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2021

IASB Chair addresses WSS meeting

27 Sep 2021

IASB Chair Andreas Barckow today delivered his inaugural speech at the World Standard Setters (WSS) conference that is currently being held in a virtual format. His key topics were his first impressions in his new role as IASB Chair, the IASB's agenda for the coming years, and the relationship between the IASB and national standard setters.

Mr Barckow, who is the former president of the German standard setter ASCG, noted that his previous role had prepared him well for the new job as "technical issues are technical issues, wherever you sit". However, he also noted that working for a global standard setter means building consensus and creating standards that work globally, which would be more difficult given the wider variety of economic backgrounds and reporting challenges. Concluding his remarks on his experience in his new role, Mr Barckow noted that as IASB Chair he would surely want to "make my mark, set out my ideas and pursue my priorities", but he noted that given the enduring pandemic and its consequences on everybody's lives he counted as one of the first big successes of his chairmanship that the changeover from his predecessor Hans Hoogervorst has been effective, seamless and quiet.

Mr Barckow then turned to the IASB's agenda for the coming years and in this context noted the IASB agenda consultation and consultations and changes in general, the interaction with the new possible sister board ISSB, and intangibles. On the agenda consultation, he noted, while the Board was seeking feedback on areas of focus, on criteria for new projects and on possible new projects themselves, the IASB has an ongoing work plan based on feedback to the previous agenda consultation and also needs to allocate resources to undertake post-implementation reviews of major standards. Mr Barckow also noted that the IASB has to be mindful of how many consultations and how much change it imposes on stakeholders.

Working with a sister board, the proposed International Sustainability Standards Board (ISSB) would also require resources, as Mr Barckow explained. The necessary connectivity and joined-up standard-setting would mean that each Board commits resources and at the same time benefits from the other Board’s expertise and resources while while acknowledging each other’s independence.Mr Barckow stressed that working together and developing requirements from joint principles and concepts was, in fact, one of the key selling points for having both Boards in the same organisation.

Turning to intangibles, Mr Barckow noted that IAS 38 Intangible Assets is more than 20 years old and has never been revisited other than for consequential changes resulting from other projects while the significance of intangibles, especially self-generated intangibles, has increased substantially over the last two decades. Therefore, he stated, he would like the IASB to explore what can be done to increase transparency in this area.

Concluding his speech, Mr Barckow commented on the relationship between the IASB and national standard setters. He noted that as a result of his previous role as national standard setter he could step back and look at the IASB’s work from the perspective of a national standard setter and to identify what is working well and where the IASB can get better. And he had learned in recent years what national standard setters are able to do. Mr Barckow mentioned the many examples of excellent research and outreach by national standard setters he had seen and that he was keen to explore whether the IASB can tap into those capabilities even more. He noted:

National standard-setters are essentially the eyes and ears of the IASB. They also have valuable expertise. You will always be closer to local stakeholders, especially investors, than the IASB can ever be, no matter how much outreach we do. Furthermore, you are more likely to see issues arising in your jurisdiction far sooner and help us to resolve them before they boil up in other jurisdictions as well. You provide a very helpful interface when it comes to the IASB liaising with stakeholders from your jurisdiction — whether in conducting outreach, addressing agenda item requests that have come to the IFRS Interpretations Committee or developing educational material, to name but a few.

And this was, Mr Barckow concluded, why the relationship with national standard setters will always be an important cornerstone in the IASB's work.

Please click to access a transcript of Mr Barckow's full speech on the IASB website.

Updated IASB work plan — Analysis (September 2021)

27 Sep 2021

Following the IASB's September 2021 meeting, we have analysed the IASB work plan to see what changes have resulted from the meetings and other developments since the work plan was last revised in July 2021. The updated work plan shows that the request for information on the post-implementation review of IFRS 9 is to be expected this week.

Below is an analysis of all changes made to the work plan since our last analysis on 24 July 2021.

Standard-setting projects

  • Disclosure initiative — Subsidiaries that are SMEs An exposure draft was published on 26 July 2021 with comments requested by 31 January 2022; feedback received will be discussed in H1 2022; in addition, the project was renamed to Disclosure initiative — Subsidiaries without public accountability: Disclosures
  • Disclosure initiative — Targeted standards-level review of disclosures  The discussion of feedback is now expected in Q1 2022 (previously H1 2022)
  • Rate-regulated activities The discussion of feedback is now expected in October 2021 (previously Q4 2021)

