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Coronavirus crisis: Implications on reporting and auditing and resources for accountants

23 Mar 2020

Accountancy Europe has released an article exploring coronavirus’ effects. In addition, Accountancy Europe is collecting all resources relevant for European professional accountants.

Please click to access the following information on the Accountancy Europe website.

The article explores coronavirus’ effects on:

  • accounting and reporting for companies as of 31 December 2019,
  • accounting and reporting for companies with year-ends in 2020,
  • auditing financial statements on 31 December 2019 and beyond, and
  • practical matters for the audit of financial statements.

The list of resources relevant for European professional accountants will be updated regularly.

Updated IASB work plan — Analysis (March 2020)

21 Mar 2020

Following the IASB's March 2020 meeting, we have analysed the IASB work plan to see what changes have resulted from the meeting and other developments since the work plan was last revised in February 2020. Changes are few.

Below is an analysis of all changes made to the work plan since our last analysis on 28 February 2020.

Standard-setting projects

  • No changes

Maintenance projects

  • No changes - the work plan still shows final amendments to IAS 16 regarding proceeds before intended use to be expected in "March 2020"

Research projects

  • Goodwill and impairment — A discussion paper was published earlier this week; the feedback received will be discussed in the second half of 2020
  • Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — due to the reduced agenda for the March meeting, the research review has been rescheduled to April 2020 (previously March 2020)

Other projects

  • IFRS Taxonomy 2019 — Update 1 Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) was published earlier this week and has therefore been removed from the work plan.

The above is a faithful comparison of the IASB work plan at 28 February 2020 and at 21 March 2020. For access to the current IASB work plan at any time, please click here.

March 2020 IASB meeting notes posted

20 Mar 2020

The IASB met on Tuesday 17 and Thursday 19 March 2020, by video link. The meeting was cut to three topics because of the Covid-19 pandemic. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

Rate-regulated Activities: The staff have been drafting the ED for the accounting model for regulatory assets and regulatory liabilities since last July. The Board decided to clarify whether some components included in the regulated rates in a period form part of total allowed compensation for the goods or services supplied by an entity in the same period or in a different period. In particular, the Board decided to clarify whether regulatory returns and performance incentives included in the regulated rates for a period form part of the total allowed compensation for to the goods or services supplied in the same period.

Management Commentary: The Board continued its discussions about the objective of management commentary, and decided that it should support primary users in assessing an entity’s prospects of future cash flows and assessing management’s stewardship of the entity’s economic resources. The primary users are existing and potential investors, lenders and other creditors and they are expected to have a reasonable knowledge of business and economic activities. The staff also introduced their thinking on developing disclosure objectives for various types of content to be included in management commentary.

Amendments to IFRS 17 Insurance Contracts: The Board decided to defer the effective date of IFRS 17 (incorporating the amendments) to annual reporting periods beginning on or after 1 January 2023 and to extend the fixed expiry date of the temporary exemption from applying IFRS 9 in IFRS 4 to the same date. The staff expect that the amendments will be issued in the second quarter of 2020.

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

Agenda for the April 2020 ASAF meeting

20 Mar 2020

The International Accounting Standards Board (IASB) has released an agenda and meeting papers for the meeting of the Accounting Standards Advisory Forum (ASAF), which is to be held by remote participation on 2 April 2020.

The agenda for the meeting is summarised below:

Thursday, 2 April (11:00-15:30)

  • IBOR reform and its effects on financial reporting — Phase 2
    • ASAF members' initial views on the proposals in the exposure draft
  • Agenda planning
  • Goodwill and Impairment
    • Board’s preliminary views included in the discussion paper
    • ASAF members’ views on the feedback process for the discussion paper and areas of focus during the comment and outreach period
    • FASB presentation on the feedback received on the invitation to comment Identifiable Intangible Assets and Subsequent Accounting for Goodwill
    • Presentation by the ASBJ and HKICPA of their paper on accounting for goodwill
  • Primary financial statements
    • ASAF members' initial views on the proposals in the exposure draft

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

IFRS conference in Madrid

20 Mar 2020

The IFRS Foundation has announced that this year's European annual IFRS Foundation conference, which was to be held in Madrid on 29 and 30 June 2020, will be postponed.

The IFRS Foundation is currently reviewing how to deliver an alternative conference combined with the World Standard-Setters meeting in September 2020.

The announcement is available on the IASB website.

IVSC issues statement on valuation during periods of market uncertainty

19 Mar 2020

In the context of the COVID-19 outbreak, the International Valuation Standards Council (IVSC) has issued a letter looking at valuation during periods of market uncertainty.

