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2020

Seventh IASB research forum — Call for papers extended

30 Mar 2020

The International Accounting Standards Board (IASB) will host its seventh Research Forum on 2–3 November 2020 in Oxford. The deadline for submitting papers has now been extended to 28 May 2020.

Decisions on submitted papers will be made by 20 July 2020. Please click for the press release and more information on the research forum on the IASB website.

CARES Act would provide optional temporary relief from CECL accounting

30 Mar 2020

On 27 March 2020, US President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which provides relief from certain accounting and financial reporting requirements under U.S. GAAP. However, until actions are taken by the SEC or the FASB, the provisions of the CARES Act are not amendments to US GAAP.

Section 4014 of the CARES Act offers optional temporary relief from applying the FASB’s current expected credit losses (CECL) standard (ASU 2016-13) for certain entities. Any guidance developed by the SEC or FASB to address the CARES Act’s impact on US GAAP would most likely take into account both the scope and length of any optional deferral, will likely take into account whether any deferral should apply to all entities that were otherwise required to adopt the CECL, and would more clearly define the date of adoption if an entity chose the deferral. For more information, see Deloitte's related Heads Up newsletter as well as the CARES Act, which is available on the US Senate's website.

Other than US Senate and Congress, the IASB has concluded that the existing requirements within IFRS 9 Financial Instruments (including the IASB's CECL model) need not be changed, removed nor added to. On Friday, the IASB only released a statement to support the consistent application of requirements in IFRS 9.

The IASB's position is supported by several other communications on the application of IFRS 9 during the COVID-19 crisis.

  • The Office of the Superintendent of Financial Institutions (OSFI) in Canada has released a statement that includes guidance on Applying IFRS 9 in extraordinary circumstances that will allow companies to remain compliant with IFRS as issued by the IASB;
  • the Prudential Regulation Authority (PRA) of the Bank of England has released a statement Covid-19: IFRS 9, capital requirements and loan covenants that offers an annex with guidance consistent with IFRS 9 to assist firms in making well-balanced and more consistent ECL estimates and in determining how to treat payment holidays and similar schemes for accounting and regulatory purposes;
  • the French Autorité des Marchés Financiers (AMF) has released guidance (in the French language only) noting that the general measures implemented allowing, among other things, payment suspensions or deferrals or the granting of additional appropriations do not mechanically constitute an indicator of a significant increase in the credit risk of the financial assets concerned;
  • the German Institut der Wirtschaftsprüfer (IDW) has released comprehensive guidance on IFRS 9 that is also available in an (abridged) English language translation; and
  • the Malaysian Accounting Standards Board (MASB) has countered calls for a temporary exemption from MFRS 9 (the Malaysian equivalent of IFRS 9) with a statement reassuring its constituents "that the principle-based nature of the Malaysian Financial Reporting Standards (MFRS) Framework requires and allows for judgement in addressing the accounting challenges arising from COVID-19".

All statements agree that IFRS 9 is principles-based and requires the use of experienced credit judgement and that the current situation does not lead to an undifferentiated, automatic transfer of financial instruments from Level 1 to Level 2 or even Level 3.

Earlier last week, ESMA hat already concluded that the principles-based nature of IFRS 9 includes sufficient flexibility to faithfully reflect the specific circumstances of the COVID-19 outbreak and the associated public policy measures.

IFRS Foundation issues statement on its work during the COVID-19 pandemic

27 Mar 2020

The IFRS Foundation has issued a statement, ‘The coronavirus and the Foundation’s work,’ which acknowledges that this is a difficult time for stakeholders and provides information on what work they are doing to support their stakeholders.

In particular, the statement notes that its projects on IBOR reform and amendments to IFRS 17 are still on schedule; however, timelines will be discussed on specific projects during its April meeting. In addition, the publication of several narrow-scope amendments to IFRS Standards have been postpone to May 2020 (see our updated IASB work plan analysis).

The IFRS Foundation has also issued educational materials to support the application of IFRS 9 during the economic uncertainity arising from the coronavirus pandemic and has shifted to virtual meetings.

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

EFRAG requests the IASB extend consultation period

27 Mar 2020

The EFRAG have sent a letter to the IASB requesting an extension to the public consultation phase of recent or soon-to-be issued publications due to the affects of the coronavirus disease pandemic. In addition, the EFRAG suggests the amendment to IFRS 9 (IBOR Phase 2) should be published quickly after the publication of the exposure draft in April 2020 in order to avoid any potential complications.

For more information, see the press release and letter on the EFRAG’s Web site.

IASB updates work plan in view of COVID-19 developments

27 Mar 2020

The IASB has postponed to May 2020 the publication of several narrow-scope amendments to IFRS Standards originally planned for March and April 2020. This consolidation of publications is intended to facilitate more efficient post-publication procedures by the stakeholders. The work plan has been updated accordingly.