Maintenance projects

  • Classification of debt with covenants as current or con-current — An exposure draft is now expected November 2021 (previously Q4 2021)
  • Initial application of IFRS 17 and IFRS 9 — Comparative Information — An exposure draft was published on 28 July 2021 with comments requested by 27 September 2021; feedback received will be discussed in October 2021
  • IAS 21 — Lack of exchangeability — The discussion of feedback is now expected in Q1 2022 (previously Q4 2021)
  • Supplier finance arrangements — An exposure draft is now expected November 2021 (previously Q4 2021)

Research projects

  • Extractive activities — A decision on the project direction is now expected in H1 2022 (previously September 2021)
  • Goodwill and impairment — A decision on the project direction is now expected in H1 2022 (previously September 2021)
  • Pension benefits that depend on asset returns Research will now be reviewed in October 2021 (previously Q4 2021)
  • Post-implementation review of IFRS 10-12 A feedback statement is now expected in Q1 2022 (previously H1 2022)
  • Post-implementation review of IFRS 9 A request for information is still expected in September 2021, which would mean "this week"

Other projects

  • Agenda consultation 2020 The discussion of feedback is now expected in November 2021 (previously Q4 2021)

The above is a faithful comparison of the IASB work plan at 24 July 2021 and 27 September 2021. For access to the current IASB work plan at any time, please click here.

We respond to the IASB's third agenda consultation

24 Sep 2021

Deloitte has responded to the request for information the IASB published in March 2021 to seek broad public input on the strategic direction and overall balance of its future work programme.

Overall, we believe that the Board’s time is appropriately allocated to the different activities and that this allocation will remain largely appropriate for the next few years. However, we believe that two key areas will require further direct attention by the Board:

  • Sustainability reporting related issues: As noted earlier, we support the IFRS Foundation continued efforts to establish a sustainability standard-setter under its institutional framework. We also noted that it will be crucial that the two Boards cooperate on fundamental elements that will be common to both Boards to ensure connectivity between financial and sustainability reporting. Amongst others, this would include work on the conceptual framework and on management commentary (beyond the project currently on the work plan of the IASB Board). We believe that the proposed projects on disclosure of intangible assets and on climate and other sustainability-related risks disclosures discussed in the request for information would also benefit from the collaboration between the Board and a future new board working on international sustainability reporting standards.
  • Digital reporting: We note that currently the time spent by the Board in this area is largely focused on taxonomy. We believe that Board should explore how digital reporting is changing the way investors consume information with a view to determine how this should be reflected in the way IFRS Standards are written. This seems to be a critical factor to consider as part of the Board’s project on improving disclosure.

Please click to download our full comment letter, which also includes a list of the key projects that we believe should be added to Board’s work plan, here.

FRC publishes review findings on viability and going concern disclosures

23 Sep 2021

The Financial Reporting Council (FRC) has published the findings of its review of companies’ viability and going concern disclosures. The report aims to provide useful guidance for preparers of annual accounts by identifying areas where viability and going concern disclosures could be improved, and by providing examples of better practice disclosures.

Although the FRC did identify some examples of good disclosure it’s overall conclusion is that there is still significant scope for improvement.

In preparing their upcoming annual reports, the FRC expects companies to prepare viability and going concern disclosures which:

  • Include sufficient company-specific qualitative and quantitative information to enable a reader to fully understand the assessment made. Such disclosures might usefully include; details of drawn and undrawn facilities in place and reliance upon such facilities; explanation of any reliance on any government support programmes; details of covenants including headroom; and information on post balance sheet changes to liquidity.
  • Are proportionate to the uncertainties to which the company is exposed and to its financial position.
  • Are based on assumptions which are clearly consistent with those used in other forward-looking areas of the financial statements such as impairment testing and the assessment of the recoverability of deferred tax assets.
  • Clearly explain the inputs and assumptions used in forecast scenarios (providing quantitative as well as qualitative information).
  • Explain the sensitivity analysis, stress and reverse stress tests carried out to support the assessment and provide details of the inputs (quantitative as well as qualitative detail) and outcomes of any such analysis.
  • Disclose information on how they are resilient to risks which could threaten either their going concern status or longer-term viability including how they are resilient to principal risks and how the impact of such risks could be mitigated if they were to crystallise.

In addition to setting out its expectations of what better practice viability and going concern disclosures should contain, the FRC also provides its expectations with respect to each statement. It expects:

Viability statements to:

  • Clearly justify the period of assessment taking into account, for example, debt repayment profiles, the nature of the business and its stage of development, planning and investment periods, strategy and business model and capital investment.
  • Provide longer-term information and extend their period of assessment beyond the common period of three years.  
  • Draw attention to any assumptions or qualifications on which the assessment is dependent.
  • Clearly map principal risks considered to the viability scenarios tested.

