More in­for­ma­tion about the issues is set out below:

Click to access all our comment letters to the IASB, IFRS Foun­da­tion, and IFRS In­ter­pre­ta­tions Committee.

The proposed amendment would extend the scope of the 2020 amendment by increasing the period of eligibility to apply the practical expedient from 30 June 2021 to 30 June 2022.

EFRAG supports the proposals and agrees that there remains a need to provide relief for lessees given the ongoing challenges that lessees face in assessing whether lease modifications have occurred under the circumstances of COVID-19. EFRAG supports a continued time restriction to ensure only the Amendments only apply to COVID-19-related concessions and to limit the effect of reduced comparability due to the Amendments.

Additionally EFRAG supports the proposed transition requirements, believes that it should be applied on a modified retrospective basis, and believes that that early adoption should be allowed at the date of the IASB’s issuance of the extension of the amendment.

Comments on EFRAG's draft comment letter are requested by 22 February 2021. For more information, see the press release and the draft comment letter on the EFRAG's website.

In January 2020, the Investment Association published its 2020 shareholder priorities in which it set out its expectations in four areas that its members identified as critical drivers of long-term value:

• Responding to climate change;
• Audit quality;
• Stakeholder engagement; and
• Diversity.

The publication outlined why investors considered these four issues to be important areas of focus for companies in 2020 and also set out their expectations for change in 2020.

Following the 2020 AGM season, the IA conducted a review of the 93 FTSE 100 companies with year-ends starting after 31 December 2019 who have held an AGM by 30 September 2020.  The 2021 publication sets out:

• An overview of progress against the 2020 shareholder expectations;
• Investors’ evolving expectations for the 2021 AGM season; and
• The approach IVIS will take to assess companies against these expectations in 2021.

Investors' evolving expectations include more developed sustainability reporting, new climate accounting expectations and also greater expectations for both gender and ethnic diversity on boards. 

The full publication is available on the Investment Association website here.

The evidence presented in the research papers will aid the IASB’s on its targeted standards-level review of disclosures project. The research papers are requested by 31 March 2021.

In addition, the Australian Accounting Review is seeking academic research papers related to the application and impact of IFRS 9. The deadline to submit these research papers is 15 April 2021. 

For more information, see the press release on the IASB’s website.

Financial Instruments with Characteristics of Equity: The Board will discuss potential disclosures that could be developed as part of the FICE project, although the staff are not seeking any decisions. The Board will also discuss the classification of particular financial instruments that contain obligations that arise only on liquidation of the entity, which IAS 32:16 classifies as equity. The 2018 DP proposed that at least some of these instruments should be classified as financial liabilities. The staff now believe that the information needs of users of financial statements could be met by supplementing the existing IAS 32 classification requirements with new presentation and disclosure requirements rather than changing the classification. The Board will be asked if it agrees with that view. 

Management Commentary: The Board will consider several issues identified during the drafting of the ED for the revised Practice Statement, mainly as a result of feedback from reviewers: (a) the status of the Practice Statement and how it compares to the status of the Materiality Practice Statement; (b) materiality—the staff recommend that the Practice Statement definition of material information should refer to the decision investors and creditors make on the basis of the management commentary and the related financial statement; (c) thresholds—clarifying why the ED uses the terms ‘key’, ‘fundamental(ly)’, ‘severely’ and ‘underpin’, and explaining how those terms relate to the materiality threshold; (d) long-term prospects, intangible resources and relationships and ESG matters—the staff suggest restructuring the appendix by providing a more summarised description of applicable requirements and guidance.

Extractive Activities: The Board will have a non-decision making session in which the staff will explain the life-cycle of a minerals and oil and gas property; the activities that are performed in the different phases of that life-cycle; and the financial reporting challenges associated with those different phases.

Agenda Consultation: The staff are seeking permission to publish the Request for Information, which will lead to the Board setting priorities for 2022 to 2026. The staff recommend 120 days as a comment period. Although this is shorter than the normal 180-days previously provided, they think that commenting on a strategic consultation should require less time for respondents.

Disclosure Initiative—Subsidiaries that are SMEs: The staff are seeking permission to begin the balloting process for the ED, and is recommending a 120-day comment period.

There will also be an oral update for the SME Standard review.

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

Background

The requirements in IFRSs, in particular in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, make a distinction between how an entity should present and disclose different types of accounting changes in its financial statements. Changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively.

Companies sometimes struggle to distinguish between accounting policies and accounting estimates and enforcers have identified divergent practices and the Interpretations Committee received a request to clarify the distinction. The Interpretations Committee passed the request on to the IASB. An exposure draft of proposed amendments published in September 2017 has now been finalised.

