The podcast discusses:

• Feedback on consultation paper Exposure Draft General Presentation and Disclosures
• Disclosure Initiative—Subsidiaries that are SMEs project
• Board’s current work plan
• Exposure Draft Regulatory Assets and Regulatory Liabilities
• Upcoming consultation on Disclosure Initiative—Targeted Standards-level Review of Disclosures.

The podcast (16 minutes) can be accessed through the press release on the IASB website.

The detailed notes taken by Deloitte observers at the meeting are available here.

Below is an analysis of all changes made to the work plan since our last analysis on 18 December 2020.

Stan­dard-set­ting projects

• Disclosure initiative — Subsidiaries that are SMEs — The IASB decided to publish an exposure draft (and not a discussion paper), which is expected in the second half of 2021.
• Disclosure initiative — Targeted standards-level review of disclosures — The exposure draft on this project is now expected in March 2021 (previously Q1 2021).
• Financial instruments with characteristics of equity — This project is now correctly listed as a standard-setting project.
• Primary financial state­ments — The Board decided to move forward with the project and a new Standard is stated as the next milestone; however, no timeline is given.
• Rate-regulated activities — The Board published an exposure draft on 28 January 2021 and discussion of the feedback received is expected to begin in the second half of the 2021.

Main­te­nance projects

• Lack of exchangeability (Amendments to IAS 21) — An exposure draft is now expected in March 2021 (previously Q1 2021).
• Lease liability in a sale and leaseback — Discussion of the feedback received on the exposure draft is expected to begin in the second quarter of 2021 (previously H1 2021).

Research projects

• Goodwill and impairment — Discussion of the feedback received on the discussion paper is now expected to begin in March 2021 (previously Q1 2021).
• Second comprehensive review of the IFRS for SMEs Standard — A decision on the project direction is now expected in March 2021 (previously Q1 2021).

Other projects

• IFRS Taxonomy Update — Amendments to IAS 1, IAS 8 and IFRS Practice Statement 2 — The next milestone is now correctly identified as "Proposed IFRS Taxonomy Update" again; the proposed update is now expected in second quarter of 2021 (previously February 2021).
• IFRS Taxonomy Update — Amendments to IFRS 17, IFRS 4 and IAS 16 — An IFRS Taxonomy Update is now expected in March 2021 (previously Q1 2021).
• Sustainability Reporting — The date for the discussion of the feedback received on the Trustees' consultation paper has been removed, however, the IASB website reveals that the Trustees will begin discussing the feedback on 1 February 2021.
• Third Agenda Consultation — This is the new name of the 2020 Agenda Consultation project; a request for information is now expected in March 2021 (previously Q1 2021).

The above is a faithful com­par­i­son of the IASB work plan at 18 December 2020 and 29 January 2021. For access to the current IASB work plan at any time, please click here.

Agenda decision to finalise

IFRS 10 Consolidated Financial Statements and IFRS 16 Leases—Sale and Leaseback of an Asset in a Single-asset Entity: In September 2020, the Committee discussed the applicability of the sale and leaseback requirements in IFRS 16 to a transaction in which an entity sells its equity interest in a subsidiary that holds only a real estate asset and then leases that real estate asset back. The staff concluded that IFRS 10:25 and B97-B99 apply to the accounting for the loss of control of the subsidiary and IFRS 16:100(a) applies for measuring of the right of use (ROU) asset and the gain on the leaseback arrangement. However, most of respondents from the outreach performed suggested adding a standard-setting project because the requirements in IFRS Standards do not provide an adequate basis to support the analysis and conclusion. The staff, therefore, asked the Committee whether it wants to finalise the tentative agenda decision or whether an amendment to IFRS 10 is required.

New issues

IAS 2 Inventories—Cost necessary to sell inventories: Which costs should an entity include as part of the estimated costs necessary to make the sale when determining the net realisable value of inventories?

The staff recommend publishing a tentative agenda decision stating that an entity includes all costs needed to make the sale, instead of only including additional costs required by the particular conditions of the inventories to make the sale.

