2020

IFRS Interpretations Committee holds December 2020 meeting

04 Dec, 2020

The IFRS Interpretations Committee met via video conference on 1 and 2 December 2020. We have posted Deloitte observer notes for the technical issues discussed during this meeting.

The committee discussed the feedback on one tentative agenda decision and four new issues:

Agenda decision to finalise

Supply Chain Financing Arrangements—Reverse Factoring: In June 2020, the Committee published a tentative agenda decision which analyses the presentation of liabilities arising from reverse financing arrangement in the statement of financial position, statement of cash flows and the related disclosure. The Committee decided to finalise the agenda decision with some suggested amendments in the wording.

New issues

IAS 1 Presentation of Financial Statements—Classification of debt with covenants as current or non-current: The Committee members generally agree with the analysis how an entity determine whether it has "the right to defer settlement" when a long-term liability is subject to a condition and its compliance with the condition is tested at dates after the reporting date, applying the amended IAS 1, in the three cases described.

IAS 19 Employee Benefits—Attributing benefit to periods of service: The Committee members agreed the conclusion of the periods of service an entity attributes benefit for a defined benefit plan in a scenario where the amount of the retirement benefit an employee is entitled to depends on the length of services before retirement but raised concerns it deviates from the general views in practice.

IAS 38 Intangible Assets—Configuration or customisation of costs in a cloud computing arrangement: The Committee members agreed with the analysis of the accounting for costs of configuring and customising the suppliers' application software to which it receives access in future and the reference to IFRS 15 for the identification and timing of the services provided by the supplier.

IFRS 9 Financial Instruments—Hedging variability in cash flows due to real interest rates: The Committee members agreed with the conclusion that a hedge of the variability in cash flows arising from the changes in real interest rate based on inflation index cannot be accounted for as a cash flow hedge.

For all of the new issues, the Committee members agreed that the principles and requirements in the relevant Standards provide an adequate basis to determine the appropriate accounting for the issue and that the Committee should publish a tentative agenda decision stating that no further action is required.

More In­for­ma­tion

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

First discussion of seventh round of academic research contributions to the IASB's work

04 Dec, 2020

Five teams of researchers have presented their accounting research projects to members and technical staff of the IASB. The research projects are independent but are all directly relevant to projects on the Board’s work plan. The involvement with the research programme helps the Board to ensure its standard-setting is evidence-based.

The evidence the IASB is looking for includes responses to consultative documents, fieldwork such as assessing systems changes or the hypothetical application of a proposed new financial reporting requirement, empirical analysis from studies of reported accounting data, share price relationships and analysts’ forecasts, the results of experimental studies, analytical modelling, and collecting and analysing views from surveys.

The papers in this round address the following topics (all links to the IASB website):

Creation of new IFRS SSB

03 Dec, 2020

Mark Carney, UN Special Envoy for Climate Action and Finance, has commented on the IFRS Foundation Trustees' sustainability consultation and stresses that he endorses the creation of new IFRS Sustainability Standards Board (SSB).

In September 2020, the Trustees of the IFRS Foundation published a consultation paper to assess demand for global sustainability standards and, if demand is strong, assess whether and to what extent the Foundation might contribute to the development of such standards. The paper noted the option of creating the SSB. The new board could operate alongside the IASB under the same three-tier governance structure, build on existing developments, and collaborate with other bodies and initiatives in sustainability, focusing initially on climate-related matters.

In his letter, Mr Carney notes:

The IFRS Foundation has an essential role to play in making this vision a reality, and I fully endorse your proposal for a new Sustainability Standards Board under the Foundation’s remit. The Foundation, with its track record of robust, reliable and independent global standard-setting should play a pivotal role in delivering sustainability reporting standards that are in the public interest.

Please click to download the full letter from the IASB website.