Going concern disclosures to:

  • Clearly identify any material uncertainties related to events or conditions which may cast significant doubt on an entity’s ability to continue as a going concern.
  • Highlight the company-specific significant judgements made by management in determining whether or not the adoption of the going concern basis is appropriate and whether or not there are material uncertainties in respect of going concern to disclose.

A press release and the full report is available on the FRC website.

IASB meeting agenda updated

22 Sep 2021

The IASB has added another slot on primary financial statements to its agenda for Friday.

The Board will continue yesterday's discussion on Friday at 11:45. We have updated our agenda for the meeting accordingly.

IFRS Interpretations Committee holds September 2021 meeting

21 Sep 2021

The IFRS Interpretations Committee (Committee) met on Tuesday 14 & Wednesday 15 September 2021. We have posted Deloitte observer notes for the technical issues discussed during this meeting.

The Committee discussed the comment letter analyses for two tentative agenda decisions, input on a Board project and two initial considerations.

IFRS 16 Leases—Non-refundable VAT on Lease Payments: In March 2021, the Committee discussed a submission about whether a lessee includes non-refundable VAT as part of the lease payments. In that meeting, the Committee members generally agreed with the accounting conclusion but some of them were not convinced that the matter is not material or widespread based on the limited outreach performed by the staff. The responses from the comment letters reflected similar views and some respondents requested an explanation of the accounting treatment of the non-refundable VAT in the agenda decision. The Committee decided to finalise the agenda decision.

IAS 32 Financial Instruments: Presentation—Accounting for Warrants that are Classified as Liabilities on Initial Recognition: In March 2021, the Committee discussed a submission asking whether the issuer reclassifies a warrant (which is classified as a financial liability at initial recognition) as equity when the exercise price is subsequently fixed. The staff concluded that the matter, in isolation, is too narrow to be answered and recommended publishing a tentative agenda decision to explain this. On the other hand, they believed that the broader issues of reclassifying financial instruments are better addressed as part of the Board’s Financial Instruments with Characteristics of Equity (FICE) project. In the meeting, the Committee members generally agreed with the staff's recommendations as did most respondents to the tentative agenda decision. The Committee decided to finalise the agenda decision.

Input on Board project

Proposed amendments to IFRS 16 LeasesLease Liability in a Sale and Leaseback: In November 2020, the Board published ED/2020/4 Lease liability in a Sale and Leaseback, which proposed an amendment to IFRS 16. The comment period ended in March 2021 and the Board discussed the feedback on the ED at its meeting. The staff analysed the feedback and provided recommendations on the project direction in the agenda paper.

Most of the Committee members supported the ‘expected payment method’ as an interim provision but a number of them suggested to leave it open at this stage because none of the approaches is perfect.

Initial consideration

IAS 7 Statement of Cash Flows—Demand Deposits with Restrictions on Use: The Committee received a submission asking whether an entity includes demand deposits with restrictions on use as a component of cash and cash equivalents ("C&CE"). The terms and conditions of the demand deposit do not prevent the entity from accessing amounts held in the demand deposit, but the entity cannot use the cash other than for the purpose specified in the agreement. The staff analysed that such demand deposits should be included in C&CE in the statement of cash flows and could be presented as C&CE in the statement of financial position, unless presenting it separately in an additional line item is relevant to an understanding of the entity's financial position. The information about the restrictions is required to be disclosed under various IFRS Standards.

The Committee decided not to add the matter to the standard-setting agenda and instead to publish a tentative agenda decision with edits that were suggested during the meeting.

IFRS 9 Financial Instruments—Cash Received via Electronic Transfer as Settlement for a Financial Asset: The Committee received a submission asking the timing of recognition of cash received via Bacs, a formal automated settlement process, as settlement for a financial asset. The submitter asked whether it is acceptable for the entity to derecognise the trade receivable and recognise the cash on transfer initiation date, rather than the transfer settlement date. The staff concluded that the trade receivable is generally derecognised on the settlement date, the date when the contractual right to the cash flows from the trade receivable expires. Also, cash should be recognised on the transfer settlement date because the entity has a right to obtain cash from the bank only when cash is deposited in its bank account.

The Committee decided not to add the matter to the standard-setting agenda and instead to publish a tentative agenda decision with edits that were suggested during the meeting.

Work in progress: The staff are in the process of analysing three matters:

  • Principal versus agentIT resellers (IFRS 15)
  • Deficits in low/new energy vehicle credits (IAS 37)
  • Rent Concessionslessors and lessees (IFRS 16 and IFRS 9)

More In­for­ma­tion

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

IASB publishes "Investor Perspectives" article on disclosures in financial statements

21 Sep 2021

The IASB has issued the latest issue of 'Investor Perspectives'. In this edition, IASB Board member Nick Anderson discusses the new approach to developing and drafting disclosure requirements in IFRSs.

