Report of the January 2022 SME Implementation Group meeting

28 Feb, 2022

The IASB has issued a report on the SME Implementation Group (SMEIG) meeting held on 21 January 2022 via video conference.

The SMEIG discussed the following topics related to the second comprehensive review of the IFRS for SMEs Standard:

  • Definition of a business and reacquired rights in IFRS 3 Business Combinations.
  • Simplifications to IFRS 15 Revenue from Contracts with Customers.
  • Cryptocurrency.
  • Recognition and measurement of development costs.
  • Update on recent IASB decisions.

View the report is available on the IFRS Foundation website.

Agenda for the March 2022 GPF meeting

28 Feb, 2022

Representatives from the International Accounting Standards Board (IASB) will meet with the Global Preparers Forum (GPF) on 11 March 2022 via video conference. The agenda for the meeting has been released.

The full agenda for the meeting is sum­marised below:

Friday, 11 March 2022 (11:00-14:30)

  • Supplier Finance Arrangements
    • Overview of IASB’s proposals in Exposure draft Supplier Finance Arrangements.
  • Non-current Liabilities with Covenants (Amendments to IAS 1)
    • Overview of IASB’s proposals in Exposure Draft Non-current Liabilities with Covenants.
  • IFRS In­ter­pre­ta­tions Committee Update

Agenda papers for this meeting are available on the IFRS Foundation’s website.

February 2022 IASB meeting notes posted

28 Feb, 2022

The IASB met in London over four days, from Monday 21 to Thursday 24 February 2022. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

The following topics were discussed:

Dynamic Risk Management (DRM)

When developing the core model for DRM, the IASB tentatively decided that when derivatives align the asset profile with the target profile, the changes in fair value of such derivatives are recognised in other comprehensive income (OCI). Volatility in equity arising from the recognition of fair value changes in OCI was one of the three main challenges identified as key to the viability and operability of the DRM model. The staff explore two potential alternatives for the mechanics the IASB could consider for the DRM model. Both approaches aim to better reflect the risk management activities in the financial statements and address the concerns raised during outreach. The staff sought the IASB’s view on the direction of the future work, without asking the IASB to make any decisions. The Chairman’s summary of the discussions was that IASB members support moving forward with the two approaches, which will now be further explored by the staff.

Disclosure Initiative—Targeted Standards-level Review of Disclosures

The comment period for ED/2021/3 Disclosure Requirements in IFRS Standards—A Pilot Approach closed in January. The purpose of this meeting was to provide a summary of the fieldwork findings and feedback received from these stakeholders and ask the IASB if it has any questions or comments. No decisions were made.

Rate-regulated Activities

The IASB reconfirmed the proposal to require an entity to apply the final Standard to all its regulatory assets and regulatory liabilities. The ED does not specify whether a particular type of body, such as a regulator, is required for a regulatory asset or regulatory liability to exist. The IASB decided that the final Standard will include the existence of a regulator in the conditions that are necessary for a regulatory asset or regulatory liability to exist.

Financial Instruments with Characteristics of Equity

This IASB was asked to make tentative decisions on proposed clarifications related to the classification of financial instruments applying IAS 32 when payment is at the discretion of the issuer’s shareholders. The IASB decided, by a narrow majority, to include, as application guidance in IAS 32, factors that may be relevant for an entity to consider in assessing whether a decision of shareholders is within the control of the entity in classifying financial instruments as financial liabilities or equity.

Primary Financial Statements

This IASB considered the relationship between the general principle of disaggregation for the presentation of information in the primary financial statements and the requirements in IAS 1 for specific line items in those statements. The IASB supported all of the staff recommendations, except for a proposal to include in the Basis for Conclusions an analysis of the costs and benefits of requirements for specified line items.

Third Agenda Consultation

The IASB continued its discussions of the feedback received on the RfI, relating to projects on the current work plan; cross-cutting themes—capacity implications; connectivity; partnering further with national standard-setters; priority of matters identified in post-implementation reviews; and strategic direction and balance of the IASB’s activities from 2022 to 2026.

Maintenance and consistent application

Availability of a Refund (Amendments to IFRIC 14): In 2015, the IASB proposed narrow-scope amendments to IFRIC 14. The IASB decided to withdraw the project from its work plan.

Provisions—Targeted Improvements—Project review: The IASB has on its work plan a project to make targeted improvements to IAS 37. The IASB has not discussed this project for some time. The purpose of this meeting was to review the project’s prospects for progress and decide whether to keep the project on the IASB’s work plan. The IASB decided to keep the project on its work plan.

Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)—Transition, effective date and due process: In December 2021, the IASB decided to proceed with its proposed amendments to IFRS 16 published in ED/2020/4 Lease Liability in a Sale and Leaseback, with some changes to the proposals. The IASB supported the staff’s recommendations with respect to the transition requirements and effective date for the amendments to IFRS 16 and to set an effective date of annual reporting periods beginning on or after 1 January 2024. One IASB member indicated his intention to dissent from the amendments.

