2021

EFRAG issues draft endorsement advice on amendments to IFRS 17

28 Dec 2021

The European Financial Reporting Advisory Group (EFRAG) has issued a draft endorsement letter and a separate invitation to comment relating to the use in the European Union (EU) of 'Initial Application of IFRS 17 and IFRS 9 – Comparative Information (Amendment to IFRS 17)' (‘the Amendment’).

The narrow-scope Amendment addresses accounting mismatches between insurance contract liabilities and financial assets arising in the comparative information presented on initial application of IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments.

EFRAG recommends the endorsement of the Amendment. EFRAG’s initial assessment is that the Amendment meets the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.

Comments are requested by 19 January 2022.

For more information, see the press release, the draft endorsement advice letter and the invitation to comment on the EFRAG website.  EFRAG has also updated its endorsement status report to reflect the draft endorsement advice.

Recent sustainability and integrated reporting developments

27 Dec 2021

A summary of recent developments at VRF, VBA, ACCA, CFA Institute, WICI/VRF, EFRAG/GRI, CDP, IRC, AASB, FASF, IFAC, SASB, exchanges around the world, Accountancy Europe, AccountAbility, and CRD.

The Value Reporting Foundation (VRF) has published the new Integrated Thinking Principles as well as updates to the Asset Management & Custody Activities, Metals & Mining and Coal Operations Industry standards. The publications can be accessed through the press release on the VRF website.

The Value Balancing Alliance (VBA) has released the VBA Disclosure Concept for Material Sustainability Matters that foresees the disclosure of backward-looking as well as forward-looking information with respect to enterprise value and impact on society. Please click to access the publication on the VBA website.

The Association of Chartered Certified Accountants (ACCA) has published Principles for Connected Corporate Reporting Standard Setting noting that corporate reporting standards should highlight the interactions between the value that organisations create for themselves, and the impact that they have on society and planet. Please click to access the publication through the press release on the ACCA website.

The CFA Institute, the global association of investment professionals, announces the release of the first voluntary Global ESG Disclosure Standards for Investment Products designed to enable investors, consultants, advisors, and distributors to better understand, compare, and evaluate ESG investment products. Please click for more information in the press release on the CFA Institute website.

The CFA Institute has also released the results of a survey asking professional analysts and investors about the duty of investment managers to integrate ESG factors into their investment analysis and decision-making, as well as their views on the need for formal, government-backed standards for how public companies report on ESG matters. Please click for more information here.

The World Intellectual Capital/Asset Initiative (WICI) and the VRF have issued a joint position paper, Unlocking and revealing the value of intangibles in delivering Sustainable Development Goals, for the purpose of articulating the importance of intangibles and communication thereon to help achieve the UN Sustainable Development Goals. The position paper can be accessed on the WICI website.

The European Financial Reporting Advisory Group (EFRAG) and Global Reporting Initiative (GRI) have joined forces on the technical work for their respective new biodiversity standards. EFRAG is to make the draft EU standard available to the Commission mid-June, while GRI’s aims to release an updated GRI Biodiversity Standard in the second half of 2022. For more information, please see the press release on the GRI website.

The CDP (previously known as the 'Carbon Disclosure Project') has launched a new climate disclosure framework to empower small and medium-sized enterprises (SMEs) to make strategic and impactful climate commitments, track and report progress against those commitments, and demonstrate climate leadership. Please click for more information on the CDP website.

The Integrated Reporting Committee (IRC) of South Africa has published an information paper Aligning Internal and External Integrated Reporting noting that the content areas and six capitals of the integrated report offer a useful structure for holistic internal reporting and driving integrated thinking. Please click for the information paper on the IRC website.

The Australian Accounting Standards Board (AASB) has released a proposed interim climate change reporting standards framework for industry feedback. The voluntary framework adopts the recommendations of the Taskforce on Climate- related Financial Disclosures (TCFD). Please click for more information on the AASB website.

The AASB has also released a staff paper Globally consistent reporting for sustainability-related information: Australian perspectives. The staff paper can be accessed here on the AASB website.

Japan's Financial Accounting Standards Foundation (FASF) has officially announced the establishment of the Sustainability Standards Board of Japan (SSBJ) and the formation of the SSBJ Preparation Committee. More information is available in this press release.

The International Federation of Accountants (IFAC) has announced that all its Points of View are now available in Arabic, French, Russian, and Spanish in addition to English. This includes Enhancing Corporate Reporting and Climate Action. Please click to access the translations through the press release on the IFAC website.

The Sustainability Accounting Standards Board (SASB) announces that German translations of the SASB standards are now available. More information is available through the press release on the SASB website.

The following stock exchanges have released guidance on climate reporting (all links to external websites):

The following organisations have released guidance on assurance on sustainability reporting:

  • IFAC — more information here
  • Accountancy Europe — more information here
  • AccountAbility — more information here

The Corporate Reporting Dialogue (CRD) has dissolved, citing the success of its mission given the upcoming consolidation of four of its seven members.