IAS 10 Events after the Reporting Period—Preparation of Financial Statements when an Entity is No Longer a Going Concern: Can an entity prepare financial statements for prior periods on a going concern basis if it was a going concern in those periods and had not previously prepared financial statements for those periods? And if it had previously prepared financial statements for the preceding period on a going concern basis, is it required to restate comparative information in respect of the preceding period to reflect the basis of accounting used in preparing the current period's financial statements? IFRS Standards are silent on both matters.

The staff recommend not to add the matter to the Committee’s standard-setting agenda as the matter is not widespread and there is no evidence of diversity in practice.

Work in progress: The staff are analysing requests related to the accounting of warrants that are initially classified as liabilities and non-refundable value-added tax on lease payments.

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

Their discussions will consider approval of a shortened comment period for a potential exposure draft of an amendment to IFRS 16 Leases, extending operational relief to lessees in accounting for COVID-19-related rent concessions, and initial analysis of responses to the Trustees’ consultation paper on sustainability reporting.

An agenda paper on the comment period is available on the IASB website.

As reported earlier, the Board of the European Financial Reporting Advisory Group (EFRAG) published positive a draft endorsement advice on IFRS 17, however, it was noted that the EFRAG Board achieved consensus on all issues with the exception of annual cohorts, with nine Board members voting in favour of the cohorts meeting the endorsement criteria and seven members disagreeing.

ESMA's comment letter notes that IFRS 17 has the benefit of providing transparency on insurance accounting aspects that have for a long time remained unregulated under IFRS due to the continued application of IFRS 4, which was initially intended as a temporary solution and which has de facto prevented the application of an accounting model that could provide clear principles on how to recognise, measure and present amounts relating to insurance contracts on the basis of commonly understood accounting principles.

On the annual cohort question, ESMA highlights that a key role in promoting greater transparency and consistency in accounting for insurance contracts in accordance with IFRS 17 is played by the principles for the aggregation of contracts that form an integral part of the new measurement model and that include the annual cohort requirement. ESMA notes that "IFRS 17 is built around a set of checks and balances which have been carefully developed" and ESMA regrets that EFRAG has decided to assess selected requirements in isolation from others. ESMA is of the view that the alternatives proposed cannot be considered to be more effective and efficient than the current annual cohort requirement.

ESMA therefore supports the endorsement of IFRS 17 in its current form. Should further evidence emerge that the effectiveness and efficiency of the requirements can be improved, ESMA believes the IASB should consider these as part of the post-implementation review of IFRS 17.

Please click for the following additional information on the ESMA website:

• Press release
• Comment letter on the draft endorsement advice

Recordings of the seven outreach events are now available on the EFRAG website.

We will post any updates to the agenda, our comprehensive pre-meeting summaries as well as observer notes from the meeting on this meeting page as they become available.

Board Work Plan: This was a regular update of the work plan. Within the next six months the IASB expects to finalise amendments related to three projects and publish consultation documents for six projects.

Amendments to be finalised:

• Disclosure Initiative—Accounting Policies (February 2021)
• Accounting Policies and Accounting Estimates (February 2021)
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Q2 2021)

Consultation documents to be published:

• Exposure Draft (ED) on Rate-Regulated Activities (January 2021)
• ED on the Disclosure Initiative—Targeted Standards-level Review of Disclosures (March 2021)
• ED on Lack for Exchangeability (March 2021)
• Request for Information (RFI) on the Agenda Consultation (March 2021)
• ED on Management Commentary (April 2021)
• RFI on the classification and measurement requirements in IFRS 9 (Q3 2021)

The Board will not start any remaining research pipeline projects or the PIR of IFRS 5. Rather, as decided at the Board’s October 2020 meeting, the Board will obtain updated information about those projects as part of the 2020 Agenda Consultation to help reassess their relative priority.

The Board will hold an extraordinary meeting early in February to determine whether a project needs to be added to update the condition in the amendment to IFRS 16 with regard to COVID-19-related rent concessions that any reduction in lease payments affects only payments originally due on or before 30 June 2021.

Maintenance and Consistent Application: The staff presented the December 2020 IFRIC Update. 

