2021

May 2021 IASB meeting notes posted

02 Jun, 2021

The IASB met on Monday 24, Wednesday 26 and Thursday 27 May 2021 by video conference. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

Initial application of IFRS 17—presentation of comparative information: Prior to the meeting, the staff replaced the original paper with a revised paper that included a new analysis and recommendation (our summary of that revised paper is included in the overall summary attached). The Board discussed the revised paper on the presentation of comparative information on initial application of IFRS 17 and IFRS 9. Insurers have raised concerns about an accounting mismatch between financial assets and insurance contract liabilities that could arise from the continued application of IAS 39. The staff think the Board could consider adding a specific transition requirement to IFRS 17 to enable insurers to present comparative information on a basis that is consistent with how IFRS 9 would be applied going forward, without unnecessarily disturbing the transition requirements in IFRS 9. Although no decisions were made, many Board members expressed support for a narrow-scope amendment to address this issue.

Goodwill and Impairment: The Board continued its discussion of feedback on particular aspects of the DP — the effectiveness of the impairment test and whether to reintroduce amortisation of goodwill. For its next steps, the Board will reconsider the objective and scope of the project first to determine whether all of the topics covered in the DP should remain as one project. The Board supported the staff recommendation that it prioritise the redeliberations around reintroduction of goodwill as this may affect other decisions.

Financial Instruments with Characteristics of Equity:  The Board decided that entities be required to categorise its claims that are financial instruments in a way that reflects differences in their nature and priority, and at a minimum, distinguish between secured and unsecured financial instruments; contractually subordinated and unsubordinated financial instruments; and those issued/owed by the parent and those issued/owed by subsidiaries. Furthermore, to provide information about the risks and returns of particular instruments in the event the entity is liquidated.

Primary Financial Statements: The Board decided to retain the proposal to introduce separate investing and financing categories in the statement of profit or loss. The Board asked the staff did not support the staff recommendation that all income and expenses from liabilities that arise from transactions that involve only the raising of finance and interest income and expenses from other liabilities to be classified in the financing category of profit or loss. The Board asked the staff to explore more options. The Board decided not to proceed with either the proposed addition to the definition of financing activities in IAS 7 or the proposed definition of liabilities (in the new Standard).

Dynamic Risk Management: The staff gave the Board an overview of the challenges identified during the outreach and discussed during the April 2021 meeting that are key to the viability and operability of the Dynamic Risk Management (DRM) model, a proposal of the next steps and the indicative timeline to address each of the identified challenges. It is proposed that the Board will decide on the project direction in H1 2022. No decisions were made.

Maintenance and Consistent Application:

IFRS Interpretations Committee Agenda Decisions

No Board members objected to the publication of two agenda decisions: Attributing Benefit to Periods of Service (IAS 19); and Hedging Variability in Cash Flows due to Real Interest Rates (IFRS 9).

Lease Liability in a Sale and Leaseback

The Board considered the feedback received on Exposure Draft ED/2020/4 Lease Liability in a Sale and Leaseback which proposes to amend IFRS 16. The Board received 87 comment letters. While a few respondents agreed with the proposed amendment, most respondents disagreed with, or expressed concerns about, aspects of the proposals. Nevertheless, most respondents agreed that there is a need to amend IFRS 16 and enhance the measurement requirements for sale and leaseback transactions. Many respondents suggested possible ways forward, including alternative solutions to account for sale and leaseback transactions. The staff plan to submit a paper to a future Board meeting analysing the feedback and providing recommendations on the project direction. No decisions were made.

IFRIC Update April 2021

The staff presented the April 2021 IFRIC Update to the Board. No Board members had questions or comments.

Disclosure Initiative—Subsidiaries that are SMEs: The Board decided that the proposal refer to material rather than significant accounting policies; and a description of resulting changes to the entity’s risk management strategy be included.

Second Comprehensive Review of the IFRS for SMEs Standard: The Board decided that the status of Section 2 of the IFRS for SMEs Standard will remain unchanged but that it be aligned with the 2018 Conceptual Framework. The Board will assess if there are potential inconsistencies between a revised Section 2 and any other section of the IFRS for SMEs Standard. The Board decided to retain the concept of ‘undue cost or effort’ but acknowledged more work was required on this. In relation to IFRS 9, the Board decided to propose an amendment to the IFRS for SMEs Standard to supplement the list of examples in Section 11 with a principle for classifying financial assets based on their contractual cash flow characteristics.

