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November

Agenda for the upcoming Emerging Economies Group meeting

30 Nov 2021

The IASB Emerging Economies Group (EEG) will meet via video conference on 2–3 December 2021. An agenda for the meeting is now available.

The agenda for the meeting is sum­marised below:

Thursday 2 December 2021 (11:30-15:00)

  • Welcome
  • Disclosure initiative — Subsidiaries without Public Accountability: Disclosures
    • Overview of the exposure draft and dis­cus­sion with EEG members on the proposals
  • Equity method
    • Update on scope, approach, and deliberations by the IASB on this project.
  • Sustainability-related reporting
    • Update on the International Sustainability Standards Board.

Friday 3 December 2021 (11:30-14:15)

  • Post-implementation review of IFRS 9
    • Update on the Request for Information Post-implementation Review of IFRS 9.
  • Update on IASB ac­tiv­i­ties

Agenda papers from this meeting are available on the IASB's website.

FRAB November 2021 Meeting

30 Nov 2021

The associated documents of the Financial Reporting Advisory Board’s (FRAB’s) meeting of 18 November 2021 have been made available on the HM Treasury website.

The role of the FRAB is “to ensure that gov­ern­ment fin­an­cial re­port­ing meets the best pos­sible stand­ards of fin­an­cial re­port­ing by fol­low­ing Gen­er­ally Ac­cep­ted Ac­count­ing Prac­tice (GAAP) as far as pos­sible”. The FRAB in­cludes rep­res­ent­at­ives from the ac­count­ancy pro­fes­sion in the private and public sectors, aca­demia and gov­ern­ment bodies. The board meets reg­u­larly to con­sider pro­posed changes to policy and prac­tice.

Key topics dis­cussed during the November meeting in­cluded:

  • An update on the WGA 2019-20 and 2020-21;
  • Updates on CIPFA/LASAAC and CIPFA Code 2022-2023 developments;
  • An update on FReM 2021-22 and FReM 2022-23 with illustrative statements;
  • Updates on IFRS 17 In­sur­ance Con­tracts, IFRS 9 Financial Instruments adaptation, Discount Rates and Accounting for social benefits - IPSAS 42 Social Benefits and IFRS;
  • Updates from the NAO regarding the 2020-21 audit and forward look;
  • CIPFA Sustainability updates and updates from the Sustainability Working Group; and
  • An update on dis­cus­sions held by and de­cisions made by the IFRS In­ter­pret­a­tions Com­mit­tee.

The associated documents for the November 2021 meeting are avail­able on the HM Treas­ury website.

IFRS Advisory Council membership update

30 Nov 2021

The Trustees of the IFRS Foundation have announced appointments and re-appointments to the IFRS Advisory Council effective 1 January 2022.

The Advisory Council is the formal advisory body to the Trustees, the IASB, and the ISSB. It advises the IFRS Foundation on its strategic direction, technical work plan and priorities.

The new and reappointed members of the Advisory Council are:

  • Michiel van der Lof - EY
  • Melissa Taylor - KPMG
  • Fergun Condon - Grant Thornton
  • Emmanuelle Revolon - International Co-Operative Alliance
  • Kevin Dancey - IFAC
  • Cliff Nyandoro Magara - Institute of Certified Public Accountants of Kenya
  • Garth Jones - AIA Group
  • Maria Ángeles Peláez Morón - BBVA
  • James Andrus - Council of Institutional Investors
  • Trevor Derwin - Deloitte
  • Ellen Gaston - Internatonal Monetary Fund
  • Sergey Epifanov - PJSC LUKOIL
  • M P Vijay Kumar - South Asian Federation of Accountants (SAFA) 
  • George Iguchi - Securities Analysts Association of Japan

All appointments take effect 1 January 2022 and are for a three-year period.

The Advisory Council’s Chair, Bill Coen, has also been re-appointed, effective for three years from 1 February 2022.

