Initial consideration:

IAS 37 Provisions, Contingent Liabilities and Contingent Assets—Climate-related Commitment: The IFRS IC received a submission asking its views on how IAS 37 applies to climate-related commitments to a fact pattern where an entity manufacturer of household products publicly states a net-zero transition commitment. The manufacturer published a detailed plan for the modification of the manufacturing method to achieve 60% reduction in emissions in nine years and to buy carbon credits to offset its remaining emissions after those nine years. The submitter asked i) whether the public statement of a net zero transition commitment creates a constructive obligation as defined in IAS 37; ii) whether a constructive obligation created by a net zero transition commitment meets the criteria in IAS 37 for recognising a provision; and iii) if a provision is recognised, whether the expenditure required to settle it is recognised as an asset or as an expense when the provision is recognised. The staff analysed that whether there is a constructive obligation depends on different facts and circumstances. The present obligation and probable outflow criteria are satisfied only after nine years and thereafter as the entity emits greenhouse gases. Most of the IFRS IC members agreed with the analysis in the paper and agreed to publish a tentative agenda decision.

IFRS 8 Operating Segments—Disclosure of Revenues and Expenses for Reportable Segments: The IFRS IC received a submission asking about the application of IFRS 8:23 which requires an entity to report a measure of profit or loss for each reportable segment and to disclose specified amounts for each reportable segment. The submitter said that it observes diversity in its jurisdiction in the application of two aspects of IFRS 8:23: (a) how to read the requirement for an entity to disclose the specified amounts applying IFRS 8:23(a)-(i) for each reportable segment; and (b) how to determine ‘material items’ applying IFRS 8:23(f). The staff analysed that the principles and requirements in IFRS Accounting Standards provide an adequate basis for an entity to determine the accounting treatment or disclosure requirements for the above submission. The staff recommended not to add a standard-setting project to the work plan and instead to publish tentative agenda decisions. The IFRS IC members had a lively discussion on IFRS 8:23(f) and expressed different views. 7 out of 13 IFRS IC members agreed with publishing the tentative agenda decision.

Finalisation of agenda decision:

IAS 27 Separate Financial Statements—Merger between a Parent and Its Subsidiary in the Separate Financial Statements: In its June 2023 meeting, the IFRS IC discussed a submission about how an entity applies IAS 27 to account for a merger with its subsidiary (which contains a business) in its separate financial statements and whether the merger should be accounted for as a business combination applying IFRS 3 or whether the parent entity should recognise the subsidiary’s assets and liabilities at their previous carrying amounts (carrying amount method). In the meeting, the IFRS IC members generally agreed with the staff’s analysis. The respondents to the agenda decision provided comments on different perspectives of the agenda decision. The staff recommended that the agenda decision be finalised, with some proposed changes. Most of the IFRS IC members agreed finalising the agenda decision.

IFRS IC input to IASB projects:

Climate-related and Other Uncertainties in the Financial Statements: In its September 2023 meeting, the IASB discussed potential actions it could take to help address concerns about reporting the effects of climate-related risks in financial statements. The IASB decided to consult the IFRS IC on how entities apply the requirements in IAS 36 in measuring value in use when an asset is subject to highly variable future cash flows over an extended time horizon. The IASB seeks input from the IFRS IC on the concerns identified in respect of lack of compliance due to misunderstanding of the requirements, limitations of the requirements and insufficiently clear requirements in IFRS Accounting Standards. The IFRS IC members gave input on the uncertainties of the impairment assessment brought by the climate-related matters in various aspects.

Provisions—Targeted Improvements: The IASB is conducting a project to make three targeted improvements to IAS 37. The IASB seeks IFRS IC input on one of the proposed improvements with respect to: i) initial suggestions for possible amendments to the requirements and illustrative examples supporting the ‘present obligation’ recognition criterion in IAS 37; and ii) whether to add to IAS 37 application requirements specifying when an entity has a present obligation for costs payable if a measure of its activity—for example, its revenue or carbon emissions—exceeds a specified threshold. The IFRS IC members were supportive of this project and made some comments on the proposed amendments and the amendments to/newly added illustrative examples.

Power Purchase Agreements: In July 2023, the IASB added a project to its work plan to research whether narrow-scope amendments to IFRS 9 could be made to better reflect how financial statements are affected by Power Purchase Agreements (PPAs). The project team has conducted further research on the prevalence of PPAs and how to restrict the scope of any potential standard-setting solution to limit the risk of unintended consequences for other contracts or transactions to purchase non-financial items. The IASB seeks IFRS IC members’ input into the additional research performed. The IFRS IC members gave their thoughts on whether standard-setting is needed and which standard-setting option they favoured.

More Information

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

IOSCO believes that the recommendations contained within the report will also be useful to standard setters, including the International Accounting Standards Board (IASB), as they pursue initiatives to enhance business combination disclosures and related matters of goodwill impairment testing.

IOSCO reminds issuers of the importance that their accounting and disclosures result in a fair and transparent presentation of the financial position, performance and cash flows of the company. The report notes:

This means the goodwill should not be stated at an amount in excess of its recoverable amount, that impairment losses should be recognised in a timely manner, and that disclosures of significant judgements and key assumptions related to the recoverability be transparent.

Please click to access the report on the IOSCO website.

The podcast looks back at the ISSB’s progress in 2023, IOSCO’s endorsement of the ISSB standards, and foundational work to support the implementation of IFRS S1 and IFRS S2 including capacity building, interoperability and connections.

It also reflects on highlights from December 2023, including:

• The ISSB’s engagements at COP28;
• The launch of the IFRS sustainability knowledge hub; and
• Nature and social aspects of climate-related risks and opportunities.

For more information and access to the podcast, please see the press release on the IFRS Foundation website.

