making over time.” They believe, however, that consistent communication of how sustainability matters affect drivers of enterprise value can be a “complementary enabler of change, since it creates a financial incentive for companies and their investors to improve performance on some sustainability matters as much and as quickly as they can”.

Following the paper’s launch, the group is co-hosting a webinar on 12 January 2020, where the CEOs of each organisation will come together to further outline the concepts and motivations behind the paper. 

A joint press release announcing the paper is available on the CDP website.

Our related Purpose-driven Business Reporting in Focus publication is available here.

Maintenance and Consistent Application — IFRIC Update: At its December meeting the IFRS Interpretations Committee finalised an agenda decision in relation to supplier financing. At this meeting, the Board cleared that decision. If four or more Board members had objected, the decision would not have been published. This is the first agenda decision to be subjected to the revised due process. The final agenda decision was published immediately after the meeting, on 14 December, and can be accessed at https://www.ifrs.org/news-and-events/updates/ifric-updates/december-2020/#5.

Disclosure Initiative — Subsidiaries that are SMEs: The IASB is developing a Standard setting out reduced disclosure requirements for subsidiaries that apply IFRS Standards, but meet the definition of an SME. At this meeting, the Board decided to seek views on whether the consultation document should include proposed reduced disclosure requirements for IFRS 17; and that IFRS 1 not be amended and that transition provisions are not required. The Board also decided that if an entity stops applying the reduced disclosure Standard that the comparatives should apply full IFRS; that the reduced disclosures can be applied for the ‘first time’ more than once; and that the Standard is optional and an entity can reverse its decision to apply it.

SME Standard review and update: The IASB published Request for Information (RFI) ‘Comprehensive Review of the IFRS for SMEs Standard' in January. The IASB received 66 comment letters, mainly from accountancy bodies and standard-setting bodies. Overall, respondents expressed support for the IFRS for SMEs Standard to be based on full IFRS Standards. The paper also contains feedback on the specific questions asked in the RFI. The Board decided that the SME Implementation Group (SMEIG) be asked to develop a set of recommendations for the Board in its review of the IFRS for SMEs Standard. The next meeting of the SMEIG is planned for February 2021.

Disclosure Initiative — Accounting Policies: The Board is amending IAS 1 and its Practice Statement on applying materiality. The Board decided not to add any transition requirements and that the Practice Statement not include anything that would allow a reader to identify which version of the Practice Statement they were reading. They also decided to change the wording in IAS 1:117B.

Primary Financial Statements: In December 2019, the IASB published Exposure Draft ED/2019/7 General Presentation and Disclosures. The staff have summarised feedback from the 215 comment letters it received, outreach activities, fieldwork and a review of academic literature. There are 11 papers, each summarising an aspect of the feedback. To give a flavour of the feedback, there was support for many aspects of the proposals, such as defined subtotals and categories in the statement of profit or loss and introducing a definition for unusual items. But many respondents thought additional guidance was required and most did not agree with the proposed definition of unusual items. There was broad support for the proposed roles for the primary financial statements and the notes. However, there was almost no support for separating integral and non-integral associates and joint ventures and the proposals related to management performance measures received mixed, and strongly expressed, views. The staff did not ask the Board to make any decisions but asked for feedback and for the Board to identify areas they thought would require further research. The Board discussion lasted over four hours, although they did not get to all of the papers. The Board was particularly interested in making sure adequate consideration was given to how the various parts of the project link together. The staff will bring the papers not discussed back to the next meeting and start to set out their plans for the project.

Post-implementation review of IFRS 9 — Classification and Measurement: In October 2020, the Board decided to begin the post-implementation review (PIR) of the IFRS 9 classification and measurement requirements. The staff plan to identify and assess the matters to be examined, which will then form the basis for a public Request for Information (RFI). The staff expect the PIR will take around 18-24 months to complete, with the RFI being issued in the third quarter of 2021. The Board provided feedback to the staff.

Financial Instruments with Characteristics of Equity: The Board decided to move the FICE project from the research programme to the standard-setting programme.

Pensions Benefits that depend on Asset Returns: In January the Board decided to develop examples to illustrate how a proposed capped approach would compare to the outcome of the existing requirements in IAS 19 for defined benefit plans with benefits that vary with asset returns. The Board provided feedback on an illustrative example.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting. For an analysis of how the IASB work plan has changed after this meeting, please see here.