FRC consults on annual review of FRS 101

01 Dec, 2020

The Financial Reporting Council (FRC) has published Financial Reporting Exposure Draft 77 'Draft amendments to FRS 101 Reduced Disclosure Framework – 2020/21 cycle' (FRED 77) which proposes amendments to FRS 101 as a result of its latest annual review.

FRED 77 proposes limited amendments to FRS 101 to provide certain disclosure exemptions in relation to IAS 16 Property, Plant and Equipment and for consistency with IAS 1 Presentation of Financial Statements.

It also proposes an amendment to FRS 101 to remove a reference to paragraphs 39 and 40 of IAS 1. These paragraphs were deleted by Annual Improvements to IFRSs 2009–2011 Cycle, and therefore were only applicable for accounting periods beginning before 1 January 2013.

The FRC is requesting comments on FRED 77 by 28 February 2021. Please click to access the press release and consultation paper on the FRC website.

FRC consults on revisions to ISRE (UK) 2410

01 Dec, 2020

The Financial Reporting Council (FRC) has issued a consultation on proposed revisions to International Standard for Review Enagements (UK) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' (ISRE (UK) 2410).

The FRC has recently reviewed ISRE (UK) 2410 in the context of changes to auditing standards, particularly ISA (UK) 570 Going Concern. As a result, the FRC is proposing to revise parts of ISRE (UK) 2410 to ensure it remains fit for purpose in the current environment.  The FRC's specific objective in performing this limited revision to ISRE (UK) 2410 is to address a potential lack of clarity in relation to going concern when performing a review of interim financial information.

Comments are requested until 19 February 2021

A press release , Invitation to Comment and the Exposure Draft are available on the FRC website.

We comment on the Trustees' sustainability consultation

01 Dec, 2020

Deloitte has commented on the IFRS Foundation Trustees’ consultation paper on sustainability reporting published in September 2020. In our comment letter, we stress that we support standard-setting at a global level because global issues need global solutions. Supply and value chains are global and, therefore, face global risks and require a global approach. Consequently, Deloitte supports the IFRS Foundation’s proposal to establish a global sustainability standard-setter (SSB) alongside the IASB and under the governance and oversight of the IFRS Foundation.

In our comments on the proposals in the consultation paper, we also note that the standards to be developed should build on the best of what we have and cite the work of CDP, CDSB, GRI, IIRC and SASB who in September 2020 released a statement of intent to work together towards comprehensive corporate reporting in a comprehensive corporate reporting system. We believe the vision in that statement could serve as a natural starting point for progress towards a more coherent, comprehensive corporate reporting system. For the reasons stated in the consultation paper, we believe that the IFRS Foundation should begin with sustainability reporting standards for climate-related information, however, whilst we believe these standards to be the first priority, we also note that the SSB should proceed without delay to other sustainability topics.

In addition, we point out that the IFRS Foundation’s proposal would lead to a significant step towards a comprehensive corporate reporting system that builds on the well-established efforts of the existing sustainability standards and frameworks to create a standard-setting solution for reporting focused on long-term value creation, connected to financial information. Further blocks can be added to address the wider impacts of companies on the economy, environment and people, and to reflect regional and local public policy priorities. We cite IFAC’s Enhancing Corporate Reporting: The Way Forward as a demonstration of how a ‘building block approach’ can both achieve a core set of global sustainability standards and respond to the local or regional public policy objectives.

Lastly, we stress that timely action is needed to avoid fragmentation, duplications or parallel reporting requirements on topics that are common across the system. In the absence of a single set of global sustainability reporting standards, some regions are moving ahead by themselves. This could result in multiple reporting frameworks and reporting standards existing for an extended (or indefinite) period. The primary objective needs to be a reduction in, and consolidation of, the plethora of different frameworks and standards that currently exist.

We sum up our position by stating:

The scale of the challenges and the increasing momentum from all stakeholders for a global solution for sustainability reporting standards make the undeniable case for immediate action. The actions proposed in the Consultation Paper should be taken without delay.