Below is an analysis of all changes made to the work plan since our last analysis on 21 March 2020. We also note the projects the IASB intends to move forward with in April 2020.

Standard-setting projects

  • No changes

Maintenance projects

  • Annual improvements — 2018-2020 cycle — Final amendments are now expected in May 2020 (formerly April 2020). The following projects are part of the annual improvements:
    • Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities (Amendments to IFRS 9)
    • Lease Incentives (Amendment to Illustrative Example 13 accompanying IFRS 16)
    • Subsidiary as a First-time Adopter (Amendment to IFRS 1)
    • Taxation in Fair Value Measurements (Amendment to IAS 41)
  • IBOR Reform and its Effects on Financial Reporting — Phase 2 — An exposure draft is still expected in April 2020
  • Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) — An IFRS amendment is now expected in May 2020 (formerly Q2 2020)
  • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) — An IFRS amendment is now expected in May 2020 (formerly March 2020)
  • Updating a Reference to the Conceptual Framework (Amendments to IFRS 3) — An IFRS amendment is now expected in May 2020 (formerly April 2020)

Research projects

  • Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — The rescheduled research review is still expected to take place in April 2020

Other projects

  • Due Process Handbook Review — Final amendments are still expected in April 2020

The above is a faithful comparison of the IASB work plan at 21 March 2020 and at 27 March 2020. For access to the current IASB work plan at any time, please click here.

IASB publishes statement on IFRS 9 and COVID-19

27 Mar 2020

The International Accounting Standards Board (IASB) has published a document responding to questions regarding the application of IFRS 9 'Financial Instruments' during the period of enhanced economic uncertainty arising from the COVID-19 pandemic.

The document is intended to support the consistent application of requirements in IFRSs. Therefore, it highlights requirements within IFRS 9 Financial Instruments that are relevant for companies considering how the pandemic affects their accounting for expected credit losses; it does not change, remove nor add to, the requirements of IFRS 9.

Please click to access the document on the IASB website.

New UK Accounting Plus resource page

27 Mar 2020

We have set up an UK Accounting Plus resource page on accounting considerations related to COVID-19. The page includes news items and resources in connection with COVID-19 developments that highlight some of the key accounting and disclosure issues to be considered by entities that may arise as a result of COVID-19.

Please click to access our new resource page.

FRC, FCA and PRA issue Covid-19 guidance for companies and auditors

26 Mar 2020

The Financial Conduct Authority (FCA), Financial Reporting Council (FRC) and Prudential Regulation Authority (PRA) have published a joint statement relating to the impact of Covid-19 on financial reporting.

The statement recognises that investors and other stakeholders rely on financial reporting – backed by high-quality auditing and recognises that companies and their auditors currently face unprecedented challenges in preparing and auditing financial information.

In response to the current situation with Covid-19, the FCA, FRC and PRA have announced a series of actions:

  • A statement by the FCA allowing listed companies an extra 2 months to publish their audited annual financial reports.
  • Guidance from the FRC for companies preparing financial statements in the current uncertain environment. This is complemented by guidance from the PRA regarding the approach that should be taken by banks, building societies and PRA-designated investment firms in assessing expected loss provisions under IFRS 9 Financial Instruments.
  • Guidance from the FRC for audit firms seeking to overcome challenges in obtaining audit evidence.

The statement also recognises that in these extraordinary circumstances, previous market practices relating to the timing and content of financial information and the audit work that is done must change. These changes are likely to include:

  • Modified audit opinions where auditors have been unable to gather the necessary audit evidence to complete the audit in full: for example, by limiting the scope of the audit opinion.
  • Given the uncertainty about the immediate outlook for many companies, more audited financial statements that include disclosures that management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern.
  • Changes to timetables for publication of financial information that had been set before the full implications of Covid-19 were clear.

Reporting timetable for listed companies

The FCA’s statement provides temporary relief for listed companies granting them an extra two months to publish their financial statements. The FCA has indicted that the policy is intended to be temporary and its application will be kept under review.

The FCA had also issued a statement on 21 March 2020, requesting companies observe a moratorium of at least 2 weeks on the issuance of preliminary announcements and signing of audit reports until 5 April 2020.

Further measures to allow companies and auditors to focus on the delivery of information to investors and the capital markets include guidance from Companies House permitting a delay to the filing of accounts by companies for up to three months and also a relaxation of a number of deadlines for regulatory reporting.

Guidance for preparers of financial statements

The FRC’s guidance is intended to highlight some key areas of focus for boards in maintaining strong corporate governance and provide high-level guidance on some of the most pervasive issues that should be considered when preparing annual reports and other corporate reporting.

