Specifically, IASB member Rika Suzuki takes a looks into how companies could disclose better information about business combinations and whether to retain the impairment-only model to account for goodwill or to explore reintroducing amortisation of goodwill.

For more information, see the press release and ‘In Brief’ article on the IFRS Foundation’s website. In addition, a Japanese translation of the article is available.

Background

In March 2022, the OECD released technical guidance on its 15% global minimum tax agreed as the second ‘pillar’ of a project to address the tax challenges arising from digitalisation of the economy. This guidance elaborates on the application and operation of the Global Anti-Base Erosion (GloBE) Rules agreed and released in December 2021 which lay out a co-ordinated system to ensure that multinational enterprises with revenues above €750 million pay tax of at least 15% on the income arising in each of the jurisdictions in which they operate.

The IASB decided to respond to stakeholders’ concerns about the potential implications of the imminent implementation of these rules on the accounting for income taxes by jurisdictions. In particular, the IASB noted that the situation is very complicated as:

• jurisdictions may change statutory tax rates to avoid being considered a low-tax environment;
• companies might decide to move their business to jurisdictions with higher statutory tax rates; and
• companies might engage in business that comes with tax incentives that might bring down their statutory tax rate to below 15% although the jurisdiction they are doing business in is not generally considered a low-tax environment.

All of these and further considerations would entail most complicated calculations of deferred tax in a situation that is highly volatile due to the fact that jurisdictions implement the OECD rules at different speed and different points of time. Due to the many unknown variables involved, the IASB has decided to propose an exemption until the global tax system has settled and reestablished itself and the IASB can thoroughly assess the situation and provide a reliable solution.

Suggested changes

The proposed amendments in exposure draft IASB/ED/2023/1 International Tax Reform — Pillar Two Model Rules (Proposed amendments to IAS 12) are:

• The IASB proposes to provide an exception to the requirements in IAS 12 that an entity does not recognise and does not disclose information about deferred tax assets and liabilities related to the OECD pillar two income taxes. An entity would disclose that it has applied the exception.
• The IASB proposes that, in periods in which pillar two legislation is enacted or substantively enacted, but not yet in effect, an entity would disclose:
  • information about such legislation enacted or substantively enacted where the entity operates;
  • the jurisdictions in which the entity’s average effective tax rate is below 15%; and
  • whether there are jurisdictions where the entity expects either to pay pillar two income taxes although the 15% threshold does not apply or not to pay pillar two income taxes although the 15% threshold does apply.
• The IASB proposes that an entity applies the exception immediately upon issuance of the amendments and retrospectively in accordance with IAS 8 and the disclosure requirements for annual reporting periods beginning on or after 1 January 2023.

Comments on the proposed changes are requested by 10 March 2023 (the DPOC agreed to a shortened comment period in view of the urgency of the matter).

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• Our related Need to know publication
• Our UK Accounting Plus project page on IAS 12 — OECD pillar two model rules

The Advisory Council is the formal advisory body to the Trustees, the IASB, and the ISSB. It advises the IFRS Foundation on its strategic direction, technical work plan and priorities.

The Trustees have agreed to a temporary expansion of the Advisory Council to reflect the recent creation of the ISSB that has led to an expanded remit of the Advisory Council. Among the newly appointed organisations are the Organisation for Economic Co-operation and Development (OECD), Principles for Responsible Investment (PRI), and the United Nations (UN).

Please see the press release on the IFRS Foundation website for more information. A full list of current members is available here.

The proposed amendments would affect IPSAS 43 Leases (accounting for concessionary leases) and IPSAS 23 Revenue from Non-Exchange Transactions (new guidance on right-of-use assets in-kind).

Comments on the ED are requested by 17 May 2023. Please click for additional information and access to the ED in the press release on the IPSASB website.

High­lights of the podcast include dis­cus­sions on:

• COP15 announcements;
• Amendment to guidance to General Sustainability-related Disclosures (S1) to explain how companies can provide information ;
• ISSB’s upcoming agenda;
• Scope 3 GHG emission disclosures;
• Proposed requirements for financed emissions;
• Appendix B enhancement for Climate-related Disclosure (S2);
• ISSB’s work in 2023.

The podcast can be accessed through the press release on the IFRS Foun­da­tion’s website.

Please click to view the detailed notes taken by Deloitte observers for the ISSB meeting.

Highlights of the podcast include discussions on:

• 2023 priorities and milestones;
• clarity on metrics in S1 and S2;
• judgements, assumptions and estimates;
• repurposing the IASB's concept of ‘reasonable and supportable information’;
• commercially sensitive information about opportunities;
• current and anticipated financial effects and connected information; and
• the rollout and adoption of S1 and S2.

The podcast can be accessed through the press release on the IFRS Foundation’s website.