In addition, the Trustees note that the following members are stepping down from the Council at the end of 2021 or have already stepped down earlier this year: Daniel Civit, Aziz Dieye, Isabelle Ferrand, Russell Guthrie, Tessa Kuijl, Andrew Marshall, James Luke, and Carolyn Rogers.

The press release announcing the new appointments can be found on the IASB's website.

IASB issues podcast on latest Board developments (November 2021)

29 Nov 2021

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

High­lights of the podcast include dis­cus­sions on: 

  • Updates and developments in primary financial state­ments and goodwill and impairment projects;
  • Refinements to the model proposed in the dynamic risk management project;
  • Feedback summary on the post-implementation review of IFRS 10, IFRS 11, and IFRS 12;
  • Feedback related to the consultation on rate-regulated activities;
  • Alignment of the IFRS for SMEs Standard with major standards;
  • Feedback in the IASB’s Third Agenda Consultation.

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.

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

29 Nov 2021

The IFRS Interpretations Committee (Committee) meets on Tuesday 30 November and Wednesday 1 December 2021. The Committee will discuss the comment letter analyses for two tentative agenda decisions and two new submissions.

Comment letter analysis

IFRS 16 Leases—Economic Benefits from Use of a Windfarm: In June 2021, the Committee published a tentative agenda decision in response to a submission about the definition of a lease. The submitter asked whether, applying IFRS 16:B9(a), an electricity retailer (customer) has the right to obtain substantially all the economic benefits from use of a windfarm throughout the term of an agreement with a windfarm generator (supplier). The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis to account for this matter. Many of the respondents to the tentative agenda decision agreed with the conclusion. Nonetheless, some of them raised some further matters for the Committee to consider. The staff analysed these matters and recommend finalising the agenda decision with the addition of two references to previous agenda decisions to address issues raised by respondents.

IFRS 9 Financial Instruments and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance—TLTRO III Transactions: In its June 2021 meeting, the Committee discussed a submission asking how banks account for the European Central Bank (ECB)’s Targeted Longer-Term Refinancing Operations (TLTRO). Specifically, the submission asked whether the TLTRO III tranches are loans at a below-market interest rate which should be accounted for as a government grant. The staff have analysed the comment letters and recommend finalising the agenda decision with minor editorial changes.

New submissions

IFRS 15 Revenue from Contracts with Customers—Principal versus Agent: Software Reseller: The Committee received a submission asking whether a reseller of software licences is a principal or agent in respect to the standard software licences provided to the customer. The staff found that the fact pattern is highly specific and even small or subtle differences in the specific facts and circumstances could change the conclusion when applying the requirements about principal versus agent considerations in IFRS 15. The staff were therefore of the view that it would be inappropriate for the Committee to conclude whether the reseller is a principal or agent in the fact pattern submitted. Instead, the staff recommend publishing a tentative agenda decision should that only sets out the applicable requirements in IFRS 15 and explains how a reseller might apply those requirements.

IAS 37 Provisions, Contingent Liabilities and Contingent Assets—Negative low or new energy vehicle credits: The Committee received a submission asking whether an entity with negative low emission vehicle credits has a present obligation that meets the definition of a liability in IAS 37. If the answer to this question is "no", the submitter asked whether the Committee’s views would be different if the entity had entered into a binding contract to purchase positive new energy credits before the end of the reporting period the entity, but that contract is settled after the end of the reporting period. The staff recommend that the Committee publish a tentative agenda decision that outlines whether an entity with negative low emission vehicle credits has a present obligation that meets the definition of a liability in IAS 37.

Work in progress: The following new matters have not yet been presented to the Committee:

  • Rent Concessions: Lessors and Lessees (IFRS 16 and IFRS 9)
  • Special Purpose Acquisition Companies (SPAC): Classification of Public Shares as Liabilities or Equity (IAS 32)

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

IFRS Foundation appoints two new Trustees

29 Nov 2021

The IFRS Foundation has announced the appointment of Jorge Familiar and Keiko Tashiro as Trustees of the IFRS Foundation. Their appointments will begin on 1 January 2022 and will expire on 31 December 2024.