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

Webinar series on disclosure requirements in IFRS Standards — recording of first webinar available

02 Jun, 2021

In May 2021, the IFRS Foundation initiated a series of webinars on the IASB exposure draft ‘Disclosure Requirements in IFRS Standards — A Pilot Approach’.

A recording of the first webinar providing an overview of the Board’s proposals is now available on the IASB website.

EFRAG RRA briefing

02 Jun, 2021

The Secretariat of the European Financial Reporting Advisory Group (EFRAG) has published a briefing paper as part of the EFRAG strategy to stimulate debate on the IASB discussions on how to account for rate-regulated activities.

For the briefing paper, the EFRAG Secretariat has considered how the scope criteria included in the ​​IASB’s exposure draft might apply to different agreements​​​​. The briefing paper does not include questions to constituents. However, constituents are invited to express their views on the topic when responding to the EFRAG draft comment letter.

Please click to access the briefing paper through the press release on the EFRAG website.

Agenda for June 2021 joint CMAC-GPF meeting

01 Jun, 2021

Representatives from the International Accounting Standards Board (IASB) will meet with both the Capital Markets Advisory Council (CMAC) and Global Preparers Forum (GPF) by video conference on 10–11 June 2021. The agenda for the joint meeting has been released.

The full agenda for the meeting is sum­marised below:

Thursday, 10 June 2021 (11:00-15:25)

  • Welcome and in­struc­tions for virtual meeting
  • Third agenda consultation
    • Overview of the RFI.
    • Strategic direction and balance.
    • Criteria for assessing the priority of financial reporting issues that could be added to the work plan.
    • Financial reporting issues.
  • Targeted Standards level review of disclosures
    • Discussion on feedback on the proposed approach using the proposed amendments to IFRS 13 and IAS 19.

Friday, 11 June 2021 (11:00–14:45)

  • Management commentary
    • Obtaining views on whether the proposals for disclosure objectives for the areas of content have adequately identified the information needs of investors and creditors, and whether they provide preparers with a sufficient basis for meeting the information needs of investors and creditors.
  • IASB Update session

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

Call for nominations: Chair and Vice-Chair of the ISSB

01 Jun, 2021

The IFRS Foundation Trustees seek nominations for the role of Chair and Vice-Chair of the proposed International Sustainability Standards Board (ISSB).

The role of the Chair and Vice-Chair would be full-time positions on a 14-member board. Where the new board would be located is still to be determined by the Trustees. Also, the establishment of a potential new board and subsequent appointments are subject to the outcome of the consultation on proposed amendments to the Foundation’s Constitution.

Nominations are requested by 30 June 2021. Please click for more information in the press release on the IASB website.

 

Updated IPSAS-IFRS alignment dashboard

01 Jun, 2021

The International Public Sector Accounting Standards Board (IPSASB), which develops the International Public Sector Accounting Standards (IPSAS) for financial reporting by governments and other public sector entities, has released an updated IPSAS-IFRS alignment dashboard showing how far individual IPSAS are aligned with corresponding IFRSs.

Please click to access the updated alignment dashboard prepared for the June 2021 IPSASB meeting on the IPSASB website.

In this context, please see also our 2021 edition of IPSAS in your pocket published in February.

ACCA report on integrated thinking

29 May, 2021

The Association of Chartered Certified Accountants (ACCA) has published a report which looked at three key ways in which integrated thinking is communicated in the annual integrated report.

These are first through clear communication of strategy, second through pertinent discussions about non-financial value drivers that form the basis of the multi-capitals model, and third through consistency between the narrative report and the financial statements.