Post-implementation Review of IFRS 10-12

The staff had identified some matters to designate as medium priority on the research agenda and to refer other matters to the IFRS Interpretations Committee. The IASB decided to give lower priority to the research agenda items and not to refer any matters to the IFRS Interpretations Committee. The IASB decided that sufficient work has been completed to conclude the PIR and for the staff to prepare the Report and Feedback Statement on the PIR.

Second Comprehensive Review of the IFRS for SMEs Standard

The IASB continued to deliberate specific sections of the IFRS for SMEs Standard that could be aligned with IFRS Accounting Standards, amendments to IFRS Accounting Standards and IFRIC Interpretations in the scope of the second comprehensive review of the IFRS for SMEs Standard: IFRS 9 Financial Instruments (Impairment of Financial Assets); IFRS 15 Revenue from Contracts with Customers; cryptocurrency; recognition and measurement of development costs; IFRS 3 Business Combinations (Definition of a Business and Reacquired Rights); and the alignment with IFRS 3, IFRS 10 and IFRS 11. The IASB supported the staff recommendations, except for the capitalisation of development costs, with the IASB supporting the capitalisation of development costs being included as an option (i.e. an accounting policy choice). There were also close votes on some issues related to impairment of financial assets and revenue from contracts with customers.

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

Updated IASB work plan — Analysis (February 2022)

28 Feb, 2022

Following the IASB's February 2022 meeting, we have analysed the IASB work plan to see what changes have resulted from the meetings and other developments since the work plan was last revised in January 2022.

Below is an analysis of all changes made to the work plan since our last analysis on 28 January 2022.

Stan­dard-set­ting projects

  • Disclosure Initiative — Subsidiaries without Public Accountability: Disclosures — The discussion of the exposure draft feedback is now expected in April 2022 (pre­vi­ously Q2 2022).
  • Disclosure Initiative — Targeted Standards-level Review of Disclosures — The discussion of the exposure draft feedback is now expected in May 2022 (pre­vi­ously Q2 2022).
  • Second Comprehensive Review of the IFRS for SMEs Standard — Exposure draft is expected in H2 2022.

Main­te­nance projects

  • Availability of a Refund (Amendment to IFRIC 14) — Project has been removed from work plan.
  • Lease Liability in a Sale and Leaseback — IFRS amendments are expected in H2 2022.
  • Pro­vi­sions — Targeted Im­prove­ments — Despite the Board deciding at the February meeting to continue the project, the work plan still has an entry "Decide project direction"

Research projects

  • Extractive Activities — Decision of the direction of the project is expected in Q3 2022 (previously H2 2022).
  • Pension Benefits that Depend on Asset Returns — Project summary is expected in April 2022 (pre­vi­ously Q2 2022).

Other projects

  • IFRS Taxonomy Update — Amendments to IAS 1, IAS 8 and IFRS Practice Statement 2 — Project is no longer in the work plan due to the issuance of IFRS Accounting Taxonomy 2021 on 15 February.
  • Third Agenda Consultation — Feedback statement is expected in Q3 2022 (previously H2 2022).

The above is a faithful com­par­i­son of the IASB work plan at 28 January 2022 and 28 February 2022. For access to the current IASB work plan at any time, please click here.

Agenda for the March 2022 DPOC meeting

28 Feb, 2022

The Due Process Oversight Committee (DPOC) will hold its next meeting on 1 March in Frankfurt, Germany.

The agenda for the DPOC meeting is sum­marised below.

Tuesday, 1 March 2022 (09:15–11:00)

  • In­tro­duc­tion and actions from the DPOC meeting held on 19 October 2021
  • Mon­i­tor­ing com­pli­ance with due process: Technical ac­tiv­i­ties
  • ISSB
    • Initial due process
    • Process in developing the TRWG recommendations
  • DPOC matters: Cor­re­spon­dence — update since the papers distributed
  • Summary

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

Webinar on the EFRAG discussion paper on intangibles

28 Feb, 2022

In August 2021, the European Financial Reporting Advisory Group (EFRAG) published a discussion paper 'Better information on intangibles – which is the best way to go?'. On 29 March 2022, EFRAG, in conjunction with the European Federation of Financial Analysts Societies (EFFAS), will offer an online webinar to discuss users’ directions for better information on intangibles.

Please click for additional information and registration on the EFRAG website. A programme for the event can be found here.

ESMA publishes its Sustainable Finance Roadmap

28 Feb, 2022

The European Securities and Markets Authority (ESMA) has published its Sustainable Finance Roadmap 2022-2024.

The Roadmap sets out ESMA’s deliverables on sustainable finance and how they will be implemented over the next three years. ESMA identifies three priorities for its sustainable finance work in the period from 2022 to 2024:

  • Tackling greenwashing and promoting transparency;
  • Building National Competent Authorities (NCAs’) and ESMA’s capacities in the sustainable finance field; and
  • Monitoring, assessing and analysing ESG markets and risks

ESMA will address its three priorities with a comprehensive list of actions across the following sectors: investment management, investment services, issuers’ disclosure and governance, benchmarks, credit and ESG ratings, trading and post-trading and financial innovation.