In our response to the discussion paper, we support the Board’s initiative to assess whether information provided to investors on business combinations can be improved, including by setting clearer disclosure objectives. However, we are not convinced that the proposals in the discussion paper would result in disclosures that provide more useful information to users of the financial statements. We believe that additional work is required to understand more precisely what additional information is needed by investors and why it is needed, and what information is currently prepared by management to monitor the impact of business combinations.

Also, we do not support the preliminary view of the Board not to reintroduce amortisation of goodwill. Whilst we continue to recognise the conceptual merits of the impairment-only model, we note that there continues to be a perception that too little impairment is recognised too late. Finally, without the reintroduction of goodwill amortisation, we strongly diagree with the proposal to remove the requirement to perform a quantitative impairment test every year.

Download the full comment letter here.

Below is an analysis of all changes made to the work plan since our last analysis on 20 November 2020.

Stan­dard-set­ting projects

• Dis­clo­sure ini­tia­tive — Targeted Standards-level Review of Disclosures — Project recategorised from maintenance projects to standard-setting project.
• Financial instruments with characteristics of equity — the work plan still has this as a research project although the Board decided at its December meeting to move it to the standard-setting programme to be able to publish an exposure draft; no expected date for the exposure draft is given.
• Primary Financial Statements — after discussing the feedback to the exposure draft, a decision on the project direction is now expected in January 2021.

Main­te­nance projects

• Accounting policies and accounting estimates (Amend­ments to IAS 8) — the issuance of final amend­ments is now expected in February 2021 (pre­vi­ously first quarter of 2021).
• Dis­clo­sure ini­tia­tive — Accounting policies — the issuance of final amend­ments is now expected in February 2021 (pre­vi­ously first quarter of 2021).
• Lease Liability in a Sale and Leaseback — an exposure draft of proposed amendments was published on 27 November 2020 and the feedback on the exposure draft is expected to be discussed in the first half of 2021.

Research projects

• Business combinations under common control — a discussion paper was published on 30 November 2020 and the feedback on the discussion paper is expected to be discussed in the second half of 2021.
• Ex­trac­tive ac­tiv­i­ties — a decision on the project direction is now expected in the second quarter of 2021 (pre­vi­ously first quarter of 2021).
• Pension benefits that depend on asset returns — the review of the research was first discussed at the IASB's December 2020 meeting and detailed analysis is expected in February 2021.
• Post-implementation review of IFRS 10, IFRS 11 and IFRS 12 — the request for information was published on 9 December 2020 and discussion of the feedback is expected to begin in the second half of 2021.
• Post-implementation review of IFRS 9 — Classification and Measurement — the request for information is expected in the second half of 2021.
• Second comprehensive review of the IFRS for SMEs Standard — this is the new name of the 2019 Comprehensive Review of the IFRS for SMEs Standard project, which has also been recategorised from maintenance project to research project; after the IASB's discussion of the feedback to the request for information at its December 2020 meeting, a decision on the direction of the project expected in the first quarter of 2021.

Other projects

• IFRS Taxonomy Update — 2020 General Improvements and Common Practice — the feedback on the proposed IFRS Taxonomy Update is now expected in February 2021 (previously first quarter of 2021).
• IFRS Taxonomy Update — Amend­ments to IAS 1, IAS 8 and IFRS Practice Statement 2 — while a proposed Taxonomy Update was pre­vi­ously expected in the first quarter of 2021, the work plan now states that an "IFRS Amendment" is now expected in February 2021.
• IFRS Taxonomy Update — Common practice (IAS 19) — after a proposed IFRS Taxonomy Update was published on 24 November 2020 discussion of the feedback received is expected in February 2021.
• IFRS Taxonomy Update — Interest Rate Benchmark Reform — Phase 2 — Removed from the work plan since the final Taxonomy Update was published on 17 December 2020.

The above is a faithful com­par­i­son of the IASB work plan at 20 November 2020 and 18 December 2020. For access to the current IASB work plan at any time, please click here.

