February

CMAC seeks members

01 Feb, 2021

The Capital Markets Advisory Committee (CMAC) is seeking new members and welcomes applications from analysts and investors from all over the world.

New members will start on 1 January 2022 for a term of three years, renewable once for a further three years. For more in­for­ma­tion, see the press release on the IASB website.

Pre-meeting summary for the February 2020 IASB supplementary meeting

01 Feb, 2021

The IASB is meeting on Thursday 4 February 2021, by video conference. We have posted our pre-meeting summary for the meeting that allow you to follow the IASB’s decision making more closely. We summarised the agenda paper made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

IFRS 16 and COVID-19: The amendments to IFRS 16 the IASB made in relation to rent concessions and COVID-19 provided a practical expedient that applied to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2021. The staff is recommending that the IASB extend that to 30 June 2022. The staff recommend retrospective application, but note that for a lessee that has applied the initial expedient, it is possible that they may be required to reverse lease modification accounting for rent concessions that did not qualify because of the original time limit. If the IASB approves a 14-day comment period the staff think they can publish final amendments by the end of March 2021.

Our pre-meet­ing summary is available on our February supplementary meeting notes page and will be sup­ple­mented with our popular meeting notes after the meeting.

EFRAG publishes January 2021 issue of 'EFRAG Update'

01 Feb, 2021

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during January 2021.

The update reports on the EFRAG Board webcast meeting on 14 and 26 January 2021 and the EFRAG TEG webcast meetings on 13 and 19 January 2021. The publication also covers the activities of the European Reporting Lab.

The update also lists EFRAG publications issued in January including:

The January 2021 EFRAG Update can be found on the EFRAG website here.

Consultation launched on draft legislation and draft statutory guidance to improve climate related reporting for occupational pension schemes

01 Feb, 2021

The Department for Work and Pensions (DWP) has published a consultation on draft legislation and draft statutory guidance to improve climate-related reporting for occupational pension schemes.

The draft Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 and the draft Occupational Pension Schemes (Climate Change Governance and Reporting) (Miscellaneous Provisions and Amendments) Regulations 2021) (‘the Regulations’) have been produced in light of the outcome of an earlier August policy consultation ('the August consultation'). 

This sought views on policy proposals to require trustees of larger occupational pension schemes and authorised schemes to have effective governance, strategy, risk management and accompanying metrics and targets for the assessment and management of climate risks and opportunities.  The August consultation also invited responses on proposals to disclose these in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)

The draft Climate Change Governance and Reporting Regulations will require, from 1 October 2021, the trustees of schemes in scope to:

  • implement climate change governance measures and produce a TCFD report containing associated disclosures; and
  • publish their TCFD report on a publicly available website, accessible free of charge

Changes made by the Miscellaneous Provisions Regulations will require trustees who must produce a TCFD report to, among other things:

  • include a link to the TCFD report in the Annual Report
  • tell members that the TCFD report has been published and where they can locate it, by including this information in the Annual Benefit Statement and, for defined benefit (DB) schemes, the Annual Funding Statement

Concurrently the DWP also seeks views on new draft statutory guidance (link to DWP website) that would enact the government’s policy proposals. Trustees of occupational pension schemes must have regard to this statutory guidance when meeting requirements under the Regulations. The guidance is split into four parts covering: 

  • Background
  • An overview of climate change governance requirements
  • Climate change governance and production of a TCFD report
  • Publication of a TCFD report

Non-statutory guidance (link to DWP website) for the trustees of occupational pension schemes on assessing, managing and reporting climate-related risks in line with the Taskforce on Climate-Related Financial Disclosures (TCFD) has also been produced by the Pensions Climate Risk Industry Group (PCRIG). This is non-mandatory guidance but might be helpful for trustees to consider in addition to the statutory guidance which must be followed.

The consultation closes at 11:45pm on 10 March 2021 and can be accessed from the DWP website.

