The agenda for the meeting is sum­marised below:

For more in­for­ma­tion, please see the agenda and meeting papers on the IASB's website.

The publication explores where and how an organisation should show the impacts of the pandemic and the uncertainties that lie ahead in its integrated report.

Please click to access FAQ – Reporting in a time of crisis on the IRC website.

The IRC also offers a dedicated website with publications, resources and examples of COVID-19 reporting in integrated reports.

A recording of the webinar is now available on YouTube.

Please click to access the updated alignment dashboard prepared for the September 2020 IPSASB meeting on the IPSASB website.

Deloitte offers a summary of the provisions of all IPSAS in our IPSAS in your pocket publication.

Please click to access the interview on the IASB website.

Below is an analysis of all changes made to the work plan since our last analysis on 11 August 2020.

Standard-setting projects

• No changes

Maintenance projects

• 2019 Comprehensive review of the IFRS for SMEs — discussion of the feedback on the request for information is now expected in the fourth quarter of 2020 (previously no date given)
• IBOR reform and its effects on financial reporting — Phase 2 — this project has been removed from the work plan since the IASB issued final amendments yesterday
• Lease Liability in a Sale and Leaseback — the issuance of an exposure draft is now expected in the fourth quarter of 2020 (previously September 2020)

Research projects

• Business Combinations under Common Control — a discussion paper is now expected in the fourth quarter of 2020 (previously September 2020)
• Dynamic Risk Management — Core model outreach is now expected in the fourth quarter of 2020 (previously October 2020)
• Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — the request for information is now expected in the fourth quarter of 2020 (previously October 2020)

Other projects

• Due Process Handbook Review — this project has been removed from the work plan since the IFRS Foundation published the revised handbook on 21 August 2020
• IFRS Taxonomy Update — Common Practice (IAS 19 Employee Benefits) — a proposed IFRS Taxonomy Update is now expected in November 2020 (previously October 2020)
• IFRS Taxonomy Update — COVID-19 Related Rent Concessions (Amendments to IFRS 16) — this project has been removed from the work plan since the IFRS Foundation published the final Taxonomy Update on 18 August 2020
• IFRS Taxonomy Update — Interest Rate Benchmark Reform — Phase 2 — a proposed IFRS Taxonomy Update was published yesterday and feedback on the proposed update is expected to be discussed in October 2020

The above is a faithful comparison of the IASB work plan at 11 August 2020 and 28 August 2020. For access to the current IASB work plan at any time, please click here.

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:

• IASB press release (link to IASB website)
• Project summary (link to IASB website)
• Our UK Accounting Plus project page on IBOR reform and the effects on financial reporting — Phase 2

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

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.

Participants of the field-test were asked to apply the IASB's proposals to their financial statements and answer a questionnaire from EFRAG and the IASB. The results were then discussed in the workshop.

Please click for additional information and the report from the workshop on the EFRAG website.

Results from a similar workshop with financial institutions were released in September 2020.

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.