2020

Pre-meeting summaries for the November 2020 IASB meeting

11 Nov, 2020

The IASB will meet via video conference on 18 November for its regular meeting and on 19 November it will meet jointly with the FASB in an educational meeting. We have posted our pre-meeting summaries for the meetings that allow you to follow the IASB’s decision making more closely. For each topic to be discussed, we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

IASB meeting

Board work plan update: Last month the Board decided to begin the post-implementation review (PIR) of the IFRS 9 classification and measurement requirements and reconsider at a later date when to begin the PIRs of the IFRS 9 impairment and hedge accounting requirements and of IFRS 15. The staff recommend considering the start dates of those PIRs in the second half of 2021.

Post-implementation review of IFRS 10, IFRS 11 and IFRS 12: The staff will ask to Board to confirm the publication of the request for information (RFI), with a 180-day comment period. The RFI is expected to be published in December.

Maintenance and Consistent Application—Deferred Tax related to Assets and Liabilities arising from a Single Transaction: The Board is finalising amendments to IAS 12. The staff recommend an effective date of 1 January 2023 for the amendments—this will be 18 months after the expected issue date of the amendments in the second quarter of 2021.

Management Commentary: The staff have raised some issues identified during drafting of the Exposure Draft (“sweep issues”). The staff recommend that entities not applying IFRS should be permitted to apply the Practice Statement. The staff also recommend using the term ‘accuracy’ rather than ‘freedom of error’.

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 staff will propose exceptions to the process for adapting disclosure requirements for matters identified by staff when preparing the analysis of adaptions to the disclosure requirements of the IFRS for SMEs Standard or during the Board member’s review of that analysis.

Joint IASB—FASB education meeting

The purpose of this meeting is for the boards to update each other on individual projects that partially or entirely overlap with a project of the other board.

COVID-19: The boards will explain the steps they have taken to respond to the COVID-19, such as implementation and educational guidance and adjustments to their work plans.

Leases other than COVID-19: The IASB staff will explain the recent application questions discussed by the IFRS Interpretations Committee and narrow-scope standard-setting that has been initiated with regard to sale and leaseback transactions. The FASB is monitoring the implementation of its equivalent Standard and in July 2020 added a project to its technical agenda to address issues on which the FASB can act because it already has sufficient information from stakeholders.

Goodwill and Impairment: Both the FASB and the IASB have on their respective agendas projects covering accounting for goodwill. Those projects do not constitute a joint project. However, both boards previously decided to monitor each other’s work because of the largely converged accounting models for business combinations. The FASB’s project is in an active project phase while the IASB’s project is in a research phase.

Supply chain financing: The IASB will describe the issues that have been submitted to the IFRS Interpretations Committee, and the tentative agenda decision it has published. The IASB will also discuss a possible narrow-scope standard-setting project in early 2021. The Big 4 firms submitted an agenda request to the FASB in October 2019 for guidance on disclosure and cash flow statement presentation of supplier finance programmes involving trade payables. Having undertaken research and outreach, the FASB decided in October 2020 to add a project to its agenda to develop disclosure requirements related to supplier finance programmes involving trade payables (a narrow scope).

More information

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

EFRAG early-stage analysis of rate regulation proposals — preparer perspective

11 Nov, 2020

The European Financial Reporting Advisory Group (EFRAG) is inviting preparers to participate in an early-stage analysis of the likely impacts of possible changes to IFRS requirements as a result of the IASB project on the accounting for regulatory assets and regulatory liabilities. The IASB is expected to issue an exposure draft in early 2021.

The EFRAG analysis aims at assessing possible impacts of the new accounting model under consideration for preparers.

Please click for more information on the EFRAG website.

FCA Policy Statement delays ESEF implementation and extends publication deadlines for listed companies

10 Nov, 2020

The Financial Conduct Authority (FCA) has published Policy Statement (PS) 20/14. The Policy Statement sets out the FCA’s decision to delay by one year mandatory requirements related to the European Single Electronic Format (ESEF). The Policy Statement also provides an update on extending deadlines for the publication of financial statements by listed companies in response to COVID-19.