EFRAG publishes its final comment letter on the IASB's discussion paper on goodwill and impairment

01 Feb, 2021

The European Financial Reporting Advisory Group (EFRAG) has issued its final comment letter on the IASB discussion paper DP/2020/1 'Business Combinations — Disclosures, Goodwill and Impairment'.

The IASB's project on goodwill and impairment 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 its final comment letter on the discussion paper published in March 2020, EFRAG

  • supports the objective to explore whether companies can, at a reasonable cost, provide investors with more useful information about the acquisitions.  However EFRAG notes that the Discussion Paper does not aim at addressi​ng, through disclosure or enhancement of the impairment model, the perceived shortcomings in goodwill accounting.  Whilst some of the perceived shortcomings are addressed, EFRAG feels that there is still room for improvement in this area;
  • notes some practical issues to consider in relation to disclosures about the strategic rationale and management’s objectives for an acquisition as at the acquisition date and subsequent disclosures about whether an acquisition is meeting those objectives.  EFRAG asks the IASB to examine whether this information should be provided in the management commentary and indicates that these considerations would also apply to the suggested disclosures on expected synergies;
  • does not consider that the benefits would outweigh the costs for the proposal to disclose cash flows from operating activities as part of the requirements currently included in paragraph B64(q) of IFRS 3 Business Combinations and considers that presenting the amount of total equity exclusing goodwill on the statement of financial position could result in confusion;
  • suggests that the guidance on goodwill allocation to cash generating units is possibly amended to improve how the impairment test for cash-generating units containing goodwill is applied in practice;
  • appreciates the attempts to simplify the impairment test, but has reservations about introducing an indicator-only approach;
  • acknowledges the conceptual and practical arguments for both the impairment only model and reintroduction of amortisation and notes that more and more voices are raised in favour of the latter mainly for practical reasons. However, considering that an accounting policy should only be changed if it would provide reliable and more relevant information, EFRAG suggests the IASB further explore improvements to the existing impairment test and any cost and consequences of reintroducing amortisation; and
  • would recommend that the issue on whether some intangible assets could be included in goodwill should be considered in a second phase of the project.

For more information, see the press release and the final comment letter on the EFRAG's website.

FRC publishes feedback statement to its Discussion Paper on business reporting of intangibles

01 Feb, 2021

The Financial Reporting Council (FRC) has published a feedback statement to its Discussion Paper on business reporting of intangibles.

In February 2019, the FRC issued a Discussion Paper on the Business Reporting of Intangibles which considered the case for radical change to the accounting for intangible assets and the likelihood of such change being made in the near future.  The feedback statement provides a summary of the views expressed in the responses to the Discussion Paper. 

The majority of respondents acknowledged the limitations of the current reporting framework in capturing and presenting clearly the nature and value of intangibles and were supportive of efforts to address this issue, including strong support from investor respondents.

The main reservation expressed about the proposals in the Discussion Paper was that, given the inherent measurement uncertainty relating to intangible assets, and the difficulty in identifying future-oriented expenditure, efforts to provide greater transparency would lead to highly subjective disclosures and involve a high degree of management judgement. There were also concerns around the commercial sensitivity of the information and compliance costs.

The feedback statement is available on the FRC website.

IVSC paper on challenges to market value

01 Feb, 2021

The International Valuation Standards Council (IVSC) has published a perspectives paper 'Challenges to Market Value' that looks at the challenges in relation to the availability of market information in a pandemic world.

The paper notes that the current coronavirus epidemic has created a significant layer of uncertainty which has permeated all markets. While this is not necessarily just confined to the basis of market value, however, it still raises its own specific challenges:

  • How does the valuer quantify market value with a lack of market comparable information in the new COVID-19 world?
  • Where market comparable information is available, have the parties ‘acted knowledgeably, prudently and without compulsion’?
  • Does a pandemic environment enable parties to undertake ‘proper marketing’ or do sales that are witnessed in the early stages of such an event represent an environment comprised of overly willing sellers and opportunistic buyers that is more aligned with a liquidation market?

Please click to access the perspectives paper on the IVSC website.

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