The letter notes that the COVID-19 outbreak and the resulting global pandemic have created a huge amount of uncertainty around the world. The enormous market volatility and the fact that valuers have to value assets when there is limited to no comparable evidence and all markets are facing an uncertain future, can make valuing challenging. The letter can be downloaded from the IVSC website.

The IVSC has also set up a resource page Covid-19: research, analysis and guidance for the valuation profession.

IASB publishes discussion paper on goodwill and impairment

19 Mar 2020

The International Accounting Standards Board (IASB) has published a comprehensive discussion paper DP/2020/1 'Business Combinations — Disclosures, Goodwill and Impairment'. The IASB's related project aims at improving the information companies provide to investors, at a reasonable cost, about the businesses those companies buy and would help to hold management to account for its decisions to acquire those businesses. In this context, the IASB is investigating possible improvements to IFRS 3 'Business Combinations' and IAS 36 'Impairment of Assets'. The comment period on the discussion paper ends on 15 September 2020.



The IASB's project on goodwill and impairment results from the post-implementation review of IFRS 3 Business Combinations.

The feedback on the post-implementation review had revealed that impairment of goodwill is not always recognised in a timely fashion and that disclosures required by IFRSs do not provide enough information to understand whether the acquired business is performing as was expected at the time of the acquisition. There were also comments that the impairment test required for goodwill under IAS 36 Impairment of Assets is costly and complex. Some respondents also suggested reintroducing amortisation of good will.

In February 2015, to address the concerns mentioned and investigate possible improvements to IFRS 3 Business Combinations and IAS 36, the IASB added to its research agenda the following areas of focus, which later evolved into the goodwill and impairment project:

  • improving the impairment test in IAS 36;
  • subsequent accounting for goodwill (including the relative merits of an impairment-only approach and an amortisation and impairment approach); and
  • identification and measurement of intangible assets acquired in a business combination.

The discussions leading to the discussion paper published today were taken up in September 2015.


Summary of preliminary views

The discussion paper DP/2020/1 Business Combinations — Disclosures, Goodwill and Impairment presents preliminary views on the following topics:

Improving disclosures about acquisitions. The IASB believes that companies should be required to disclose the strategic rationale for an acquisition, the objectives for the acquisition, and the metrics for monitoring achievement of objectives. This should be disclosed at the acquisition date. After the acquisition date the performance against the objectives should be disclosed. Companies would disclose information management uses internally to monitor acquisitions, therefore, they would not need to create information solely for external reporting purposes. Disclosure would be required for as long as the performance is monitored by management. If the company ceases to monitor the performance or if the metrics for monitoring the performance are changed, the reason for doing so would be disclosed. The Board also believes that it should develop additional proposals that would require companies to disclose the amount, or range, of synergies expected from the acquisition, to disclose the amount of defined benefit pension liabilities and debt of the acquiree, and to disclose both actual and pro-forma revenue, operating profit and cash flows from operating activities.

Improving accounting for goodwill — Can the impairment test be made more effective? The Board believes that significantly improving the effectiveness of the test at a reasonable cost is not feasible. It also points out that shielding cannot be eliminated because goodwill has to be tested for impairment with other assets. The discussion paper also notes that an impairments test cannot always signal how an acquisition is performing, but that does not mean that the test has failed. When performed well, the test can be expected to achieve its objective of ensuring that the carrying amount of the cash-generating unit as a whole is not higher than its combined recoverable amount. The disclosure ideas discussed above could help provide investors with the information about the performance of acquisition they need. Finally, the discussion paper notes that if estimates of cash flows are too optimistic, this is best addressed by auditors and regulators, not by changing IFRSs.

Improving accounting for goodwill — Should amortisation of goodwill be reintroduced? Having concluded that the impairment test cannot be significantly improved at a reasonable cost, the Board considered whether to reintroduce amortisation of goodwill (an impairment test would still be required). The discussion paper notes that Board members have different views on this topic, but by (narrow) majority came to the preliminary view that the Board should retain the impairment only approach because there is no compelling evidence that amortisation would significantly improve financial reporting. The impairment test is believed to provide more useful information than an arbitrary amortisation charge and is more effective at holding management to account for acquisition decisions. The Board believes that it would not be appropriate to reintroduce amortisation solely because of concerns that the impairment test is not being applied rigorously or simply to reduce goodwill carrying amounts. In this context, the Board also came to the preliminary conclusion that it should develop a proposal to require companies to present on their balance sheets total equity before goodwill.