The ESEF initiative includes requirements for publication and filing of machine readable financial statements and the electronic tagging of basic financial statements and notes to these financial statements. It will enhance the accessibility of issuers’ financial data and will make easier the process of evaluating corporate performance by investors across industry sectors and different jurisdictions.

The Policy Statement confirms the FCA’s decision to push back by one year ESEF requirements originally scheduled for financial years starting on or after 1 January 2020. This means:

  • The requirement for all issuers to publish and file their annual financial reports in XHTML web browser format, replacing the current PDF format, will be pushed back to financial years starting on or after 1 January 2021, for publication from 1 January 2022.
  • The requirement for issuers who prepare consolidated annual financial statements in accordance with International Financial Reporting Standards (IFRS) to tag basic financial information will be pushed back to financial years starting on or after 1 January 2021, for publication from 1 January 2022.
  • However, the requirement for issuers who prepare IFRS consolidated annual financial statements to tag notes to the financial statements will apply to financial years starting on or after 1 January 2022, for publication from 1 January 2023.

Issuers will, however, still be able to publish and file their financial reports in ESEF voluntarily for financial years starting on or after 1 January 2020, from January 2021 if they choose to do so.  The FCA has published guidance for the preparation of annual reports in European single electronic format which is available on the FCA website here.  The Department for Business, Energy and Industrial Strategy (BEIS) has updated its policy paper on ESEF to set out its view on the role of auditors.  This is available on the BEIS webiste.

With regards to publication of financial statements by listed companies, the FCA previously announced relaxation deadlines in March (for annual reports – extension from 4 to 6 months) and May (for interim reporters – extension from 3 months to 4 months). The FCA indicated that the temporary extensions would be kept under review and, at a suitable time, would announce how the policy would be removed in a fair, orderly and transparent way.

Due to the ongoing disruption caused by COVID-19, the FCA has indicated that these reliefs will, at a minimum, continue to be available to listed companies with financial periods ending before April 2021.  This includes measures related to both annual and half-yearly financial statements.

The full Policy Statement is available on the FCA website.

Deloitte response to ad personam mandate on non-financial reporting standard setting

10 Nov, 2020

The Deloitte firms in the European Union have responded to the request of the President of the EFRAG Board to share views on the future governance and framework of EFRAG in the context of possible changes to non-financial reporting by companies.

As general background, we welcome the European Commission’s review of the non-financial reporting directive and support companies disclosing high-quality, transparent, relevant and comparable non-financial information that is connected to financial information within mainstream corporate reporting. We support global standards for reporting these because issues such as climate change are global, and the UN Sustainable Development Goals are of course global. However, we recommend a ‘building block approach’ where core global standards can be supplemented by local requirements.

We recognise the urgency of developing harmonised standards for non-financial reporting, and the particular needs of the EU, given that the EU has adopted reporting requirements that will apply in the relatively near term, particularly for financial sector companies. We are encouraged by recent international developments, including the statement of intent of five leading sustainability and integrated reporting organisations to work together in this area and by the IFRS Foundation’s consultation paper on sustainability reporting.

We agree that EFRAG has an essential role to play with respect to non-financial reporting requirements in the EU. What that role would be will depend on the overall approach agreed by the EU Institutions as well as the outcome of current developments in non-financial information standard-setting at the global level. We can see at least two possible roles and approaches for EFRAG:

  • an influencer and endorsement adviser with respect to global sustainability standards; or
  • standard-setting activities for the EU for non-financial reporting standards.

The expected role of EFRAG in non-financial reporting standard-setting will depend on a proper understanding of what needs to be developed at a European level versus what could be leveraged from global existing and future developments, and related timing. This would have significant implications on the possible changes to EFRAG’s governance and resourcing.

Please click to download our full analysis in the comment letter.

FRC publishes the results of its climate thematic review

10 Nov, 2020

The Financial Reporting Council (FRC) has published the results of its thematic review of climate-related considerations by boards, companies, auditors and professional bodies and investors. The results of the review highlight that corporate reporting needs to improve to meet the expectations of investors and other users on the urgent issue of climate change.