Specifically, this issue features insight into the proposed approach and discusses some of the changes that investors would see in the financial statements since investors have been calling for better disclosures in financial statements.

For more information, see the press release and Investor Perspectives article on the IASB’s website.

Pre-meeting summaries for the September 2021 IASB meeting

17 Sep 2021

The IASB is meeting on Monday 20, Tuesday 21, Thursday 23 and Friday 24 September 2021. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. We summarised 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.

The following topics are on the agenda:

Board work plan update: In this session, the staff will provide an overview of the Board’s technical projects to support decisions about whether to add or remove projects and assessments of overall progress on the work plan, including project prioritisation and timing.

Goodwill and Impairment: At the July meeting, the Board said they would like additional information about the disclosures about business combinations to be proposed, and further analysis of the feedback received on the subsequent accounting for goodwill, to help them make their decisions. In response to this, the staff have updated the project plan to provide this information to the Board and will now present the updated project plan for comments from Board members.

Post-implementation review of IFRS 9: In this session, the staff will ask the Board to approve the publication of the Request for Information (RFI), which if approved will be published in the last week of September 2021. The staff will also ask the Board if they agree with a 120-day comment period for the RFI.

Primary Financial Statements: At this meeting, the Board will continue its deliberations of the comments received on ED/2019/7, particularly on management performance measures (MPMs), principles of aggregation and disaggregation, analysis of operating expenses, and associates and joint ventures. The Board will be asked to make decisions with regard to all these topics.

Dynamic Risk Management: In this session, the staff will present its preliminary views on potential refinements to the DRM model which aim to closer align the DRM model to entities’ risk management practices by incorporating the concept of risk limits into the target profile. The Board will not be asked to make a decision. Instead, the staff is seeking feedback from the Board on the potential refinements, which will be taken back to draft the refinements and present them to the Board at a future meeting.

Extractive Activities: The Board will continue its discussions on extractive activities. The staff will present their further analysis on matters relating to exploration and evaluation (E&E) expenditure and activities, matters primarily relating to development and production activities, and reserve and resource information. Based on this analysis, the staff recommend that the focus of the Extractive Activities project should be the development of requirements or guidance to improve the disclosure objectives and requirements in IFRS 6 about an entity’s E&E expenditures and activities. Furthermore, the staff recommend amending the Basis for Conclusions of IFRS 6 to remove the temporary status of the Standard.

Financial Instruments with Characteristics of Equity: In this session, the Board will discuss the accounting for financial instruments that contain contingent settlement provisions and the effects of laws on contractual terms. At this meeting, the staff does not have recommendations for the Board and will instead ask Board members’ views on these two practice issues. The staff will

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

IFAC calls on G20 leaders to focus on sustainability reporting

16 Sep 2021

The International Federation of Accountants (IFAC) has released 'Four themes, two actions, one goal: G20 Call to Action 2021' urging G20 leaders to continue their commitment to sustainability, inclusion, prosperity, and global collaboration.

In order to achieve the goal of a more sustainable, inclusive, and prosperous economy and society, IFAC describes four areas the G20 should focus on:

  1. Accelerate sustainability and inclusiveness
  2. Recommit to global collaboration
  3. Resist regulatory fragmentation
  4. Focus on public sector transparency and integrity

IFAC comments that delivering on these will take a concerted effort from policymakers, businesses, other organisations, investors and individuals.

IFAC believes these priorities require two actions to be taken urgently:

On the first point, the press release states:

Momentum is growing around developing a global baseline of sustainability standards, with the IFRS Foundation poised to deliver. IFAC strongly supports this crucial work.

Please click to access the Call to Action on the IFAC website.

Agenda papers available for the UK Endorsement Board meeting on 17 September

15 Sep 2021

The agenda papers for the UK Endorsement Board (UKEB) meeting to be held on 17 September are now available.

The topics for discussion are:

  • IFRS 17 – Project plan update
  • IFRS 17 – Technical paper: with-profits inherited estates
  • IFRS 17 – Technical paper: annual cohorts
  • IFRS 17 – Technical paper: CSM allocation
  • IFRS 17 – Technical paper: other significant issues
  • Endorsement of 2020 Narrow Scope Amendments – Approve draft endorsement criteria assessment (DECA)
  • Rate-Regulated Activities – Approve feedback statement
  • IASB Agenda Consultation – Approve final comment letter and feedback statement  
  • IFRS 17 Narrow Scope Amendment – Approval final comment letter
  • Disclosure Requirements in IFRS Standards – A Pilot Approach - Updated project implementation plan 
  • Lack of Exchangeability Feedback Statement

The meeting, agenda papers and details of how to register are available on the UKEB website

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