Improving accounting for goodwill — Simplifying the impairment test. The Board is of the preliminary view that it should provide relief from the mandatory annual quantitative impairment test. A quantitative impairment test would be required only if there is an indication of impairment. The Board believes that the reduction in robustness of the test would be marginal because it is unlikely that material impairment losses occur with no indicator. Similarly, the Board is of the opinion that the benefit of performing the test when there is no indicator is marginal. The Board also intends to improve the calculation of value in use. This would be achieved by removing the restriction in IAS 36 that prohibits companies from including uncommitted restructuring and asset enhancement cash flows and by allowing companies to use post-tax inputs and post-tax discount rates in calculating value in use.

Other topics. The discussion paper also sets out the Board's preliminary view that it should continue to require identifiable intangible assets to be recognised separately from goodwill. The Board believes that there is no compelling evidence that the requirements in IAS 38 should be amended. Considering whether to align the accounting treatments for acquired and internally generated intangible assets would be beyond the scope of the project.

Comments on the discussion paper are requested by 15 September 2020.


Additional information


SME Implementation Group publishes Q&A

19 Mar 2020

The SME Implementation Group (SMEIG) has published a question and answer (Q&A) on the IFRS for SMEs.

The Q&A addresses the application of the undue cost or effort exemption for investment property on the date of transition to the IFRS for SMEs. The Q&A concludes that additional cost or effort due to the elapse of time between the date of transition and the date of preparing the first IFRS for SMEs financial statements is not considered.

Please click to access the Q&A through the press release on the IASB website.

FRC issues guidance for auditors arising from the coronavirus pandemic

17 Mar 2020

The Financial Reporting Council (FRC) has issued updated guidance for auditors which may be facing practical difficulties in carrying out audits as a result of the COVID-19 pandemic (coronavirus).

Uncertainty about the immediate outlook for many companies has increased sharply. This has consequences for companies proposing to report results in the coming months, and for their auditors. 

Some companies and auditors are also facing practical difficulties in preparing accounts and carrying out audits. Given restrictions on travel, meetings and access to company sites in some jurisdictions, the FRC indicates that audit firms may need to consider developing alternative audit procedures to gather sufficient, appropriate audit evidence.

The FRC highlights that the current situation should not undermine the delivery of high-quality audits and indicates that in current circumstances, additional time may be require to complete audits.  The FRC notes that it is important that this additional time is taken even if this results in reporting deadlines being reconsidered or company reporting being delayed.

The updated guidance highlights that auditors will need to consider the impact of coronavirus on: 

  • how they gather sufficient, appropriate audit evidence, recognising that the planned audit approach may need to change and alternative procedures developed;
  • how the group auditor proposes to review the work of component auditors;
  • the auditor's assessment of going concern and the prospects of an audited company;
  • the adequacy of disclosures made by management about the impact of COVID-19 on the company; and
  • the need for the auditor to reassess key aspects of their audit as a result of the fast-changing situation, which may require management to provide further evidence.

The updated guidance also indicates that auditors will need to engage with the entities they audit to ensure they set clear expectations as to the level of disclosure they expect to see in annual reports to communicate the impact and risk of COVID-19 on the company.  It emphasises the importance of communication with companies, especially their audit committee regarding reporting deadlines and support to carry out their work to a high standard. 

The updated guidance follows previous guidance issued by the FRC on disclosure of risks and other reporting consequences arising from the emergence and spread of Coronavirus. 

A press release and the updated guidance is available on the FRC website. 

IASB votes on IFRS 17 effective date

17 Mar 2020

At its meeting held today, the IASB discussed and voted on the remaining issues resulting from the feedback received on the exposure draft ED/2019/4 'Amendments to IFRS 17' which were the effective date of IFRS 17 and the expiry date of the IFRS 9 temporary exemption in IFRS 4.

On the effective date, which originally was set at 1 January 2021 and which ED/2019/4 proposed to move to 1 January 2022, the Board now decided to:

  • a) defer the effective date of IFRS 17 (incorporating the amendments) to annual reporting periods beginning on or after 1 January 2023; and
  • b) extend the fixed expiry date of the temporary exemption from applying IFRS 9 in IFRS 4 to annual reporting periods beginning on or after 1 January 2023.

Although, several Board members expressed doubt or concerns, the final vote on a) was 12 in favour, 1 against, 1 absent (the one absent Board member had lost connection but later stated that he would also have voted in favour). On question b) the final vote was 12 in favour, 2 against.

The Board then proceeded to discuss questions around the balloting process. All Board members agreed that there is no need to re-expose the amendments to IFRS 17, no Board member intends to dissent from the issuance of the final amendments, and all Board members gave permission to start the balloting process. 

The staff will therefore begin to draft the amendments to IFRS 17 and bring any sweep issues identified during the balloting of the amendments for discussion at a future meeting. The staff expect that the amendments will be issued in the second quarter of 2020, in line with the Board’s plan as stated in the exposure draft.

The IASB has published a press release announcing the deferral.

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