Pre-meeting summaries for the September 2022 IASB meeting

  • IASB meeting (blue) Image

19 Sep, 2022

The IASB meets in London on 20-22 September 2022. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. We 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.

The following topics are on the agenda:

Equity Method

The staff recommend that when measuring the carrying amount to be derecognised in a partial disposal would identify the cost of the specific portion of the investment being disposed of or, if it cannot be identified, apply the last-in, first-out method. They also recommend relief to allow the weighted average method to be used as a practical expedient for equity method investments held prior to the transition date. The staff recommend that when an equity accounted investee issues equity instruments, and the investor continues to apply the equity method, if the ownership interest increases it would be treated as a purchase of an additional interest whereas a decrease would be a partial disposal. The IASB will also discuss application questions related to transactions between an investor and its associate or joint venture and acknowledged conflicts between the requirements in IFRS 10 and those in IAS 28.

Goodwill and Impairment

The staff recommend several changes to the IASB’s preliminary views in relation to disclosures about the objectives and rationale for the business combinations an entity has made, including an exemption from some of the disclosure requirements when disclosure would be seriously prejudicial to the entity’s objectives for the business combination. The staff also suggest that, if some disclosure requirements are required only for a sub-set of business combinations, the focus should be on strategically important business combinations—i.e. those for which failing to meet the objectives would seriously put at risk the entity achieving its overall business strategy.

Post-implementation Review (PIR) of IFRS 9—Classification and Measurement

At this meeting, the IASB will discuss questions relating to matters raised by respondents to the RFI that are not covered by other staff papers. The staff recommend that the IASB not consider further issues related to: derecognition and whether ‘substantially all of the risks and rewards’ of a financial asset have been transferred; assessing whether the entity has a practice of settling similar contracts net in cash when considering using the ‘own use exemption’; the disposal of equity instruments classified as fair value through other comprehensive income; whether interest rates contractually linked to an index that adjusts the time value of money based on a market interest rate and/or inflation rate introduce ‘leverage’ in the context of recent significant rises in inflation rates; and whether rates including a leverage factor imposed by the government should follow IFRS 9 for regulated rates guidance and, if so, how to consider whether the rate provides exposure to risks or variability in the contractual cash flows that are inconsistent with a basic lending arrangement. The staff therefore recommend that questions about purchased or originated credit-impaired financial assets be considered as part of the upcoming PIR of the impairment requirements in IFRS 9.

Financial Instruments with Characteristics of Equity (FICE)

The staff recommend clarifying that: IAS 32:23 would apply to an obligation to redeem own equity instruments settled in a variable number of another type of own equity instruments. They recommend that on expiry of a written put option on own equity instruments: the financial liability would be reclassified to the same component of equity as that from which it was reclassified on initial recognition of the put option; and the cumulative amount in retained earnings related to the put option would be permitted to be reclassified to another component of equity but amounts previously recognised in profit or loss on remeasuring the financial liability would not be reversed. Furthermore, written put options or forward purchase contracts on own equity instruments are presented gross rather than net.

Primary Financial Statements

The staff recommend that the IASB not proceed with any specific requirements for unusual income and expenses. They also recommend that all entities would classify income and expenses from associates and joint ventures accounted for using the equity method in the investing category. They recommend withdrawing the proposal that an entity classify incremental expenses in the investing category. However, the staff recommend confirming the proposal that the specified subtotals listed (in paragraph 104 of the ED) are not management performance measures and adding ‘operating profit or loss and income and expenses from investments accounted for using the equity method’ to the list of specified subtotals. Lastly, they recommend withdrawing the proposed prohibition on a mixed presentation of operating expenses.

Work plan

The staff will provide an update on the IASB’s work plan since its last update in May 2022. The staff recommend that the IASB consider in the second half of 2023 when to begin the PIRs of the hedge accounting requirements of IFRS 9 and the requirements of IFRS 16.

PIR of IFRS 15 Revenue from Contracts with Customers

The staff anticipate that they will undertake outreach from October 2022 to Q1 2023. The RFI is expected to be published in H1 2023, with a 120-day comment period.

Contractual Cash Flow Characteristics

In 2022, the IASB added a project to clarify particular aspects of the IFRS 9 requirements for assessing a financial asset’s contractual cash flow characteristics (i.e. the ‘solely payments of principal and interest’ (SPPI) requirements). The staff recommend clarifying that for contractual cash flows to be SPPI, a basic lending arrangement does not give rise to variability in cash flows due to risks or factors that are unrelated to the borrower, even if such terms and conditions are common in the specific market in which the entity operates. They also recommend setting out the factors when a financial asset that includes contractual terms that change the timing and amount of the contractual cash flows can be consistent with a basic lending arrangement and therefore have SPPI cash flows. The staff further recommend clarifying that the reference to ‘instruments' in paragraph B4.1.23 of IFRS 9 includes such as lease receivables.

Extractive Activities

The IASB will not be asked to make any decisions during this session. The staff will present papers summarising their reviews of disclosure-related stakeholder feedback from research carried out between 2018 and 2021, relevant academic literature and relevant jurisdictional requirements and a sample of annual filings.

Maintenance and consistent application

At its June 2022 meeting, the IFRS Interpretations Committee voted to finalise the agenda decision Cash Received via Electronic Transfer as Settlement for a Financial Asset (IFRS 9). The staff recommend that, rather than finalising the agenda decision, the IASB explore amending IFRS 9. In relation to the forthcoming amendments to IAS 1 for non-current liabilities with covenants, the staff recommend that the IASB clarify requirements around the early application of the 2020 amendments and the 2022 amendments.

Rate-regulated Activities

The staff recommend that the IASB clarify that an entity would apply IFRIC 12 first and then, apply the requirements of the proposed Standard to any remaining rights and obligations to determine if the entity has regulatory assets or regulatory liabilities.

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


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.