As part of their planned activities and deliverables, ESMA highlight that they plan to contribute to the development of EU sustainability reporting standards (including adjustments for SMEs) and to the International Organization of Securities Commissions (IOSCO) work relating to international sustainability reporting standards. 

For more information, see the press release and Sustainable Finance Roadmap on the ESMA website. 

UKEB publishes its final comment letter on the IASB's proposed reduced disclosure IFRS

28 Feb, 2022

The UK Endorsement Board (UKEB) has published its final comment letter and feedback statement in response to the International Accounting Standard Board’s (IASB's) Exposure Draft ED/2021/7 'Subsidiaries without Public Accountability: Disclosures'.

In July 2021, the IASB published the Exposure Draft Subsidiaries without Public Accountability: Disclosures that introduced proposals which would allow eligible subsidiaries that are small and medium-sized entities (SMEs) to apply International Financial Reporting Standards (IFRSs) but with reduced disclosure requirements.

In its final comment letter, which has been informed after in-house research, a preparer survey, a user survey and feedback received during stakeholder roundtables and interviews, the UKEB:

  • supports the IASB’s efforts to develop an IFRS Standard that would permit eligible subsidiaries to apply recognition and measurement requirements in full IFRS, but with a reduced set of disclosure requirements.  It sees that there will be a number of benefits to the Standard including reduced audit work and the provision of information that is proportionate to the needs of users of such financial statements.  
  • indicates that it expects the draft standard to be attractive to UK groups with overseas subsidiaries, where the group prepares consolidated financial statements in accordance with IFRS but that UK groups with only UK registered subsidiaries are likely to continue to apply FRS 101 Reduced Disclosure Framework.
  • whilst broadly agreeing with the scope of the proposals, recommends that the IASB extends the scope so that an ultimate parent of a group, that does not itself have public accountability, may also take advantage of the reduced-disclosure framework when preparing its individual financial statements.
  • highlights concerns regarding the scope of the proposals which are currently limited to subsidiaries whose ultimate or intermediate parents produce consolidated financial statements in accordance with IFRS.  The UKEB indicates that this will limit the uptake of the draft Standard.
  • suggests that the IASB reviews its ‘bottom-up approach’ to reduced disclosure and considers aligning it more closely with the ‘top-down approach’ that the UK experience has demonstrated as being cost effective for preparers and which provides decision-useful information for users. 
  • identifies that further reductions in disclosure requirements could be made with respect to IFRS 7 Financial Instruments: Disclosures and IFRS 13 Fair Value Measurement.
  • recommends subsidiaries should also be required to disclose in the notes the name of the entity in the group that reports on the IFRS 7 risk management and the IFRS 13 fair value disclosures as it believes that such a cross reference will be helpful to users of the accounts.
  • recommends that the IASB considers including a clearer articulation of the users’ information needs (specific consideration of the information needs of non-controlling shareholders and bank credit departments) and how these reduced disclosures address them.  
  • does not support the ED proposals that subsidiaries that are not publicly accountable (but may be within scope of the ED) should provide the full IFRS 17 disclosure requirements.  The UKEB recommends that the IASB proposes reduced disclosures for subsidiaries without public accountability as part of the exposure drafts for any new or amended IFRS. 

The final comment letter and the feedback statement are available on the UKEB website.

EFRAG publishes another working paper on sustainability reporting standards

25 Feb, 2022

The Project Task Force on European Sustainability Reporting Standards (PTF-ESRS) of the European Financial Reporting Advisory Group (EFRAG) has released one more working paper on the first draft standards on sustainability reporting.

The papers reflect the current state of the standard-setting work carried out by the Task Force following the due process the PTF-ESRS has defined for itself.

After publication of six working papers in Batch 1 in January 2022 and three working papers in Batch 2 in February 2022, Batch 3 consists of:

ESRS SEC 1 aims to identify sector-specific sustainability aspects that the reporting entity has to take into account. The sector classification is based on the European Classification of Economic Activities (NACE) and the classifications made in the EU Taxonomy. 14 sector groups are subdivided into 40 sectors, for which sector-specific aspects are provided in the appendix to ESRS SEC1.

Again, the PTF emphasises that the publication of these working papers is to ensure a transparent process, there is, however, no public consultation at this point; this is planned for a later date, which, however, is not specified. However, an early analysis of the working papers might be helpful given that as early as June 2022 EFRAG will have to submit the drafts of its sustainability reporting standards to the European Commission.

FRC Lab hybrid event on the future of the Lab

24 Feb, 2022

The FRC Lab ("Lab") will be hosting a hybrid event on 'What's next for the Financial Reporting Lab?' on 16 March 2022.

Over the last 10 years since its formation, the Lab has provided practical solutions to reporting issues and has worked with over 250 companies and investors.  As the reporting landscape becomes more complex and interconnected, with sustainability and technology as key drivers, there is an increased need for market-led solutions.

This event will focus on the future of the Lab over the next 10 years, the reporting challenges ahead and ways in which stakeholders can contribute to the Lab's future programme.

The event will comprise a welcome address and an open conversation between FRC and Lab members.

Further details and how to register for the event are available on the FRC 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.