In addition to the recent major developments reported separately on our sustainability and integrated reporting site, the following smaller developments occurred recently:

• The World Business Council for Sustainable Development (WBCSD) has published the eighth edition of Reporting matters – WBCSD’s annual review of its member companies’ sustainability and integrated reports. Please click to access the publication through the press release on the WBCSD website.
• The International Integrated Reporting Council (IIRC) has released a report investigating the extent to which investors and analysts value non-financial information, the ways they use it and the benefits they see from integrated reporting. Please click to access the publication through the press release on the IIRC website.
• The IIRC also announces the launch of the revised <IR> Framework in January 2021. Please see this press release for more information.
• Climate Action 100+ has released its 2020 progress report. One section of the report (p. 13 ff.) also deals with disclosures. Please click to access the report through the press release on the Climate Action 100+ website.
• At its last meeting, the Board of the International Organization of Securities Commissions (IOSCO) considered the IFRS Foundation's Trustees' sustainability consultation and agreed that the IOSCO Sustainable Finance Task Force should further explore engaging with the IFRS Foundation to ensure that any proposals stemming from the consultation paper meet securities regulators’ expectations both in terms of content and governance. Please see the press release on the IOSCO website for more information.
• The latest report released by the Climate Disclosure Standards Board (CDSB), The state of EU environmental disclosures in 2020 analyses the strength and weaknesses of disclosure among 50 largest companies in the European Union under the EU Non-Financial Reporting Directive (NFRD). Please click to access the publication through the press release on the CDSB website.
• The CDSB website also offers access to a series of briefings around the disclosure under the NFRD. They can be accessed here.
• In addition, the CDSB and the United Nations Sustainable Stock Exchanges (SSE) initiative have formalised their long term and ongoing collaboration and cooperation with an official Exchange of Letters. The announcement is available on the SSE website.
• The US Securities and Exchange Commission’s (SEC’s) Asset Management Advisory Committee recently published its recommendations on Environmental, Social and Governance (ESG) disclosure. The recommendations focus on the adoption of ESG standards for disclosures and ESG investment products. Please click to access a draft of the recommendations on the SEC website.
• The Sustainability Accounting Standards Board (SASB) has issued a staff bulletin on human capital management disclosure. The bulletin provides an overview of the human capital-related topics and metrics in SASB’s 77 industry-specific standards to assist companies in preparing human capital-related disclosures. Please click for more information in the press release on the SASB website.
• The UK Government has announced its intention to mandate climate disclosure by large companies and financial institutions across the economy by 2025. The announcement is available on the Government website.
• The Accounting Bodies Network of the Prince of Wales' Accounting for Sustainability project (A4S) has published a statement of support agreeing with the IASB that existing standards should be applied to climate-related and other emerging risks. The statement of support is available on the A4S website.
• The Alliance for Corporate Transparency has published joint position on the reform of the EU NFRD setting out seven recommendations. Please click for the list of recommendations and access to the full joint position on the Alliance for Corporate Transparency website.
• Accountancy Europe has released a podcast discussing what is being done on the side of accountants to accommodate sustainability into corporate reporting. The podcast can be accessed on the Accountancy Europe website.
• The following new translations are available (links to the organisations' websites):
  
  • Global reporting initiative (GRI): GRI 306 Waste 2020 now also available in Arabic, Traditional Chinese, French, German, Italian, Japanese, Portuguese, and Spanish and the full set of GRI standards now also available in Portuguese;
  • WBCSD guidance framework and checklist tool on the COVID-19 business recovery now also available in Spanish; and
  • SASB implementation guidance for companies now also available in French, German, Japanese, and Spanish.

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.

The outreach events are scheduled between 13 and 22 January 2021 and will consist of speakers from the public sector, private sector, SMEs and civil society from across Europe.

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

Note: On 11 January 2021, EFRAG released a background paper for the outreach events beginning on 13 January. Please click to see the background paper here.

Similar to most other respondents, Accountancy Europe calls for global non-financial reporting standards and sees the IFRS Foundation in the best position to achieve this. The comment letter states:

We fully support setting up a sustainability standards board (SSB) to address NFI reporting, in parallel with the International Accounting Standards Board (IASB). The SSB would benefit from the global acceptance and applicability, oversight and due process of the IFRS Foundation.

Nevertheless, the letter also sets out a few point that Accountancy Europe believes merit further consideration by the IFRS Foundation:

• Interconnected standard setting following a clear vision;
• a two-stage approach to materiality;
• collaboration with global and European stakeholders; and
• building upon the work of existing initiatives such as CDP, CDSB, GRI, IIRC, and SASB.

Please click to access the full comment letter on the Accountancy Europe website.