The exposure draft contains proposed guidance for the IASB when developing and drafting disclosure requirements in IFRSs in future as well as proposed amendments to IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits that result from applying the proposed guidance to those standards.

In its final comment letter, EFRAG supports the objective of the project to improve the relevance of disclosures and to develop a more rigorous methodology for the IASB to define objective-based disclosure requirements.  EFRAG also agrees, in particular, with the proposal to work closer with users of financial statements and other stakeholders early in the standard-setting process to understand what information they need, and to articulate better how such information is intended to be issued. 

However EFRAG concludes that based upon its extensive outreach, field testing and consultation conducted with European stakeholders, that the proposed approach may not achieve its intended objective.  In particular EFRAG highlights that the proposed approach is likely to:

• Be ineffective in addressing the disclosure problem and not result in providing more useful and relevant information and could even result in relevant information being omitted; 
• Result in impairing comparability for users of financial statements by introducing a more flexible approach to disclosures;
• Increase enforcement and audit challenges; and 
• Be more costly for preparers and their auditors.

In light of the above, EFRAG suggests an alternative approach which it considers to be less radical whereby the IASB would combine the introduction of overall and specific objectives with a list of items of disclosures always required (subject to materiality assessment) to meet those objectives.  This would be complemented by application guidance describing users' needs and illustrative examples showing how to apply judgements to meet the objectives under various circumstances and supporting preparers, auditors and enforcers to develop a common understanding about the application of objectives-based disclosures.

EFRAG also encourages the IASB to further consider the interactions between its proposed approach to develop disclosure requirements and:

• The role of the notes of the financial statements taken as a whole;
• The increasing use of technology and digital reporting;
• The application of the materiality concept; and
• The assessment of stewardship.

The press release the comment letter and the feedback statement are available on the EFRAG website.

The exposure draft adds disclosure requirements, and ‘signposts’ within existing disclosure requirements, that would ask entities to provide qualitative and quantitative information about supplier finance arrangements.

The UKEB supports the proposals in the ED highlighting that they will improve transparency about the use of supplier finance arrangements and enhance the ability of users of financial statements to assess the effects of those arrangements on an entity’s liabilities and cash flows, as well as on its liquidity risk and risk management.  To enhance the proposals the UKEB recommends:

• that specific requirements be added to enable users to understand the magnitude of an entity's supplier finance arrangements.  The UKEB recommends that there should be specific requirements for an entity to disclose its accounting policy for the presentation of cash flows that are part of supplier finance arrangements; the amounts of those cash flows; and the line item(s) in the Statement of Cash Flows where they are presented.
• that the proposed amendment in paragraph IG18 of IFRS 7, currently proposed only for the Implementation Guidance, be incorporated as part of the specific disclosure requirements in the Standard to ensure it is given appropriate prominence.

Comments on the draft comment letter are requested by 4 March 2022.

The press release, the draft comment letter and the invitation to comment are available on the UKEB website.

The RFI seeked comments from stakeholders to identify whether the classification and measurement requirements in IFRS 9 'Financial Instruments' provide information that is useful to users of financial statements; whether there are requirements that are difficult to implement and may prevent the consistent implementation of the standard; and whether unexpected costs have arisen in connection with applying or enforcing the standard.

We support the efforts of the Board believe the classification and measurement requirements of IFRS 9 have generally worked well and as intended, leading to useful information for users of financial statements about the amount, timing and uncertainty of future cash flows. However, we believe there are areas that could be amended to improve the usefulness of information that arises from applying the Standard and to make the Standard more relevant given changes in lending activity that have developed since the classification and measurement requirements were finalised in 2014.

Please click to download our full comment letter.

Below is an analysis of all changes made to the work plan since our last analysis on 17 December 2021.

Stan­dard-set­ting projects

• Management Commentary — Discussion on the feedback from the exposure draft is expected in March 2022 (previously Q1 2022).

Main­te­nance projects

• Lack of Exchangeability (Amendments to IAS 21) — Decision on the direction of the project is expected in Q2 2022.
• Non-current Liabilities with Convenants (Amendments to IAS 1) — Discussion on the feedback from the exposure draft is now expected in Q2 2022 (previously H1 2022).
• Provisions — Targeted Improvements — Decision on the project’s direction is now expected in February 2022.
• Supplier Finance Arrange­ments — Feedback on the exposure draft is expected in Q2 2022 (previously H1 2022).