Changes

The changes to IAS 8 focus entirely on accounting estimates and clarify the following:

• The definition of a change in accounting estimates is replaced with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”.
• Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty.
• The Board clarifies that a change in accounting estimate that results from new information or new developments is not the correction of an error. In addition, the effects of a change in an input or a measurement technique used to develop an accounting estimate are changes in accounting estimates if they do not result from the correction of prior period errors.
• A change in an accounting estimate may affect only the current period’s profit or loss, or the profit or loss of both the current period and future periods. The effect of the change relating to the current period is recognised as income or expense in the current period. The effect, if any, on future periods is recognised as income or expense in those future periods.

Effective date

The amendments are effective for annual periods beginning on or after 1 January 2023 and changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Our UK Accounting Plus project page on Changes in accounting policies and estimates
• Our related Need to know publication
• Updated EFRAG endorsement status report

Background

The feedback on the Board's DP on Principles of Disclosure suggested that guidance is required to assist entities in determining which accounting policies to disclose. It was noted that the application of materiality is key to deciding which accounting policies to disclose, however IAS 1 Presentation of Financial Statements does not refer to materiality but states that ‘[a]n entity shall disclose its significant accounting policies' without the Board providing a definition for the term ‘significant’.

Therefore, the Board decided to develop amendments IAS 1 to require entities to disclose their material accounting policies rather than their significant accounting policies. To support this amendment the Board has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2 Making Materiality Judgements to accounting policy disclosures.

Changes

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) amends IAS 1 in the following ways:

• An entity is now required to disclose its material accounting policy information instead of its significant accounting policies;
• several paragraphs are added to explain how an entity can identify material accounting policy information and to give examples of when accounting policy information is likely to be material;
• the amendments clarify that accounting policy information may be material because of its nature, even if the related amounts are immaterial;
• the amendments clarify that accounting policy information is material if users of an entity’s financial statements would need it to understand other material information in the financial statements; and
• the amendments clarify that if an entity discloses immaterial accounting policy information, such information shall not obscure material accounting policy information.

In addition, IFRS Practice Statement 2 has been amended by adding guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ to accounting policy information in order to support the amendments to IAS 1.

Effective date and transition

The amendments are applied prospectively. The amendments to IAS 1 are effective for annual periods beginning on or after 1 January 2023. Earlier application is permitted. Once the entity applies the amendments to IAS 1, it is also permitted to apply the amendments to IFRS Practice Statement 2.

Dissenting opinion

Board member Françoise Flores dissented from issuing the final amendments. Ms Flores believes that stating that accounting policy information is material even if it is standardised or duplicates the requirements of IFRSs if the underlying accounting is complex and users of the entity’s financial statements would otherwise not understand material transactions, other events or conditions stretches the concept of materiality beyond its intended scope and undermines the overall aim of the amendments, which is to help an entity reduce the disclosure of immaterial accounting policy information.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Our UK Accounting Plus Project page on Disclosure initiative — Accounting policies
• Our related Need to know publication
• Updated EFRAG endorsement status report

Background

In May 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS 16). The pronouncement amended IFRS 16 Leases to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. On issuance, the practical expedient was limited to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2021.

Since lessors continue to grant COVID-19-related rent concessions to lessees and since the effects of the COVID-19 pandemic are ongoing and significant, the IASB is now proposing to extend the time period over which the practical expedient is available for use.

Suggested changes

The changes proposed in ED/2021/2 Covid-19-Related Rent Concessions beyond 30 June 2021 (Proposed amendment to IFRS 16) would amend IFRS 16 to

1. permit a lessee to apply the practical expedient regarding COVID-19-related rent concessions to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2022 (rather than only payments originally due on or before 30 June 2021);
2. require a lessee applying the amendment to do so for annual reporting periods beginning on or after 1 April 2021;
3. require a lessee applying the amendment to do so retrospectively, recognising the cumulative effect of initially applying the amendment as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment; and
4. specify that, in the reporting period in which a lessee first applies the amendment, a lessee is not required to disclose the information required by paragraph 28(f) of IAS 8.

Comment period

The IFRS Foundation's Due Process Handbook sets out that 75% of the Trustees must approve comment periods shorter than 30 days. The Trustees approved a 14-day comment period. Therefore, comments on the proposed changes are requested by 25 February 2021.

Effective date

The Board expects to finalise the amendment by the end of March 2021 and proposes an effective date of 1 April 2021 for the final amendment (earlier application permitted, including in financial statements not yet authorised for issue at the date the amendment is issued).

Alternative view

The exposure draft includes an alternative view by Board member Nick Anderson. Mr Anderson voted against publication of the exposure draft noting that when the practical expedient was initially offered, its application was limited to a very specific timeframe. Extending the period during which the practical expedient is available would further impede comparability between lessees that apply the practical expedient and those that do not.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• Our UK Accounting Plus project page on IFRS 16 and COVID-19 — Extension of practical expedient
• Our related Need to know publication

The research papers are due by 15 May 2022. Selected research papers will be featured at a joint conference on 2–4 November 2022 and considered for potential publication in the TAR. For more information, see the press release on the IASB’s website.

A recording of the virtual workshop is now available. It can be accessed here on the IASB website.