The thematic review reflects the important role that boards, companies, auditors, professional associations and investors play in considering and responding to climate-related issues and provides findings on how each of them is responding to climate-related challenges. It highlights the FRC’s views on current market practice, outlines its reporting expectations, and indicates where it will focus its attention on to ensure that there is an appropriate response to climate change. A summary report is supported by more detailed reports for each of the groups.

The FRC asked a number of questions asked to the respective groups:

  • Boards - How are boards taking account of climate-related challenges?
  • Companies - How are companies developing their reporting on climate-related challenges?
  • Auditors - How are auditors taking account of climate-related challenges?
  • Professional associations - How are professional bodies and audit regulators taking account of climate change in their regulatory responsibilities?
  • Investors - What do investors want to see?

The thematic reviews key outcomes show that:

  • Although it is the board’s responsibility to consider climate-related issues, there is little evidence that business models and company strategy are influenced by integrating climate considerations into governance frameworks. Investors continue to want companies to outline how the board considers and assesses climate change. The FRC indicates that this consideration is even less amongst smaller cap companies.
  • There is an increasing number of companies who are providing narrative reporting on climate-related issues. However, while minimum legal requirements are often being met, companies are not meeting the additional demands of users who are calling for additional disclosure to inform their decision making and who are themselves responding to a changing regulatory environment.
  • Whilst some companies have set strategic goals such as 'net zero’, it is often unclear from their reporting how progress towards these goals will be achieved, monitored or assured.  The review also indicates that it is often unclear as to whether a 'net zero' objective is central, peripheral or aspirational in the context of a company's strategy.  Whilst companies might acknowledge the government's commitments to 'net zero' in aspirational terms, often in the Chair's statement, the FRC found that it is often difficult to understand how that intention is clearly linked to the company's strategy and objectives.
  • Consideration and disclosure of climate change in the financial statements lags behind narrative reporting. The FRC review identified areas of potential non-compliance with the requirements of International Financial Reporting Standards (IFRS).
  • The quality of support, training and resources provided to the audit practice varies considerably across firms. The FRC indicates that firms need to do more to ensure that their internal quality monitoring has appropriate regard for climate change considerations.
  • From the audits reviewed there were indications that auditors need to improve their consideration of climate-related risks when planning and executing their audits.
  • UK professional bodies, and audit regulators in the Crown Dependencies, are responding to climate change, but approaches differ in terms of substance and granularity regarding references to climate-related reporting and the impacts of climate change.
  • Investors support the Task Force on Climate-related Financial Disclosures (TCFD) framework, but also expect to see disclosures regarding the financial implications of climate change.

Concurrent with the issuance of the thematic review, the FRC has issued a statement on Non-Financial Reporting Frameworks. In it the FRC pledges its support for global standards for non-financial reporting, welcoming the recent consultation issued by the IFRS Foundation Trustees. It comments:

In order to meet the ambition of UK stakeholders to improve the quantity and quality of climate-related and wider environmental, social and governance reporting, we believe some of the existing frameworks can act as steps in supporting the market to move more quickly to meet the information needs of investors and other capital providers. The FRC therefore encourages UK public interest entities voluntarily to report against the Task Force on Climate-related Financial Disclosures’ (TCFD) 11 recommended disclosures and, with reference to their sector, using the Sustainability Accounting Standards Board (SASB) metrics. We encourage companies to reporting on these areas within their next reporting cycle, where possible, and disclosure should be considered in the context of the existing strategic reporting framework in the UK.  

In order to assist companies to achieve reporting under TCFD and SASB that meets the needs of investors the FRC has set out some of its future work including:

  • An increased focus on climate change considerations in its ongoing Corporate Reporting Review and Audit Quality Review monitoring work, where relevant.
  • Undertaking a review of reporting under the Streamlined Energy and Carbon Reporting regulations in 2021.
  • Assessing professional associations’ approaches to climate change, including in their regulatory and curriculum-setting functions.
  • Incorporating monitoring of climate-related reporting in its annual UK Stewardship Code and UK Corporate Governance Code monitoring and consideration of whether climate-related amendments are appropriate within future revisions of these Codes, the Guidance on the Strategic Report and associated guidance.
  • Highlighting areas of the financial statements of UK GAAP reporters where climate change could be a consideration.
  • Investigating developing investor expectations and better practice reporting under TCFD and SASB, plus engaging internationally on the developing approach to reporting frameworks and standards.
  • Undertaking a project considering the requirements of audit, emerging role of assurance, and responsibilities of audit committees in this area.