Research projects

• Business Com­bi­na­tions under Common Control — The direction of the project phase is the current milestone; no expected date is given.
• Equity Method — Decision of the direction of the project is expected in March 2022 (pre­vi­ously Q1 2022).
• Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 —Feedback statement is now expected in Q2 2022 (previously H1 2022).
• Post-implementation Review of IFRS 9 — Classification and Measurement —Discussion on the feedback to the request for information is now expected in March 2022 (pre­vi­ously H1 2022).

Other projects

• IFRS Taxonomy Update — 2021 Tech­nol­ogy Update—Feedback on proposed update is expected in March 2022 (previously Q1 2022).
• IFRS Taxonomy Update — Initial Ap­pli­ca­tion of IFRS 17 and IFRS 9 — Com­par­a­tive In­for­ma­tion — IFRS Taxonomy Update is now expected in March 2022.
• Research Programme — Project has been added to the work plan; it is not a project in its own right, but rather offers an overview of all meetings where the Board was updated on the status of the research programme.

The above is a faithful com­par­i­son of the IASB work plan at 17 December 2021 and 28 January 2022. For access to the current IASB work plan at any time, please click here.

The following topics were discussed:

Maintenance and Consistent Application

In April 2021, the IASB published ED/2021/4 Lack of Exchangeability, which proposed to amend IAS 21. The comment period ended in September 2021. The purpose of this paper was to provide the IASB with a summary of feedback on the ED. There was general support for the proposals, with some suggestions. The IASB was not asked to make any decisions at this meeting.

No comments were made by IASB members about the most recent meeting of the IFRS Interpretations Committee.

Business Combinations under Common Control

The IASB published its Discussion Paper (DP) Business Combinations under Common Control (BCUCC) in November 2020. At this meeting the staff presented detailed summaries of feedback on the remaining topics from the DP: how to apply each measurement method (being the acquisition method and the book-value method) and disclosure. The feedback was very mixed. The IASB did not object to the plan for deliberating the preliminary views in the DP.

Board work plan update

The staff gave the IASB an overview of its technical projects to support decisions about whether to add or remove projects, as may be discussed in individual project papers and an assessment of overall progress on the work plan, including project prioritisation and timing. The paper set out projects completed since the last update, listed the projects out for consultation and noted that no documents are expected to be published for consultation within approximately the next six months. (Note: this conclusion relates only to the IASB. We expect the new ISSB will publish consultation documents in the next six months). There was no discussion of this paper.

Approach to prioritising matters arising from post-implementation reviews

The staff have developed proposals to provide a more consistent approach to prioritising matters arising from post-implementation reviews (PIRs). The IASB supported the recommendations, which consider the nature of the evidence collected, what factors should lead to further action and how to prioritise projects.

Feedback on IFRS Taxonomy 2021—Proposed Update

The staff gave an oral update on responses to PTU/2021/3 IFRS Taxonomy 2021—Proposed Update 3—Initial Application of IFRS 17 and IFRS 9—Comparative Information (Amendment to IFRS 17). Only two comment letters were received and the staff expect to finalise the update in March.

Primary Financial Statements

The IASB decided to confirm the requirement for an entity to: disclose a description of why an MPM communicates management’s view of performance, including an explanation of how the MPM is calculated and how the measure provides useful information about the entity’s performance; disclose a reconciliation between an MPM and the most directly comparable subtotal or total specified in the Standards; add a requirement for an entity to disclose, for each item reconciling an MPM to the most directly comparable subtotal or total specified by IFRS Standards, the amount(s) related to each line item(s) in the statement(s) of financial performance. The IASB decided not to specify that one way to meet this requirement is to use a side-by-side columnar format for the reconciliation, but will provide an illustrative example using side-by-side disclosure.

The staff had recommended the IASB retain the proposed requirements to disclose the income tax effects and the effect on NCI for each item disclosed in a reconciliation between an MPM and the most directly comparable IFRS specified subtotal or total and how the entity determined the income tax effect. The IASB decided not to vote on this paper before further research has been conducted by the staff.

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

The independent research, which builds on similar research in 2020, reinforces the case for developing standards for Audit Committees to help promote a more consistent approach to audit quality.