Jorge Familiar is Vice-President for Finance and Group Controller for the World Bank and has recently been appointed Vice-President and Treasurer effective from 1 January 2022.

Keiko Tashiro is Deputy President at Daiwa Securities and also serves as the group’s Head of Overseas Operations and Head of Sustainable Development Goals.

In addition, the current IFRS Foundation Trustee Chair Erkki Liikanen and Trustees Sarah J Al Suhaimi and Dr Suresh P Kana have been reappointed to serve a second three-year term, also beginning on 1 January 2022.

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

COVID-19 disclosure quality in European banks' financial statements

29 Nov 2021

A study published as part of the working paper series of the European Banking Institute (EBI) looks at COVID-19 disclosures in half-year and year-end financial statements 2020 of European banks.

ESMA, EBA, IOSCO and IASB communicated in the second quarter of 2020 their expectations on disclosure regarding the pandemic’s impact in order to meet the objective of the IFRS to provide decision-useful information to stakeholders. The aim of the study was to examine the extent to which banks fulfilled the disclosure expectations communicated by the relevant professional institutions.

The papers of the EBI working paper series are available on SSRN. Please click to access the COVID-19 study here.

FRC publishes latest review of corporate governance reporting

26 Nov 2021

The Financial Reporting Council (FRC) has published its latest ‘Review of Corporate Governance Reporting’.

A sample of 100 companies drawn from the whole premium listed market was reviewed. The comprehensive report presents the findings from the review and sets out the FRC’s expectations for the future application of the UK Corporate Governance Code ("the Code") and reporting.

The report highlights areas of high-quality reporting, but also draws attention to improvement needed in areas such as disclosures on board appointments, succession planning and diversity. The report also found that more focus on reporting the effectiveness of internal control and risk management systems would enhance the level of confidence in the company’s control framework.

In last year’s review of corporate governance reporting, the FRC expressed its disappointment in the way that companies had met the new 2018 Corporate Governance Code. This year it identifies a general improvement in reporting. The review highlights the continuing need for high quality governance which is linked to effective decision-making by Boards and management and for greater clarity as to how a company is applying the Code’s principles and clearer explanations where there are departures from the Code provisions so that shareholders and stakeholders have greater confidence in the quality of governance.

The review starts by making clear that the FRC believe that good reporting is characterised by clear and consistent explanations, supported by real-life examples of application and cross-referencing between related initiatives and sections.

The report reiterates expectations set out in last year’s review and, where relevant, introduces new expectations to support the findings from this year’s assessments of governance reporting. There should be:

  • Greater attention on the alignment between reported good governance and company practices and policies, strategy and business models.
  • Increased focus on assessing and monitoring culture by using different methods and metrics and providing clear evidence of a feedback loop.
  • Better reporting of succession planning, and how this links to assuring the make-up of the board and delivering diverse challenge.
  • Improved reporting on outcomes and actions, rather than declarations or statements of intent without detail, e.g. reporting on the performance of particular decisions, which may come in the form of key metrics supported by narrative or case studies. Statements in relation to climate commitments are an example of where detail is required.
  • Specific disclosure of the governance structure (who and what) and processes (how and when) in place to manage risk that clearly demonstrates the way that the company identifies, monitors and mitigates risks.
  • Better explanation of how executive remuneration is aligned to a company’s purpose, values and strategy.

In addition, the FRC draws attention in particular to ensuring clarity in the disclosures of:

  • departures from any Code provision and supporting explanation;
  • engagement with shareholders and the workforce in relation to remuneration, and the impact on remuneration policy and outcomes;
  • the impact of engagement with stakeholders, including shareholders, on decision-making, strategy and long-term success;
  • where suppliers are identified as a key stakeholder group, the methods utilised for engagement with suppliers to reduce risks and ensure continuity of supply;
  • how the board has assessed the level of climate-related risk and, as a result of that assessment, oversees climate-related risks, as well as other committees and initiatives involved in the decision-making process;
  • diversity policies together with objectives and targets and demonstrating their connection to company strategy;
  • the process for how the board has determined the company’s risk appetite and the risk appetite for each of the company’s principal risks; and
  • the outcome of the review of the risk management and internal control systems.