Background

When the ISSB inherited the SASB standards, it found that a small subset of the standards incorporated references to specific jurisdictional laws and regulations that may be globally inapplicable, introduce regional bias, increase application costs, and decrease the comparability and decision-usefulness of the resulting disclosures. The ISSB has therefore developed a methodology for enhancing the international applicability of the SASB standards and SASB standards taxonomy updates without substantially altering the standards’ structure or intent. This methodology has been applied to the relevant SASB standards. The ISSB had previously consulted on the methodology in an exposure draft published in May 2023.

The SASB standards facilitate the implementation and application of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information for preparers.

Changes

With the amendments published today, the ISSB intends to make the SASB standards more internationally applicable and GAAP-agnostic. The amendments remove and replace jurisdiction-specific references and definitions, without substantially altering industries, topics or metrics.

Effective date

To support those entities already using the SASB standards, the ISSB determined that these amendments will be effective for preparers with annual reporting periods beginning on or after 1 January 2025, with early application permitted.

Further information

The following further information is available:

• Updated SASB Standards on the SASB website
• Basis for conclusions on the IFRS Foundation website
• Our UK Accounting Plus project page on the International applicability of the SASB standards

Diego Salvador Barrero, Meghan Clark and Michael Thom will join the CMAC for a three-year term beginning 1 January 2024, renewable once for an additional three-year term.

Additional information, including information on the backgrounds of the new members, is available on the IFRS Foundation website.

Keshni Kuni has been appointed as a new member for an initial five-year term.

For more information about her background, please see the press release on the IFRS Foundation website.

The following topics are on the agenda:

ISSB consultation on agenda priorities: ISSB members will review of the summary of feedback on the ISSB’s request for information (RFI) from users of general-purpose financial reporting who self-identified as an ‘investor” when submitting their response to the RFI.

IFRS sustainability disclosure taxonomy: The ISSB will be asked to confirm the principle for creating elements for narrative information and asked if they support targeted amendments to the modelling of specific taxonomy elements to refine and enhance the Taxonomy as well as minimising the gap in how similar requirements in IFRS S2 and ESRS E1 are modelled (specifically with regards to granularity and data type).

International applicability of the SASB Standards: The staff will seek ratification by the ISSB of amendments to the SASB Standards; seek ratification of the related updates to the digital SASB Standards Taxonomy; and ask the ISSB to confirm it is satisfied that it has complied with the applicable due process requirements to publish the updated SASB Standards.

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

The following topics are on the agenda:

Power Purchase Agreements: In this meeting, the staff will present the research on how to address accounting issues related to power purchase agreements. Based on the findings of the research and other input received from stakeholders the staff recommends that the IASB undertake narrow-scope standard-setting to amend IFRS 9 to better reflect power purchase agreements in the financial statements with the next project milestone to be an exposure draft and explore an approach to this standard-setting that includes amending the ‘own use’ and hedge accounting requirements in IFRS 9.

Work plan: The IASB will receive an update on its work plan. In addition, the IASB will make decisions about the timing of the post-implementation reviews of IFRS 16 and the hedge accounting requirements in IFRS 9.

Rate-regulated Activities: The IASB will make decisions on the proposals in the Exposure Draft Regulatory Assets and Regulatory Liabilities, in particular with regard to unit of account and offsetting, presentation and items affecting regulated rates only when related cash is paid or received.

Maintenance and consistent application: The IASB will discuss potential amendments to IAS 21 to require an entity to translate all items (assets, liabilities, equity items, income and expenses, including comparatives) at the most recent closing rate if the entity has a non-hyperinflationary functional currency and presents its financial statements in a hyperinflationary presentation currency; or translates the results and financial position of a foreign operation that has a non-hyperinflationary functional currency into a hyperinflationary presentation currency.

Climate-related and Other Uncertainties in Financial Statements: The staff will inform the IASB about current initiatives in progress to address issues related to the reporting of climate-related and other uncertainties in financial statements, including their status and upcoming steps

Management Commentary: The IASB will receive an update on the project. Potential next steps could include collaborating with the ISSB in advancing the project; proceeding with the IASB project and drawing on input from the ISSB where necessary; or pausing the project until the new reporting landscape becomes more settled.

Provisions—Targeted Improvements: The IASB will discuss the direction of the project. The staff recommend that the IASB continue developing proposed amendments to IAS 37 and make the next project milestone the publication of an exposure draft for stakeholder comment.

Addendum to the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard: The IASB will discuss the staff recommendation to publish an addendum exposure draft that proposes amendments to the IFRS for SMEs Standard to align Section 7 Statement of Cash Flows with Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) and Section 30 Foreign Currency Translation with Lack of Exchangeability (Amendments to IAS 21).

Second Comprehensive Review of the IFRS for SMEs Accounting Standard: In this session, the IASB will continue the redeliberation of its proposals in the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard. The staff recommends that the IASB should finalise the proposals for the new Section 12 Fair Value Measurement without significant amendments to its overall content. The staff further recommends that the IASB does not amend Section 9 Consolidated and Separate Financial Statements to include requirements for investment entities and to remove the requirement from Section 22 Liabilities and Equity to present the amount receivable as an offset to equity in its statement of financial position if the equity instruments are issued before the entity receives the cash or other resources.

Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures: The IASB will decide whether to update the Exposure Draft Subsidiaries without Public Accountability: Disclosures for disclosure requirements in the forthcoming IFRS 18 Presentation and Disclosure in Financial Statements.

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

The report assesses progress being made on emission plans and examines the role of finance functions in assisting their organisations in defining a pathway to a low-carbon future.

The press release and full report are available on ACCA website.

We look forward to seeing you again after the holidays and to continue to be your preferred accounting website in 2024.