March

EFRAG publishes draft endorsement advices on disclosure of accounting policies and definition of accounting estimates

15 Mar, 2021

EFRAG has published draft endorsement advices on ‘Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)’ and ‘Definition of Accounting Estimates (Amendments to IAS 8).’

For both the amendments regarding disclosure of accounting policies and the definition of accounting estimates, the EFRAG's overall pre­lim­i­nary as­sess­ment is that the amend­ments satisfy the criteria for en­dorse­ment for use in the EU and therefore rec­om­mends their en­dorse­ment.

Please click to access:

March 2021 IASB meeting agenda posted

12 Mar, 2021

The IASB has posted the agenda for its next meeting, which will be held via video conference on 23–24 March 2021. There are seven topics on the agenda.

The Board will discuss the following:

  • Board work plan update
  • Management commentary
  • Main­te­nance and con­sis­tent ap­pli­ca­tion
  • Equity method
  • Goodwill and impairment
  • Second comprehensive review of the IFRS of SMEs Standard
  • Primary financial statements

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries, as well as observer notes from the meeting on this page as they become available.

Pre-meeting summaries for the March 2021 IFRS Interpretations Committee meeting

12 Mar, 2021

The Committee meets on Tuesday 16 March 2021, via video conference. The Committee will discuss one comment letter analysis on a tentative agenda decision and two new issues.

Comment letter analysis

IFRS 38 Intangible Assets—Configuration or Customisation Costs in a Cloud Computing Arrangement: In December 2020, the Committee discussed the accounting for a customer's costs of configuring or customising the supplier's application in a ‘Software as a Service’ (SaaS) arrangement. The staff concluded that no intangible asset is recognised in the fact pattern described and the customer should refer to requirements in IFRS 15 for the identification of services and timing of recognition. However, a number of respondents disagreed with, or expressed concerns about, different aspects of the technical analysis and some respondents suggested adding a standard-setting project to the work plan.

The staff analysed these concerns, but concluded that the agenda decision should be finalised with some edits to address the concerns raised.

New issues

IFRS 16 Leases—Non-refundable VAT on lease payments: The Committee received a submission about the accounting by a lessee for non-refundable value-added tax (VAT) charged on lease payments. In the fact pattern described, the lessee operates in a jurisdiction which requires sellers to collect VAT and remit the amounts to the government and generally allows purchasers to recover VAT charged on payments for goods and services. However, due to the nature of operations, the lessee can recover only a portion of the VAT charged, including that charged on lease payments. The submitter asked whether the lessee includes non-refundable VAT as part of the lease payments.

The staff recommend not to add the matter to the Committee’s standard-setting agenda as the amount involved is not material and outreach provided no evidence of diversity in practice.

IAS 32 Financial Instruments: Presentation—Accounting for warrants that are initially classified as liabilities: The Committee received a submission describing a fact pattern in which an entity issues a warrant that gives the holder the right to buy the entity’s own equity instruments at a price that will be fixed at a future date. The warrant is classified as a financial liability at initial recognition. The submitter asked whether the issuer reclassifies the warrant as equity when the exercise price is subsequently fixed.

The staff are already aware of diversity in practice regarding this issue and know that the issue is prevalent. Reclassification between financial liabilities and equity instruments was identified as one of the practice issues the Board will consider in its FICE project.

The staff recommend not adding a standard-setting project to the Committee’s agenda, because the matter, in isolation, is too narrow. Instead, they recommend publishing a tentative agenda decision to explain this. The staff believe that the broader issues of reclassifying financial instruments are better addressed as part of the Board’s FICE project.

Work in progress: The staff are analysing requests related to the accounting for provision of financing to credit institutions under European Central Bank’s third Targeted Longer-Term Refinancing Operations programme.

The full agenda for the meeting and our com­pre­hen­sive pre-meet­ing summaries can be found here.

IFRS Foundation Trustees seek ASAF members

11 Mar, 2021

The IFRS Foundation is calling for applications from national standard-setters and regional bodies to become members of the Accounting Standards Advisory Forum (ASAF).

ASAF was set up in 2013 to formalise and streamline the relationships between the IFRS Foundation and IASB with representatives from across the standard-setting community, in order to bring important regional perspectives to the IASB's technical work and to offer feedback on the most important issues of the day.