The research, conducted by YouGov, was based on in-depth interviews with 50 Audit Committee Chairs (ACCs) of Public Interest Entities (PIEs).  The interviews explored:

• Defining a good quality, and a poor quality, audit;
• Planning and executing an audit, including evidence gathering and communication with auditors;
• Reporting on audit quality;
• The audit tender process;
• Changes in the audit sector, including familiarity with AQIs;
• The future of the FRC, and as it transforms into the Audit, Reporting and Governance Authority.

There were a range of different views expressed on audit quality.  The ACCs interviewed highlighted that proper planning - alongside knowledge of the business and the specific sector - communication, and timeliness from the audit team were characteristics of a good quality audit.  The research indicated that the lead audit partner also has a significant impact on perceptions of audit quality.  Some ACCs continue to find it difficult to differentiate audit quality from the quality of service provided by their audit firm. 

When selecting an auditor the ACCs look for expertise, consistency and professionalism of the audit team as well as an understanding of the business.  Audit Committee Chairs consider the ability to build a rapport important and that it is critical that the auditor shows a healthy level of scepticism and offers robust challenge. 

Audit quality is taken very seriously by ACCs and the research highlighted that they are particularly alert to this during the audit tendering process with mandatory tendering being seen as an opportunity to encourage innovation by prospective auditors.  Many ACC were 'pleasantly surprised' by the response by audit firms to the pandemic but did note that the pandemic has impacted the ability to have informal interaction with audit firms and has resulted in more formal and structured interactions between the ACC and the lead audit partner.

The press release and full research are available on the FRC website. 

Ms Lloyd currently serves as Vice-Chair of the International Accounting Standards Board (IASB) and Chair of the IFRS Interpretations Committee and will step down from these roles to take up her new position on 1 March 2022. Ms Lloyd has been appointed for an initial four-year term. The press release notes that her appointment completes the current search for ISSB Vice-Chair(s). It also notes that the Trustees have begun the process of identifying successors for her current roles.

Ms Guillot is the current Chief Executive Officer of the Value Reporting Foundation (VRF), which was formed through the merger of the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC) in 2021. She has been appointed effective 1 February 2022. Ms Guillot will provide strategic advice and counsel to the Chair of the ISSB with specific responsibilities for the consolidation of the VRF into the IFRS Foundation and the establishment of the ISSB. She will serve a two-year term, renewable for one year. A further Special Advisor to the ISSB Chair from the Asia-Oceania region is expected to be appointed who will focus on the ISSB’s engagement with developing and emerging economies, as well as with smaller companies.

The press release also highlights that the Trustees are progressing with their search for the remaining ISSB members, with potential candidates encouraged to submit their applications. Interviews for these roles are scheduled to begin in early February 2022.

Please click for more information in the press release on the IFRS Foundation website.

The call for applications is available through the press release on the EFRAG website. Candidates can only be nominated by EFRAG Member Organisations. Nominations for membership are invited by 10 February 2022.

In addition, EFRAG is looking for candidates for both the Chair and the members of its Sustainability Reporting Technical Expert Group. More information is available here.

Ongoing matter

IAS 37 Provisions, Contingent Liabilities and Contingent Assets—Negative low or new energy vehicle credits: In its November 2021 meeting, the Committee discussed 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. In the meeting, Committee members generally agreed with the staff's analysis that an entity that has generated negative credits has an obligation that meets the definition of a liability in IAS 37. Some Committee members suggested refining the words in the tentative agenda decision and some members suggested the analysis of the implications of the consensus in IFRIC 6 Liabilities arising from Participating in a Specific Market—Waste Electrical and Electronic Equipment. The staff recommend publishing the tentative agenda decision with proposed refinements to the wordings.

Comment letter analysis

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.

Education session

IFRS 17 Insurance Contracts—Profit recognition for annuity contracts: The Committee received a submission about determining how to recognise unearned profit as revenue based on the services an entity provides to policyholders of annuity contracts in a scenario where an entity includes unearned profit in the measurement of insurance contracts and subsequently recognises it as revenue as the entity provides services. The paper provides an overview of the applicable IFRS 17 requirements and other background related to those requirements.

Administrative matters

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): Accounting for warrants at acquisition (IFRS 2 or IAS 32)
• 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.

The pronouncement includes minor improvements to IPSAS to address issues raised by stakeholders and minor amendments sourced from recent IFRS improvements and narrow scope projects.

Please click for more information and access to the pronouncement on the IPSASB website.