Disclosure Initiative—Subsidiaries that are SMEs: The IASB is developing a Standard setting out reduced disclosure requirements for subsidiaries that apply IFRS Standards but meet the definition of an SME. At this meeting, the Board discussed disclosures about cash-generating units containing goodwill and intangible assets with indefinite useful lives and the scope of the proposed Standard. The Board decided that it apply to entities that, at any point during their reporting period, are subsidiaries of a parent presenting consolidated financial statements applying IFRS Standards and that the scope should not be limited to single entity financial statements. They also decided that the consultation document should be an ED.

Primary Financial Statements: In December 2019, the IASB published Exposure Draft ED/2019/7 General Presentation and Disclosures. At the December 2020 meeting, the Board began discussing summarised feedback from the 215 comment letters it received, outreach activities, fieldwork and a review of academic literature. The Board did not discuss four of the 11 papers and at this meeting continued its discussions. The staff also presented a redeliberation plan.

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

Background

The IASB is developing an accounting model that will require rate-regulated companies to provide information about their incremental rights to add amounts, and incremental obligations to deduct amounts, in determining the future rates to be charged to customers as a result of goods or services already supplied.

Currently, there is no specific guidance in IFRSs addressing the accounting for rate‑regulated activities and companies use different accounting models to report the effects of rate regulation. Consequently, comparing and understanding the effects of rate regulation across different countries and companies is difficult.

The exposure draft published today follows a discussion paper DP/2014/2 Reporting the Financial Effects of Rate Regulation that was published in September 2014 and examined a certain type of rate regulation where customers have little or no choice but to purchase the rate‑regulated goods or services from the entity.

Previous to the publication of DP/2014/2, the IASB published the limited‑scope standard IFRS 14 Regulatory Deferral Accounts in January 2014 to provide a short‑term, interim solution for rate‑regulated entities that have not yet adopted IFRSs but that recognise regulatory deferral balances under their previous GAAP. This was to address the concern that the lack of guidance may be a barrier to the adoption of IFRS Standards of for such entities. Once the exposure draft is finalised, IFRS 14 will be withdrawn.

Key proposals

The main proposals in ED/2021/1 Regulatory Assets and Regulatory Liabilities are the following:

• Objective: The new standard would replace IFRS 14 Regulatory Deferral Accounts by introducing a new comprehensive accounting model for regulatory assets and liabilities.
• Scope: The standard would apply when the entity is party to a regulatory agreement that determines the regulated rate the entity can charge for the goods or services it supplies to customers.
• Recognition: Regulatory assets and liabilities arise when the regulated rate is determined in such a way that some or all of the total allowed compensation for goods or services supplied in one period is charged to customers in a different past or future period. Recognising regulatory assets and liabilities leads to regulatory income and expense.
• Measurement: Regulatory assets and liabilities would be measured at historical cost, modified for subsequent measurement by using updated estimates of the amount and timing of future cash flows. The estimated future cash flows of a regulatory asset or liability would be discounted to their present value by using the regulatory interest rate. After initial recognition, the carrying amount of the regulatory asset or liability would be updated at the end of each reporting period to reflect conditions existing at that date.
• Presentation: In the statement(s) of financial performance, an entity would present all regulatory income and expense as a separate line item immediately below revenue. In the statement of financial position, an entity would present line items for regulatory assets and liabilities.
• Disclosure. The exposure draft includes several proposed disclosure objectives and detailed requirements to achieve these objectives.

The deadline for submitting comments is 30 July 2021.

Alternative view

The basis for conclusions on the exposure draft includes an alternative view by Board member Mary Tokar. Ms Tokar voted against publication of the exposure draft because of the focus on understanding the relationship between an entity’s revenue and expenses and the related proposals to present particular items of regulatory income and regulatory expense in other comprehensive income, and to measure some regulatory assets and regulatory liabilities by reference to the measurement under IFRSs of the related liabilities and related assets. She also disagrees with the proposed scope of the standard.

Effective date and transition

The exposure draft does not contain a proposed effective date as the IASB will decide on the effective date only upon completion of its redeliberations. The expectation is currently that the standard will become effective approximately 18-24 months after being published in its finalised form.

The standard would be applied retrospectively with one transitional provision and early adoption would be permitted.