The ASAF is comprised of 12 members and a non-voting chair (being the IASB chair or vice-chair).  The 12 members are sourced from the following geographical regions:

  • Africa: 1 member
  • Americas (North and South): 3 members
  • Asia/Oceania: 3 members
  • Europe (including non-EU): 3 members
  • World at large*: 2 members

* subject to maintaining overall geographical balance.

Membership of the ASAF is open to all recognised accounting standard-setters of jurisdictions and regional bodies. Existing ASAF members are eligible for reappointment.

The closing date for applications is 30 April 2021. The first ASAF meeting of the new membership will take place on 9–10 December 2021.

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

IASB decides to extend the practical relief regarding COVID-19-related rent concessions

10 Mar, 2021

In a supplementary meeting held earlier today, the IASB considered the feedback received on the February 2021 exposure draft 'Covid-19-Related Rent Concessions beyond 30 June 2021 (Proposed amendment to IFRS 16)' and decided to finalise the proposed extension of the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification by one year.

During the meeting, the staff presented an analysis of the feedback received that showed that almost all respondents supported the Board's proposals in the exposure draft. The only change the staff recommended as a result of its analysis of the feedback was an additional explanatory transition paragraph.

Main points raised during the Board's discussion were the fact that IFRS 16 is not a new standard anymore so that companies should be able to comply with the requirements; the pandemic is still ongoing; there are differences in magnitude of and general situation in connection with the pandemic around the world; there is a difference between public health and economy; the lack of comparability would be continued; setting an end date to the practical relief will always be arbitrary; does there need to be an end date at all when the reference is clearly to COVID-19 related rent concessions?

When called to vote, the Board

  • agreed with the conclusions the staff had drawn and decided to finalise the proposal in the exposure draft with the one additional explanatory transition paragraph proposed (10 in favour, one absent);
  • agreed with with the conclusion that the amendment to IFRS 16 does not require re-exposure (12 in favour, one absent); and
  • was satisfied that it has complied with the applicable due process requirements and that it has undertaken sufficient consultation and analysis to begin the balloting process for the amendment to IFRS 16 and thus gave permission to do so (12 in favour, one absent).

The same Board member that dissented from publishing the exposure draft also dissented from publishing the final amendments. In addition, one Board member who did express serious doubt when the exposure draft was published, but did not dissent then, now dissented as well.

The staff expects to finalise the amendment by the end of this month so that it can be issued on 31 March 2021 with an effective date of 1 April 2021.

In addition, see the detailed notes taken by Deloitte observers for the meeting.

IASB Chair's farewell speech to IFASS members

09 Mar, 2021

The spring meeting of the International Forum of Accounting Standard Setters (IFASS) concluded today with a farewell speech of IASB Chair Hans Hoogervorst to his fellow standard setters.

Mr Hoogervorst began his speech with some quips about departing presidents and his intention to leave peacefully. In fact, he noted, there was no need for an armed insurrection of angry national standard-setters as his designated successor, Andreas Barckow, is the former Chair of the German standard-setter and thus really understands what national standard-setters need from the IASB - an insider so to say.

Mr Hoogervorst then looked back over his ten years as Chairman. He noted he was truly proud of what the IASB has achieved during that time: completing reforms following the global financial crisis and delivering major improvements to financial instruments accounting, to revenue recognition and to lease accounting — often in the face of fierce lobbying. In his second term, the IASB focused on improvements to presentation. Not all projects of that phase are finished yet, but all of them delivered or promise progress at making disclosures more relevant.

While mentioning big standards and adoption of IFRSs around the world, Mr Hoogervorst could not help but comment on the adoption of IFRS 17 in Europe and that some parties still hope to limit the scope of the annual cohorts requirement that are intended to insure that contracts cannot continue contributing to profits long after they have expired. His questions were:

  • Is it really worth it?
  • Will European insurers really look good if they apply a carve-out that most investors will view as a short-cut that distorts performance?
  • Is it in the interests of the industry itself to lose the full benefits of applying the same standard across the world?

A bracket around Mr Hoogervorst's speech were the crises at the beginning at the end of his chairmanship. He joined  the IASB with little experience with accounting at a time when the accounting for financial instruments came under attack during the financial crisis. He noted that people were pointing the finger at accounting when the blame was really much closer to home. At that time he was convinced that the criticism of accounting was a typical case of shooting the messenger. Mr Hoogervorst noted that during the COVID-19 crisis and recession the state of the global economy is even more perilious that ten years earlier with debt exploding around the world. He stated that he would not be surprised if accounting comes under pressure again, as it did in 2008, when the economic stress that has been building up finally erupts. But, he noted, that is exactly the point when proper accounting matters the most.