Whilst encouraging reporting under TCFD and SASB would be seen as a step in the right direction, the FRC highlights that it is not just investors that are the only stakeholder with an interest in climate-related reporting. It draws attention to its recently issued ‘Future of Corporate Reporting’ Discussion Paper which proposes to develop a future reporting model that meets the needs of a wider set of stakeholders.

A webinar will be held on 25 November will be held to mark the publication of the thematic review.

The following are available on the FRC website:

IFAC releases training material on IPSAS

10 Nov, 2020

The International Federation of Accountants (IFAC) has developed a package of training materials to support International Public Sector Accounting Standards (IPSAS) implementation.

The training materials are aimed primarily at entities currently using a cash basis of accounting and transitioning to, or planning a move to, accrual IPSAS.

The course is structured over ten modules with each broken down into topics including assets, liabilities, financial instruments, and first-time adoption of accrual basis IPSAS.

Please click for more information and access to the materials on the IFAC website.

IASB announces eighth research forum

09 Nov, 2020

The International Accounting Standards Board (IASB) will host its eighth Research Forum on 1–2 November 2021 in the Asia Oceania region, or virtually if travel is not permitted.

The Forum will be held in conjunction with the journal Accounting and Finance. The call for papers inviting submissions that can provide evidence to inform the standard-setting activities of the IASB notes the following areas of particular interest:

  • Better communication in financial reporting
    • Primary financial statements
    • Management commentary
    • Disclosure initiative – Targeted standards-level review of disclosures
    • Taxonomy
  • Research projects
    • Extractive activities
    • Equity accounting
    • Goodwill and impairment
    • Business combinations under common control
  • Application
    • Post-implementation reviews of IFRS 9, IFRS 15 and IFRS 16
    • Comprehensive review of the IFRS for SMEs
  • Any other topics on the IASB work plan or research pipeline

Please click for more information on the IASB website.

IPSASB delays effective dates

09 Nov, 2020

The IPSASB has published 'Covid-19: Deferral of Effective Dates' delaying the effective dates of recently published standards and amendments by one year to 1 January 2023. The amendment is a response to the global COVID-19 pandemic and intended to provide stakeholders with additional implementation time.

The standards and amendments affected include: 

  • IPSAS 41 Financial Instruments;
  • IPSAS 42 Social Benefits;
  • Long-term Interests in Associates and Joint Ventures (Amendments to IPSAS 36) and Prepayment Features with Negative Compensation (Amendments to IPSAS 41);
  • Collective and Individual Services (Amendments to IPSAS 19); and
  • Improvement to IPSAS, 2019

The amendment can be accessed on the IPSASB website.

November 2020 IASB meeting agenda posted

07 Nov, 2020

The IASB has posted the agenda for its next meeting, which will be held via video conference on 18–19 November 2020. The second day of the meeting will be a joint education session with the FASB.

On the first day of the meeting, the IASB will discuss the following:

  • Work plan
  • Maintenance and consistent application
  • Disclosure initiative — Subsidiaries that are SMEs
  • Management commentary
  • Post implementation review of IFRS 10-12

On the second day of the meeting, the IASB and FASB will discuss the following:

  • Goodwill and impairment
  • Leases other than COVID-19
  • COVID-19
  • Supply chain financing

The full agenda for the meeting can be found here. We will post any updates to the agenda, our comprehensive pre-meeting summaries, as well as observer notes from the meeting on this page as they become available.

English and Japanese recordings of the second webinar on the goodwill and impairment DP

06 Nov, 2020

The IASB has made available the recordings of the recent second webinar on the goodwill and impairment discussion paper, which was offered in the English and the Japanese language.

The webinar introduced in more detail the Board’s preliminary views about improving disclosures about acquisitions.

For access to the recordings, please see the press release on the IASB website.

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