A press release and the full report are available on the FRC website. An FRC podcast is available here.

IASB proposes amendments to IAS 7 and IFRS 7 regarding supplier finance arrangements

26 Nov 2021

The International Accounting Standards Board (IASB) has published the exposure draft 'Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7)' to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that would ask entities to provide qualitative and quantitative information about supplier finance arrangements. The deadline for submitting comments is 28 March 2022.

 

Background

The IFRS Interpretations Committee received a submission about supply chain finance arrangements asking:

  • How an entity presents liabilities to pay for goods or services received when the related invoices are part of a supply chain finance (or reverse factoring) arrangement; and
  • what information about reverse factoring arrangements an entity is required to disclose in its financial statements.

In response to that submission, the Committee published an agenda decision in December 2020. However, feedback and input received — in particular from investors and analysts — suggested the information entities provide about supplier finance arrangements applying existing IFRS requirements does not meet all investor information needs.

In response to that feedback, the Board tentatively decided to amend IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that would ask entities to provide qualitative and quantitative information about supplier finance arrangements.

 

Key proposals

The main proposals in ED/2021/10 Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7) would: 

  • Not define supplier finance arrangements. Instead, the proposed amendments describe the characteristics of an arrangement for which an entity would be required to provide the proposed information and the amendments would also provide examples of the different forms of such arrangements that would be within the scope of the Board’s proposals.
  • Add a disclosure objective. Entities would have to disclose in the notes information that enables users of financial statements to assess the effects of their supplier finance arrangements on their liabilities and cash flows.
  • Complement current requirements in IFRSs by adding additional disclosure requirements about:
    • the terms and conditions of each supplier finance arrangement;
    • for each arrangement, as at the beginning and end of the reporting period:
      • a) the carrying amount of financial liabilities that are part of the arrangement and the line item(s) in which those financial liabilities are presented;
      • b) the carrying amount of financial liabilities disclosed under a) for which suppliers have already received payment from the finance providers;
      • c) the range of payment due dates (for example, 30 to 40 days after the invoice date) of financial liabilities disclosed under a); and
    • as at the beginning and end of the reporting period, the range of payment due dates of trade payables that are not part of a supplier finance arrangement.
    An entity would only be permitted to aggregate this information for different arrangements when the terms and conditions of the arrangements are similar.
  • Add supplier finance arrangements as an example within the liquidity risk disclosure requirements in IFRS 7 and the disclosure requirements regarding changes in liabilities arising from financing activities in IAS 7.

The deadline for submitting comments on these proposals is 28 March 2022.

 

Effective date

The Board intends to decide on the effective date after exposure. The amendments would be applied retrospectively in accordance with IAS 8. Earlier application would be permitted.

 

Additional information

The following additional information is available on the IASB website and on IAS Plus:

ICAEW concludes series on IPSAS vs IFRS

26 Nov 2021

Over the recent months, the Institute of Chartered Accountants in England and Wales (ICAEW) published a series of reviews of major standards looking at the differences between International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSASB), and the suitability of each in public sector financial reporting. The fourth and final part of the series has now been released.

When introducing the series, ICAEW noted that IFRS are internationally recognised and widely adopted which brings about consistency in financial statements which in turn facilitates cross border comparability and understandability. On the other hand, IPSAS are designed for public sector entities whose main objectives are to provide goods and services to benefit society and to redistribute wealth. Therefore, the ICAEW series looked into the question what is the better choice of standards if a government were to adopt accrual accounting now.

The complete series of in-depth reviews can now be accessed on the ICAEW website:

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.