Concluding his speech Mr Hoogervorst thanked the national standard setters and stressed that IFASS was a wonderful example of what can be achieved when highly skilled people from around the globe work together to solve common challenges, which was even more impressive given the anti-globalisation backdrop of the last five years where a politically expedient solution is often valued above the right accounting solution. He asked the standard setters to continue to stand up for independent standard-setting and to give his successor and his team the same support they have given him in the last decade.

Please click to access the transcript and a recording of the speech on the IASB website.

IASB offers insights on forthcoming agenda consultation

09 Mar, 2021

The International Forum of Accounting Standard Setters (IFASS) is currently holding its spring meeting as a virtual conference. During one presentation today, the IASB offered insights on the forthcoming request for information on the IASB's third agenda consultation and asked participants on outreach proposals and ideas.

The request for information is expected to be published at the end of March 2021, with Board deliberations to take place during the second half of 2021 and a final work plan to be published in the first half of 2022. This will allow the incoming Board Chair to be involved in determination of the Board's priorities for 2022-2026.

As one of the first points of the presentation, the IASB commented on the connection and distinction between the IFRS Foundation's current initiative on sustainability reporting and the IASB's agenda consultation. Sustainability reporting is a hot topic at the moment and respondents might not be clear about what would be addressed where. The IASB is currently working on its management commentary project and could do more on sustainability aspects, should stakeholders wish so, as long as this is connected to financial statements. The IFRS Foundation is intending to set up a sustainability standards Board that would deal with sustainability reporting as such. While there is some connecting middle ground, respondents should not confuse the two initiatives. As the IFRS Foundation Trustees move forward quickly with their initiative, their decisions would be available before the Board makes decisions on its future agenda.

The presenter then explained that the request for information will consist of three parts: (1) strategic direction and balance of the Board's activities, (2) criteria for assessing which projects to add to the work plan, and (3) priority of financial reporting issues. The IASB asks that respondents consider parts one and two first instead jumping immediately to part three.

Part one of the request for information regarding the strategic direction and balance notes that the IASB's work is currently following six lines:

  • New IFRS Standards and major amendments to IFRS Standards
  • Maintenance and consistent application of IFRS Standards
  • Digital financial reporting
  • The IFRS for SMEs Standard
  • Stakeholder engagement
  • Understandability and accessibility

In this part of the request for views the IASB is seeking stakeholders’ views on whether the Board should increase, leave unchanged or decrease its current level of focus on each line of work. And while there is a little room for additional work, respondents are asked to assume that the Board’s overall level of resources will remain substantially unchanged during the 2022 to 2026 period.

Part two of the request for information regarding criteria for assessing which projects to add to the work plan notes that the Board will use a specified list of seven criteria to assess the potential financial reporting issues that could be added to its work plan to develop new IFRS Standards and major amendments to IFRS Standards. The criteria are derived from the Due Process Handbook and the 2015 Agenda Consultation. The relative importance of any specific criterion will vary depending on the particular circumstances. Generally, the Board will evaluate potential project for its work plan primarily on the basis of whether the project will meet investors’ needs, while also taking into account the costs of producing the information.

Finally, part three of the request for information regarding the priority of financial reporting issues describes 22 projects. The Board will seek stakeholders’ views on what priority they would give each of the potential projects described in the RFI — high, medium or low — and whether their prioritisation refers to all or only some aspects included in the project description.

Stakeholders will have the opportunity to provide feedback on the request for information through comment letters, an online survey, outreach meetings, and consultative group meetings. Standard setters participating in the IFASS meeting were especially asked to share thoughts on possible additional outreach activities. Comments included:

  • There are currently many consultations. Stakeholders might be thoughtful of their resources and how they allocate them.
  • Priorities have changed during the COVID-19 pandemic and the pandemic might have changed the way stakeholders look at issues.
  • The IASB might consider setting aside some additional resources to be able to react to changed stakeholder reactions to the request for information.
  • The current virtual environment might offer additional opportunities of participating in outreach activities, including in other standard setters' outreach events.
  • Outreach events of the IASB should, where possible, be held in the local language.
  • The IASB should collaborate with local IFASS members in selecting participants for outreach events.

