Comment letters on tentative agenda decision: IFRS 16 Leases—Definition of a Lease: Substitution Rights: In November 2022, the IFRS IC published a tentative agenda decision in response to a submission about how to assess whether a contract contains a lease applying IFRS 16 when the supplier has particular substitution rights.  Almost all respondents agreed with the IFRS IC’s analysis of level at which to evaluate whether a contract contains a lease. Most respondents agreed (or did not necessarily disagree) with the conclusion that, there is an identified asset in the fact pattern described, but some of them raised comments on the analysis in the tentative agenda decision. In this meeting, all IFRS IC members agreed with the conclusion in the agenda decision with suggested amendments to the text.

New item: IFRS 9 Financial Instruments—Guarantee over a Derivative Contract: The IFRS IC received a submission about how to assess whether an issuer accounts for a guarantee written over a derivative contract as a financial guarantee contract or a derivative. In the fact pattern described, Entity C provides a guarantee over a derivative contract between Entity A and Entity B, which promises to reimburse Entity A, in full or in part, the actual loss suffered in the event of a default by Entity B. The submitter asked whether such guarantee written meets the definition of a financial guarantee contract of a derivative. The staff concluded that the matter described in the request is, in isolation, too narrow for the IASB or the IFRS IC to address in a cost-effective manner.  All IFRS IC members agreed with this.

New item: IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments—Premium Receivable from an Intermediary: The IFRS IC received a submission about how an issuer accounts for premiums receivable from an intermediary. In the fact pattern described, a policyholder has paid the premiums to an intermediary when the amounts became due under an insurance contract. At this point, the insurer is legally obliged to provide insurance contract services to the policyholder, even if the intermediary does not pay the premiums to the insurer (under the agreement between the insurer and the intermediary, the intermediary is allowed to pay later). The submission asked, when the policyholder pays the premiums to the intermediary, whether the insurer is required to recognise the premiums receivable from an intermediary as a separate financial asset under IFRS 9 and remove these premiums from the measurement of the group of insurance contracts under IFRS 17. The staff concluded that the premiums receivables from the intermediary remain in the measurement of a group of insurance contracts until recovered or settled in cash. However, the view that the premiums receivable from an intermediary should be recognised as a separate financial asset under IFRS 9 and are removed from the measurement of the group of insurance contracts under IFRS 17 cannot be precluded. Some of the IFRS IC members agreed that both views are acceptable. Some had their preferred view over another, but they accepted or did not preclude another view. Overall, the IFRS IC decided to publish the tentative agenda decision.

New item: Home and Home Loans Provided to Employees: The IFRS IC received a submission about how an entity accounts for homes and loans to buy homes provided to its employees in two fact patters. In view of the fact that outreach indicates that neither of the fact patterns described in the submission is widespread, nor are the amounts involved material, that staff recommend not adding a standard-setting project to the work plan and to publish a tentative agenda decision that explains the reasons. All IFRS IC members agreed with this.

Potential Annual Improvements to IFRS Accounting Standards: IFRS IC members shared their views on the staff’s preliminary views on the following two proposed amendments to IFRS Accounting Standards and to include them in the next annual improvements cycle:

• IFRS 9 Financial Instruments and IFRS 16 Leases—Lessee accounting for lease payments forgiven
• Guidance on implementing IFRS 17 Insurance Contracts: Disclosure of deferred difference between fair value and transaction price

Input on IASB project: Business Combinations—Disclosures, Goodwill and Impairment: Possible changes to the impairment test of cash-generating units (CGU) containing goodwill: The IASB has a project which aims at improving information entities provide about their business combinations at a reasonable cost. The staff identified suggestions for changes to the impairment test of CGUs containing goodwill that the staff considered warrant further consideration. The staff paper provided details of each suggestion and initial staff comments. The purpose of the discussion is to obtain feedback on some suggestions respondents to the Discussion Paper had for changes to the impairment test of CGUs containing goodwill. The IFRS IC members shared their views on each of the suggestions for changes to the impairment test of CGUs containing goodwill.

Work in progress: The new matter, Merger between a parent and its subsidiary in separate financial statements, has not yet been presented to the IFRS IC.

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