Season's greetings

24 Dec 2021

We wish all our readers a healthy and happy festive season and all the best for the New Year!

We look forward to seeing you again after the holidays and to continue to be your preferred accounting website in 2022.

UKEB publishes its response to the IASB on potential changes to the subsequent accounting for goodwill

21 Dec 2021

The UK Endorsement Board (UKEB) has published its response to the International Accounting Standard Board's (IASB's) research questions on potential changes to the subsequent accounting for goodwill.

The response, which has been informed from desk-based research and outreach to UK IFRS reporters, indicates that: 

  • A potential transition to a hybrid model for subsequent measurement of goodwill could have a material impact on the financial position of UK IFRS reporters, if amortisation of existing goodwill balances is required on transition. 
  • A potential transition would be unlikely to have a major impact on financial stability of UK IFRS reporters.
  • The majority of UK IFRS reporters responding to the UKEB's survey do not anticipate major operational changes if there were to be a transition.
  • Most UK GAAP reporters consider specific and appropriate factors when determining the useful life of goodwill for amortisation purposes.

The UKEB will conduct field-testing to further explore possible consequences of potential changes to the subsequent measurement of goodwill.  

The press release and the response letter are available on the UKEB website.

UKEB final comment letter on the IASB's ED on 'Disclosure Requirements in IFRS Standards — A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19)

21 Dec 2021

The UK Endorsement Board (UKEB) has published its final comment letter on the International Accounting Standard Board's (IASB's) ED/2021/3 Disclosure Requirements in IFRS Standards – A Pilot Approach ("the ED").

In its final comment letter the UKEB supports the IASB's efforts to make financial statement disclosure more useful and effective.  The comment letter, which has been informed from the UKEB's own analysis and stakeholder feedback, recommends a hybrid approach which would retain the use of the objectives and user information proposed in the ED but would require some amendments to the other ED proposals in order to address practical difficulties identified by stakeholders.  The comment letter highlights a number of challenges with the proposals in the ED including: 

  • stakeholder concerns about the practical application of the ED's proposals, in particular the possible consequences of removing the mandatory disclosure regime altogether.  The UKEB suggests that this would create challenges for some preparers as well as for auditors and regulators.
  • concerns identified through feedback that not all stakeholders are currently in a position to successfully transition to the ED's purely objectives-based approach 'without adverse consequences'.  In this regard the UKEB suggests that the IASB consider the path to improved disclosure as a journey with multiple milestones.

On the proposed hybrid approach the UKEB believes that that approach would enable the establishment of the principle that disclosures should be based on user needs but also will achieve many of the IASB's proposals.  It also provides a number of comments in relation to the ED proposals relating to IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits.

The final comment letter and the feedback statement are available on the UKEB website.

Summary of the November 2021 GPF meeting

20 Dec 2021

Representatives from the International Accounting Standards Board (IASB) met with the Global Preparers Forum (GPF) by video conference on 12 November 2021. Notes and recordings from the joint meeting have now been released.

The topics discussed at the meeting included:

  • Goodwill and impairment
  • Equity method
  • Subsidiaries without public accountability
  • IASB Update
  • IFRS Interpretations Committee update

The meeting summary is available on the IASB website. The next GPF meeting is proposed to be held on 11 March 2022.

December 2021 IASB meeting notes posted

20 Dec 2021

The IASB met for three days, starting on Tuesday 14 December 2021. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

The following topics were discussed:

Financial Instruments with Characteristics of Equity

The staff are proposing amendments to IAS 32. The Board decided to (a) clarify that some financial instruments with contingent settlement provisions can be compound instruments and clarify the measurement requirements for the liability component of such instruments; (b) specify that the term ‘liquidation’ in paragraph 25(b) of IAS 32 refers to when an entity has started the process to permanently cease to trade; (c) specify that the assessment of whether a contractual term is ‘not genuine’ in paragraph 25(a) of IAS 32, is not purely a probability-based assessment; and (d) amend IAS 32 to specify how an entity must consider the effects of applicable laws when classifying financial instruments as financial liabilities or equity.

The staff plan to bring recommendations on the classification of financial instruments that are subject to shareholders’ discretion and whether additional disclosures would be beneficial at a future meeting.

Maintenance and Consistent Application

Lease Liability in a Sale and Leaseback: The Board decided to proceed with ED/2020/4 Lease Liability in a Sale and Leaseback (Proposed amendments to IFRS 16). The Board decided to retain the following proposals: clarify that the leaseback liability is a liability to which IFRS 16 applies; not change the initial measurement requirements in paragraph 100(a) of IFRS 16 for the right-of-use asset and the gain or loss arising from the sale and leaseback; clarify that a seller-lessee subsequently measures the right-of-use asset arising from the leaseback applying paragraphs 29-35 of IFRS 16; and include an illustrative example of a sale and leaseback transaction with variable payments. However, the Board decided to change the following aspects of the proposals: no longer prescribe how a seller-lessee determines the proportion of the previous carrying amount of the asset that relates to the right of use the seller-lessee retains; require the seller-lessee to subsequently measure the leaseback liability applying paragraphs 36-46 of IFRS 16; and specify that the term ‘lease payments’ may not be as defined in Appendix A to IFRS 16. Instead, the seller-lessee would apply the term ‘lease payments’ or ‘revised lease payments’ in such a manner that it does not recognise any amount of the gain or loss that relates to the right of use retained to the extent that the right of use is retained.