Applicants invited for IFRS Interpretations Committee membership

09 Mar, 2021

The Trustees of the IFRS Foundation have invited applications for candidates to fill two vacancies on the IFRS Interpretations Committee.

Specifically, the Trustees are seeking individuals who have a preparer focus and individuals with direct and relevant experience in the application of IFRSs. Members are expected to attend approximately six two-day meetings each year held in London. Terms of membership will begin 1 July 2021 and will expire on 30 June 2024. Membership is unpaid, but the IFRS Foundation meets members' reasonable expenses of travel on IFRS IC business.

Applications are accepted until 6 April 2021.

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

Pre-meeting summary for the March 2021 IASB supplementary meeting

08 Mar, 2021

The IASB will hold a supplementary meeting on 10 March 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 have 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.

IFRS 16 and COVID-19: The sole topic is its proposal to extend the period to which the practical expedient for COVID-19 related rent concessions can be applied by a year. The staff recommend that the Board finalise the proposal that it cover payments originally due on or before 30 June 2022. If the Board agrees, the staff expect to be able to publish the final amendments by the end of March. 

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

Standard setters discuss non-financial reporting

08 Mar, 2021

The International Forum of Accounting Standard Setters (IFASS) is currently holding its spring meeting as a virtual conference. One presentation today saw a discussion of non-financial reporting against the backdrop of the possible development of EU non-financial reporting standards.

The discussion first saw an introduction to the final report on preparatory work for possible EU non-financial reporting standards. The presenter explained that the European Commission (EC) had asked the European Financial Reporting Advisory Group (EFRAG) to undertake preparatory work for the possible elaboration of EU non-financial reporting standards in view of the political ambition and urgent timetable of the European Green Deal and sustainable finance agenda. The task force set up by EFRAG to (a) assess the current state of non-financial reporting and the currently existing reporting standards and frameworks and to (b) report on the best way forward came to the conclusion that the current fragmented non-financial reporting landscape does not offer a solution that could be taken per se as an EU reporting framework. The final report of the task force, therefore, proposes setting up a European Sustainable Standard (ESS) setter that would develop EU non-financial reporting standards under an ambitious roadmap that would see first drafts of standards by mid-2022.

While the standard setters participating in the IFASS meeting acknowledged the enormous amount of work invested into the comprehensive assessment in a very short time, there were many questions and concerns. Apart from questions regarding the maturity of the data available and the operationalisability of the new framework given assurance questions, the main comments concerned a perceived competition between international initiatives, especially the IFRS Foundation's plans to set up an international Sustainability Standards Board (SSB), and the ESS. Speakers noted the need for a global solution as the underlying problems are global as well and as companies act globally. They acknowledged the current fragmented reporting landscape, but pointed at frameworks and standards that can be used to fill gaps until a truly global solution is available (TCFD and SASB were most commonly mentioned). One participant also asked whether the standard setter for ESS was intended to fill the gap until the SSB would take over. Generally, the fear was expressed that ESS would drive international standard-setting in this area further apart as moving ahead single-handedly would lead to one more set of standards being out there that would need to be converged with global standards in the end.

The presenter responded by pointing out the urgency of non-financial reporting standard-setting and the wish to keep up the momentum of EU developments. He also underlined that the development of ESS was by no means intend to occur in isolation but open to co-operation and contribution of other interested parties. Finally, he noted the fact that EU standards would automatically take prevalence as they would be the most complex and comprehensive standards and as their application would be mandatory. He also pointed out that convergence would not be necessary on all topics as the EU standards would cover more areas than envisioned by the IFRS Foundation.

The presentation was somewhat overtaken by the fact that the Trustees of the IFRS Foundation published a statement announcing the strategic direction and further steps of their sustainability initiative while the presentation was given. The IASB Vice Chair commented on that and noted that she was relieved to see that the philosophy behind the EU ideas and the Trustees' decisions seemed to be consistent and that there were many commonalities. She noted that the IFRS Foundation was moving much faster than people seemed to realise and would hit the ground running in their standard-setting work as it would build on existing frameworks such as the TCFD. She concluded by also noting the need of a global solution and the importance of working together.

Correction list for hyphenation

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