Additional information

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

• IASB press release (includes a short Debrief introduction)
• Access to the exposure draft
• Access to the basis for inclusions (includes alternative view)
• Access to the illustrative examples
• IASB Snapshot document summarising the proposals
• Our Uk Accounting Plus Project page on Rate-regulated activities — Comprehensive project
• Our related Need to know publication
• Deloitte's comment letter 

The FCA and the FRC encourage all stakeholders, including in particular boards of listed companies, to re-familiarise themselves with the measures which remain in place. These are as follows:

Corporate Reporting for listed companies

Temporary reliefs for delayed publication of financial statements will remain in place until the disruption caused by the COVID-19 pandemic abates. The joint statement indicates that companies will be given plenty of notice when it is decided to bring any of these measures to an end.  The measures are:

• An additional two months to publish annual financial reports (link to FCA website) (i.e. within six rather than four months of the financial year end date).
• An additional month to publish half yearly financial reports (link to FCA website) (i.e. within four rather than three months of the financial half year end date). 

Extended period for filing accounts at Companies House

At present the deadline for filing any accounts with Companies House is extended by 3 months. While this automatic extension expires on 5 April 2021, it will be replaced with an application process (link to Companies House website) to Companies House, with companies granted a discretionary 3-month extension where they cite coronavirus as a factor impacting the timely completion and/or audit of accounts. 

Delaying or adapting Annual General Meetings (AGMs)

The temporary ability to postpone AGMs provided by the Corporate Insolvency and Governance Act 2020 (CIGA) expired on 30 September 2020. Further CIGA measures to provide flexibilities around the conduct of AGMs have been extended to 30 March.  The Act provides no scope to extend them beyond that date.  The Chartered Governance Institute ('ICSA') in association with the City of London Law Society Company Law Committee and Martin Moore QC, with the support of the Department for Business, Energy and Industrial Strategy and the Financial Reporting Council has published guidance (link to ICSA website) to help clarify expectations surrounding company meetings scheduled to be held after 30 March 2021.   

The joint statement also covers extended reporting deadlines for public sector bodies

AIM Companies

Concurrently, the London Stock Exchange has also confirmed that the temporary measures put in place last year to allow AIM companies to request an extension of their reporting deadline remain available until further notice.  The temporary reliefs for AIM companies are:

• An additional three months to publish the annual audited accounts (i.e. within nine rather six months of the financial year end date).
• An additional month to publish its half yearly report (i.e. within four months rather than three months of the financial half year date).

As well as reminders of the temporary reporting reliefs in place, the joint statement also serves to alert investors to the changes in reporting timetables and remind companies of their reporting obligations under the Market Abuse Regulation.  The joint statement additionally highlights the guidance for companies that the FRC issued in December 2020 related to corporate governance and financial reporting during the COVID-19 pandemic. 

FCA and PRA regulated firms

The Prudential Regulation Authority (PRA) has also issued a statement (link to PRA website) setting out its approach to regulator reporting for PRA-regulated banks, building societies, designated investment firms and credit unions (firms) in response to COVID-19.  The statement indicates that consistent with the above measures announced by the FRC and FCA, the PRA will accept a delay in the submission by UK banks and designated investment firms of their annual reports and accounts by up to two calendar months, where the remittance deadlines contained in the PRA Rulebook fall on or before Saturday 31 July 2021. For building societies, while the PRA is prepared to accept a similar delay, firms considering this may need to consider other statutory requirements that apply to them.  The PRA statement indicates that firms should keep their supervisory contact at the PRA notified of any significant developments in their financial circumstances and those that are able to submit before the end of the delayed submission window are encouraged to do so.

The FCA has also announced (link to FCA website) that the deadline for FIN-A (annual report and accounts) returns due up to and including 31 July 2021 is extended for two months. This extension applies to the “80 day” deadline for most FCA regulated firms with Part 4A permission, the seven month deadline for non-UK banks, and the six month deadline for the Society of Lloyds and service companies.

The FRC and FCA joint statement is available in full on the FCA website here along with Q&As here.  The updated guidance from the London Stock Exchange is available on the London Stock Exchange website.