With respect to corporate governance the key messages to board are to:

  • develop and implement mitigating actions and processes to ensure that they continue to operate an effective control environment, addressing key reporting and other controls on which they have placed reliance historically but which may not prove effective in the current circumstances;
  • consider how they will secure reliable and relevant information, on a continuing basis, in order to manage the future operations, including the flow of financial information from significant subsidiary, joint venture and associate entities; and
  • pay attention to capital maintenance, ensuring that sufficient reserves are available when the dividend is paid, not just proposed; and sufficient resources remain to continue to meet the company’s needs.

The guidance is intended to focus the minds of boards on those areas of reporting that are of most interest to investors and to encourage them to provide clarity on the use of key forward-looking judgements. The guidance covers:

  • the need for narrative reporting to provide forward-looking information that is specific to the entity and which provides insights into the board’s assessment of business viability and the methods and assumptions underlying that assessment;
  • going concern and any associated material uncertainties, the basis of any significant judgements and the matters to consider when confirming the preparation of the financial statements on a going concern basis;
  • the increased importance of providing information on significant judgements applied in the preparation of the financial statements, sources of estimation uncertainty and other assumptions made; and
  • judgement required in determining the appropriate reporting response to events after the reporting date and the extent to which qualitative or quantitative disclosures may be appropriate.

More detailed guidance is provided on the following specific areas:

  • Corporate governance
  • Management information
  • Risk management and internal controls systems
  • Dividends and capital maintenance
  • Corporate reporting
  • Strategic Report and Viability Statement
  • Financial statements – going concern and material uncertainties, significant judgements and estimation uncertainty and events after the reporting date.

Guidance for auditors

The FRC’s bulletin for auditors provides guidance for auditors in relation to the impact of Covid-19 on audit engagements. The Bulletin contains a non-exhaustive list of factors auditors should be considering when carrying out audit engagements in the current circumstances, along with guidance on how they might be addressed. The FRC has indicated that it may issue further guidance, if it is required as the situation develops.

The key messages are:

  • the need for more time, for both auditors and as importantly Boards/companies and management in preparing additional analysis;
  • there is a likelihood of increased numbers of opinions with material uncertainties in relation to going concern;
  • to issue an opinion not subject to disclaimer or a scope limitation always requires sufficient appropriate audit evidence; and
  • a reminder that there are particular reporting obligations on auditors in certain circumstances.

Click for (all links to FRC website):

IFRS Foundation Trustees and Due Process Oversight Committee hold February 2020 meeting

26 Mar 2020

The IFRS Foundation Trustees and the Due Process Oversight Committee (DPOC) met in Brussels on 19–20 February 2020.

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 non-fi­nan­cial reporting including sus­tain­abil­ity reporting and climate change.
    • Gov­er­nance issues — The Trustees approved a change to (1) the IFRS Foundation Constitution regarding the IFRS Advisory Council’s role and (2) amendments to the IFRS Foundation’s Bylaws.
    • Op­er­a­tions analysis — The Trustees received pre­sen­ta­tions on the analysis of jurisdictional compliance with IFRS Standards.
    • Committee reports — The Trustees discussed reports from the Business Process and Tech­nol­ogy Committee, 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 the proposed amend­ments to IFRS 17 and the project to revise IFRS Practice Statement 1 Management Commentary.
  • External en­gage­ment — The Trustees met with IFRS Foundation Monitoring Board. In addition, they held a stake­holder event with the EFRAG entitled Financial reporting: remaining relevant in a changing environment.

For more in­for­ma­tion, see the press release, which also offers an article on the stake­holder event, and the full summary on the IFRS Foun­da­tion Trustees’ and DPOC meeting on the IASB’s website. Our own report of the stakeholder event is available here.

EFRAG sends letter to the IASB on IFRS 17 amendments

26 Mar 2020

In September 2018, the European Financial Reporting Advisory Group (EFRAG) submitted a letter to the IASB regarding IFRS 17 'Insurance Contracts' noting a number of concerns of EFRAG's constituents.

EFRAG has now sent a second letter sincerely appreciating the IASB’s efforts to address issues associated with the implementation of IFRS 17 identified in the September 2018 letter. However, while EFRAG is appreciative of the changes made, this new letter expresses regret that some of the conclusions reached by the Board deviate from EFRAG’s recommendations. In particular, EFRAG refers to the annual cohort requirement. In February 2020, the IASB discussed the issue but came to the conclusion that it was not possible to specify an exemption without the use of ‘bright lines’ and without developing a particularly complex set of criteria.

Please click to access the letter on the EFRAG website.

Correction list for hyphenation

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