The webinars are:

• Part 1 (24 January, 14:00 GMT): Better information for better decisions — Introduction to investor-focused sustainability disclosure
• Part 2 (31 January, 16:00 GMT): Any size or stage — Getting started on climate disclosure
• Part 3 (7 February, 04:00 GMT): Connectivity and controls — The path to investor-grade disclosure

Please click for more information and registration on the IFRS Foundation website.

The Board will discuss the following:

• Business Combinations — Disclosures, Goodwill and Impairment
• Equity Method
• Disclosure Initiative — Subsidiaries without public accountability: Disclosures
• Primary Financial Statements
• Taxonomy Update
• Maintenance and Consistent Application

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.

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.

The following topics were discussed.

Metrics and Targets

The ISSB agreed minor drafting changes to clarify that the objective of disclosures on metrics and targets in the proposals is to enable users to understand performance on sustainability-related risks and opportunities, including (but not limited to) how an entity measures, monitors and manages such risks and opportunities.

Disclosure of judgements, assumptions and estimates

The ISSB decided to require, in addition to requiring disclosure of the sources of estimation uncertainty, the judgements that the entity has made in the process of preparing and disclosing its sustainability-related financial information. They also decided requiring disclosure of the sources that have been applied in preparing the entity’s sustainability-related financial disclosures, including the industry or industries specified in IFRS Sustainability Disclosure Standards, SASB Standards or other industry-based sources of guidance.

In addition, the ISSB decided to clarify that the words ‘to the extent possible’ mean ‘to the extent possible taking into consideration the requirements of IFRS Accounting Standards (or other relevant GAAP)’ and to require an entity to explain significant differences in the financial data and assumptions that the entity has used in preparing its sustainability-related financial disclosures, in comparison to those that the entity has used in preparing its financial statements.

Furthermore, the ISSB decided to clarify that the disclosure requirements on estimation uncertainty relating to metrics also apply to current and anticipated effects of sustainability-related risks and opportunities on the entity’s financial position, financial performance and cash flows. The ISSB also decided to provide guidance on the disclosure of judgements, assumptions and estimates that an entity is required to make in applying IFRS Sustainability Disclosure Standards.

Commercially sensitive information about opportunities

The ISSB decided to introduce an exemption in [draft] S1 that would permit entities, in limited circumstances, to exclude information about a sustainability-related opportunity when the information is commercially sensitive. It would specify that this would not be applicable to information which is already publicly available, nor would it able to be used to justify broad non-disclosure, using commercial sensitivity as a justification, or to avoid disclosing information about risks.

Reasonable and supportable information that is available at the reporting date without undue cost or effort

The ISSB decided to introduce the concept of ‘reasonable and supportable information that is available at the reporting date without undue cost or effort’ into IFRS S1 and IFRS S2, to help an entity to apply specific requirements in the Standards.

Current and anticipated financial effects and connected information

The ISSB decided to make minor drafting changes to clarify that when sustainability-related risks and opportunities have affected or are expected to affect the information in an entity’s financial statements, the entity is required to explain the connections between those current and anticipated financial effects and the sustainability-related risks and opportunities. They also decided to clarify the relationship between resilience assessment requirements and the requirements to disclose current and anticipated financial effects by emphasising those requirements can be applied independently, but the resilience assessment can inform the disclosures of current and anticipated financial effects. Furthermore, the ISSB decided to clarify that there is no requirement for an entity to perform a resilience assessment to determine current and anticipated financial effects of sustainability-related risks and opportunities.

Using scenario analysis to assess climate resilience

The ISSB decided to require an entity to use an approach to climate-related scenario analysis that enables the entity to consider all reasonable and supportable information that is available without undue cost or effort, at the reporting date, including information about past events, current conditions and forecasts of future economic conditions, taking into consideration the degree of the entity’s exposure to climate-related risks and opportunities and the skills, capabilities and resources available to the entity to conduct climate-related scenario analysis.

Greenhouse gas emissions—reporting period relief

The ISSB decided to provide relief that allows an entity to measure its GHG emissions using information for reporting periods that are different from the entity’s reporting period when that information arises from entities in its value chain with reporting periods that are different from that of the entity, on condition that the entity uses the most recent data available without undue cost or effort to measure and disclose its GHG emissions, the length of the reporting periods is the same and the entity discloses the effects of significant events and changes in circumstances (relevant to its GHG emissions information) that occur between the reporting dates of the entities in its value chain and the date of the entity’s general purpose financial reporting.

Climate-related targets—Latest international agreement on climate change

The ISSB decided to amend the proposal in paragraph 23(e) of [draft] S2 to require an entity to disclose how the latest international agreement on climate change has informed any climate-related targets it has set.

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