Economic Benefits from Use of a Windfarm (IFRS 16)—Finalisation of Agenda Decision: No Board members objected to the finalisation of the agenda decision.

Business Combinations under Common Control

The Board published its Discussion Paper (DP) Business Combinations under Common Control (BCUCC) in November 2020, with a comment letter deadline of 1 September 2021. The purpose of this meeting was to provide the Board with an overview of feedback on the DP and detailed summaries of feedback on selected topics from the DP. The Board was not be asked to make decisions in this session.

Almost all respondents agreed that the project should cover the receiving entity’s reporting for all transfers of businesses under common control. Most respondents agreed with the preliminary view that neither the acquisition method nor a book-value method should be applied to all BCUCCs. Some respondents (including most respondents from China) disagreed and said a book-value method should be applied to all BCUCCs. A few respondents reported mixed views within their organisation/jurisdiction or did not express a clear view.

Third Agenda Consultation

The Board decided to proceed with the criteria as proposed in the Request for Information for evaluating potential projects: its importance to investors; whether there is any deficiency how the matter is reported; the type of entities it is likely to affect or whether it is more prevalent in some jurisdictions than others; how pervasive or acute the matter is likely to be; interaction with other projects; the complexity and feasibility of the potential project and its solutions; and whether the Board and its stakeholders have capacity and could make timely progress.

Primary Financial Statements

The Board decided to proceed with a definition for unusual items, removing the reference to ‘limited predictive value’, developing application guidance which clarifies that the definition captures income or expenses that are dissimilar in type or amount from income or expenses expected in the future and explain that in considering whether income or expenses are similar, an entity would consider characteristics of the income and expenses, including the underlying event or transaction.

The Board decided to retain the proposal to classify in the investing category: income and expenses from assets that generate returns individually and largely independently of other resources; adding further application guidance; and income and expenses from associates and joint ventures. The Board also decided retaining the label ‘investing category’ and not continuing with the proposal to define ‘income and expense from investments’.

Second Comprehensive Review of the IFRS for SMEs Standard

The Board decided that the IFRS for SMEs be amended to make it more closely aligned with IFRS 3, IFRS 10 (but not investment entities) and IFRS 11 (but retain the IFRS for SME classifications of joint arrangements and the accounting requirements for jointly controlled entities). The Board discussed whether and how to align the IFRS for SMEs Standard with the impairment requirements in IFRS 9 and asked the staff for more analysis. The Board decided adding the definition of a financial guarantee contract from IFRS 9. The summaries contains the full list of amendments the Board decided to incorporate or not to incorporate into IFRS for SMEs, as well as other narrower amendments the Board should make.

Rate-regulated Activities

The staff has developed a plan for redeliberating ED/2021/1 Regulatory Assets and Regulatory Liabilities. The Board decided to prioritise total allowed compensation (returns on assets not yet available for use and regulatory assets and regulatory liabilities arising from differences between assets’ regulatory recovery pace and their useful lives) and scope (including interaction of the proposals with IFRIC 12). These are topics about which respondents raised significant concerns.

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

Agenda for the January 2022 IFRS Advisory Council meeting

20 Dec 2021

An agenda has been released for the meeting of the IFRS Advisory Council that will be held by remote participation on 11 January 2022.

A summary of the agenda is set out below:

Tuesday 11 January 2022 (12:00-15:45)

  • Welcome and Chair's preview
  • Agenda consultation
    • Introduction and background
    • Strategic direction and balance of the IASB’s activities
    • Financial reporting issues that could be added to IASB’s work plan
  • Post-implementation reviews – Priority of projects arising from post- implementation reviews
  • Chair summary

Agenda papers for the meeting are available on the IASB website.

IASB issues podcast on latest Board developments (December 2021)

20 Dec 2021

The IASB has released a podcast featuring IASB Chair Andreas Barckow and IASB Vice-Chair Sue Lloyd discussing deliberations at the December 2021 IASB meeting.

Highlights of the podcast include discussions on: 

  • Primary financial statements
  • Rate-regulated activities
  • Financial instruments with characteristics of equity
  • Business combinations under common control
  • Second comprehensive review of the IFRS for SMEs 
  • Lease liability in a sale and leaseback
  • Reflections on the highlights of 2021

The podcast can be accessed through the press release on the IASB website.

Please click to view the detailed notes taken by Deloitte observers for the IASB meeting.

GPF seeks members

20 Dec 2021

The Global Preparers Forum (GPF) is seeking new members with an emphasis for candidates from the Americas.

The closing date for applications is 31 January 2022. New members will start on 1 March 2022 for a term lasting between two to five years. For more information, see the press release on the IASB’s website.

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