The ACCA reviewed fourteen 2019/20 integrated reports of companies in the International Integrated Reporting Committee's (IIRC's) <IR> Business Network.  It highlights that 'while the quality of many aspects of integrated reporting is improving....integrated thinking - or at least its representation in the report - is not yet at the stage where it can be considered a truly embedded management approach'.  Detailed findings, based upon the review of those companies, revealed that:

  • There were divided views about the purpose of an integrated report, with nearly half of the companies positioning their integrated reports as sustainability reports.
  • Strategy and strategic goals were not always communicated coherently.  The ACCA found that reporting on governance, business model and outlook were often divorced from strategy and lacked consideration of future horizons.
  • Sustainability objectives were not fully connected to the overarching corporate strategy. 
  • Multi-capitals thinking was yet to fully take root.  The ACCA found that key value drivers were not discussed consistently throughout the integrated reports, which might point to a lack of consensus across the business as to what the key value drivers are. 
  • The integrated report was not always consistent or connected with the financial statements, for example not referencing impairments recorded in the financial statements in integrated reports.

The report includes best practice examples and a set of 10 tips for organisations that wish to improve the way they communicate integrated thinking through their reporting.

A press release and the full report are available on the ACCA website.

UK Endorsement Board secretariat publishes final comment letter on IASB’s Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12

28 May, 2021

The UK Endorsement Board (UKEB) secretariat has published its final comment letter on the International Accounting Standard Board’s (IASB's) Request for Information on its post-implementation review of IFRS 10 'Consolidated Financial Statements', IFRS 11 'Joint Arrangements' and 'IFRS 12 Disclosure of Interests in Other Entities' (the Standards).

The UKEB secretariat's final response has been informed from stakeholder roundtables and interviews, desk-based reviews of annual reports and public consultation on its draft response.  It concludes that the Standards have achieved their objectives and the objectives of them set by the IASB when issued and are working effectively overall.  The UKEB secretariat makes some recommendations in a few areas where it believes that the 'application of the Standards can be significantly improved'.  These are:

IFRS 10

  • Review the requirement to disclose why an investment entity is classified as such when it meets the investment entity criteria but does not exhibit the typical characteristics.
  • Review the application guidance for identifying investment entities to ensure it results in appropriate outcomes for all types of investment fund.
  • Require investment entities to consolidate those intermediate subsidiaries which are investment entities to improve visibility at group level of assets and liabilities held by those subsidiaries.
  • Additional guidance to improve consistency and comparability in accounting for acquiring a controlling interest in a single-asset entity

IFRS 11

  • Include principle-based guidance from IFRIC’s March 2015 Update on the assessment of other facts and circumstances.
  • Include additional guidance in the Standard to address any diversity of practice relating to the interaction of IFRS 11 with IFRS 15 and IFRS 16.

IFRS 12

  • Review the extent to which disclosures for unconsolidated structured entities have proved useful as an indicator of potential risk.
  • Consider including guidance on the level of aggregation and disaggregation of disclosures on interests in other entities as part of its Primary Financial Statements project.
  • Consider including enhanced disclosures for subsidiaries with material non-controlling interests.

The final comment letter and further information is available on UKEB website.

UK Endorsement Board publishes draft comment letter on the IASB’s DP/2020/2 Business Combinations under Common Control

28 May, 2021

The UK Endorsement Board has published its draft comment letter on the International Accounting Standard Board’s (IASB's) Discussion Paper DP2020/02 Business Combinations under Common Control ("BCUCC").

In its draft comment letter the UK Endorsement Board supports the proposals in the discussion paper and indicate that the proposals will provide users of financial statements with information on BCUCC which it calls a 'significant step forward from the minimal information required today'.

In particular, the UK Endorsement Board expect the proposals in the Discussion Paper will lead to improvements over current financial reporting as follows:

  • Measurement and disclosure requirements in the DP will reduce diversity in accounting practice, improve transparency and lead to greater comparability between financial statements.
  • The proportionate approach, whereby the book value method is required in situations where non-controlling shareholders are not affected, will reduce complexity and cost for preparers.

Comments on the draft comment letter are requested by 30 June 2021. For more information, see the UKEB's website.

June 2021 IFRS Interpretations Committee meeting agenda posted

28 May, 2021

The IFRS Interpretations Committee has posted the agenda for its next meeting, which will be held by video conference on 8-9 June 2021.

The Committee will discuss the following:

  • IAS 2 — Costs necessary to sell inventories
  • IAS 10 — Preparation of financial statements when an entity is no longer a going concern
  • IFRS 9 — European Central Bank’s third targeted longer-term refinancing operations programme
  • IFRS 16 — Power purchase agreements in a gross pool electricity market
  • Work in progress

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.

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