Download the full comment letter here.

Report on the November 2020 IFRS Advisory Council meeting

01 Dec, 2020

A summary report has been released of the meeting of the IFRS Advisory Council held by remote participation on 3–4 November 2020.

The participants discussed:

  • Updates on Trustees and Board’s Activities — The Advisory Council received an update on recent Trustee activities that focused on COVID-19, roles requiring succession, and sustainability. There was also an update on recent Board activities that focused on IFRS 17 amendments, IBOR Phase 2, COVID-19, and the post-implementation reviews of IFRS 9 and IFRS 15.
  • Feedback from previous Adisory Council meetings — Council members received an update on how the IFRS Foundation has incorporated past Advisory Council feedback into its strategic activities related to relevance, risk, process and the IFRS Standards, since the last Council meeting.
  • Sustainability — This was the main agenda item and focused on the consultation paper on sustainability reporting. Questions considered were:
    • Is there a need for a global set of internationally recognised sustainability reporting standards?
    • Is the development of a sustainability standards board (SSB) to operate under the governance structure of the IFRS Foundation an appropriate approach to achieving further consistency and global comparability in sustainability reporting?
    • Do Council members have any comment or suggested additions on the requirements for success (including on the requirements for achieving a sufficient level of funding and achieving the appropriate level of technical expertise)?
    • Could the IFRS Foundation use its relationships with stakeholders to aid the adoption and consistent application of SSB standards globally? If so, under what conditions?
    • How could the IFRS Foundation best build upon and work with the existing initiatives in sustainability reporting to achieve further global consistency?
    • How could the IFRS Foundation best build upon and work with the existing jurisdictional initiatives to find a global solution for consistent sustainability reporting?
    • If the IFRS Foundation were to establish an SSB, should it initially develop climate-related financial disclosures before potentially broadening its remit into other areas of sustainability reporting?
    • Should an SSB have a focused definition of climate-related risks or consider broader environmental factors?
    • Do Council members agree with the proposed approach to materiality that could be taken by the SSB?

The full meeting summary is available on the IASB's website. There are also recordings of the individual sessions.

President of the EFRAG Board consults on his views on non-financial reporting standard-setting

01 Dec, 2020

In October 2020, EFRAG Board President Jean-Paul Gauzès invited all interested stakeholders to contribute views related to his ad personam mandate from the European Commission to develop proposals for possible changes to the governance and funding of EFRAG in the context of non-financial reporting standard-setting.

He has now collected the input received in to one document, which again consults on. The document focuses on obtaining additional input on a number of matters that were not, or not fully addressed in the first public consultation conducted in October 2020.

Please click for more information in the press release on the EFRAG website.

IVSC publishes perspectives paper on social value

01 Dec, 2020

International Valuation Standards Council (IVSC) has published a perspectives paper 'Defining and Estimating ‘Social Value’'.

The concept of ‘Social Value’ is an area of growing government, public and commercial interest. However, its meaning is often clouded in uncertainty, with many definitions, and the lack of an internationally recognised measurement framework and standards of practice.

This new perspectives paper explores some of the concepts surrounding social value and seeks comments to determine whether standards or guidance material are required.

Please click to access the paper on the IVSC website.

EFRAG outreach event on business combinations and the investor view – summary report

01 Dec, 2020

On 12 November 2020, EFRAG, along with the IASB, hosted an outreach event to discuss business combinations and the subsequent accounting for goodwill. A summary report is now available.

The event focused on the views of European investment decision-makers as regards information about the objectives and targets for an acquisition and, in subsequent periods, information about how that acquisition is performing against those targets that they consider important.

High-level speakers and panellists considered the IASB’s preliminary views included in the Discussion Paper Business Combinations —  Disclosures, Goodwill and Impairment and the EFRAG’s Draft Comment Letter.

Please click for access to the summary report on the EFRAG website.

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