The final comment letter, which incorporates findings from an EFRAG-supported academic study, considers that IFRS 15 is generally working as intended.  

Nevertheless, EFRAG identifies some application challenges that should be further considered by the IASB in the context of this project. These include:

• challenges in determining whether a reporting entity is a principal or an agent; 
• challenges in accounting for contracts involving licences;
• challenges of applying the requirements of IFRS 15 along with the requirements of IFRS 3, IFRS 16, IFRS 10, and IFRS 11;
• challenge of identifying performance obligations related to contracts with upfront fees, pre-production services, and those involving licences; and 
• challenge in determining the transaction price in respect of the requirements for the estimation of variable consideration and the treatment of ‘negative’ revenue.

EFRAG has made suggestions for the IASB to address the above application challenges including through additional illustrative examples. 

The press release, the final comment letter.

Update January 2024 - the feedback statement is available on the EFRAG website.

The update reports on the EFRAG Joint Financial and Sustainability Reporting Technical Expert Group (EFRAG FR and SR TEG) on 18 October 2023, EFRAG Financial Reporting Board (EFRAG FRB) meeting on 3 October 2023 and the EFRAG FR TEG hybrid meeting on 19 October 2023 and webcast meetings on 24 October and 30 October 2023 and the EFRAG Sustainability Reporting Board (EFRAG SRB) meetings on 11 October, 24 October and 25 October 2023 and the EFRAG SR TEG meetings on 2 October, 17 October, 18 October and 26 October 2023.

The update also lists EFRAG publications issued in October including: 

• EFRAG's final endorsement advice regarding Supplier Finance  Arrangements (Amendments to IAS 7 and IFRS 7) to the European Commission
• EFRAG's final comment letter on the IASB's request for information on the Post-implementation Review of IFRS 15 Revenue from Contracts with Customers.

The update also covers EFRAG's sustainability reporting and related activities.

Please click to download the October 2023 EFRAG Update from the EFRAG website.

The discussion will focus on the objectives and uses of the statement of cash flows, and issues with how the statement of cash flows is currently prepared under the requirements of IAS 7 Statement of Cash Flows.

As part of its research project on the statement of cash flows, EFRAG is planning to issue a Discussion Paper for public comments that will:

1. List, and shortly discuss, different alternative objectives/uses of the statement of cash flows. This will include considering whether the statement should reflect changes in cash, changes in cash and cash equivalents or changes in working capital or net debt.
2. List the issues with current requirements/practice. The issues would be categorised/labelled according to which objective/use of the statement of cash flows (in (1)) they would be related to.
3. Discuss whether the IASB could consider the issues by targeted amendments to IAS 7, or a comprehensive review would be necessary to deal with the issues in a satisfactory manner.

The roundtable discussions are intended to receive input for (1) and (2) listed above.

The closed event will be held online on 17 November 2023.

Further details, including the discussion paper and details of how to register are available on the EFRAG website.

The Taxonomy Regulation requires, in its Article 8, in-scope companies to include in their non-financial statements or consolidated non-financial statements information on how, and to what extent, their activities are associated with economic activities that qualify as environmentally sustainable under Articles 3 and 9 of the Regulation.  Information to be disclosed as well as timing is specified in the Disclosures Delegated Act.

As part of its objective to coordinate European supervision and enforecement activities related to disclosures under Taxonomy Regulation, ESMA collected information from national enforcers with respect to the Fiscal Year 2022 non-financial statements published by European non-financial undertakings listed in regulated markets. The focus of the fact-finding exercise was to evaluate the quality of the disclosures with which issuers have responded to the new requirements. ESMA, in particular, was keen to understand the extent to which companies had responded to points it had made in its 2022 European Common Enforcement Priorities.

The key findings identified by ESMA were:

• Disclosure of mandatory Key Performance Indicators (KPIs): Almost all issuers (96% of the sample), disclosed the required Taxonomy alignment KPIs.
• Use and completeness of the mandatory reporting templates: The reporting templates were generally used, but for 30% of the sample they were either modified or not fully completed.  ESMA reminds issuers that full reporting using the complete templates is mandatory.
• Disclosure of mandatory qualitative information: At least some of the mandatory qualitative information regarding the issuers’ assessment of their compliance with transparency requirements in relation to the nature of their activities, the technical screening criteria, the Do No Significant Harm – DNSH criteria, and the minimum safeguards was missing or insufficient for more than 40% of the assessed issuers. In addition, only 40% of the sample provided comments on their eligibility or alignment rates.
• Materiality exemption: The OpEx alignment KPI was the KPI most often not reported (4% of the sample) or reported as zero (26% of the sample). Subject to conditions and specific disclosures, the Disclosures Delegated Act makes it possible to claim a materiality exemption for the OpEx KPI. In the cases where such claim was made, ESMA found that information did not in general allow an external reader to assess whether the conditions for applying the exemption were met and/or some of the criteria attached to it were applied appropriately.
• Other areas of incorrect application:  Additional areas of incorrect application were identified in relation to the transparency on the avoidance of double counting, the screening of activities against one climate objective only or the reconciliation with financial reporting.
• Good reporting practices were also encountered, such as detailed explanations on the nature of activities or compliance tests, as well as links to the corporate sustainability strategy.

ESMA reminds issuers of the importance of providing all quantitative and qualitative disclosures required by the Disclosures Delegated Act and ‘strongly encourages’ issuers to use guidance and tools published by the European Commission too assist them in their reporting.  Its latest Statement on European common enforcement priorities, provides ESMA’s expectations in this area.

ESMA notes that it may undertake further analysis on the areas of reporting which require more clarity or on those areas it has identified where there was material incorrect application of the requirements.

The full report is available on the ESMA website.

The IASB published the amendments to IFRS 16 Leases to clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale.

The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 21 November 2023.

The IASB published the amendments to IAS 12 Income Taxes to provide a temporary exception to the requirements regarding deferred tax assets and liabilities related to pillar two income taxes.

The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 9 November 2023.

Following introductory remarks, the TIG will discuss operating procedures and TIG member observations on implementation to date.

Please click to access the agenda and the paper for the meeting on the IFRS Foundation website.

The FRC has decided that the right balance at the current time is to take forward only a small number of the original 18 proposals set out in the consultation and to stop development of the remainder. Significantly, the internal controls proposal will be taken forward informed by stakeholder feedback to ensure there is a more targeted and proportionate Code revision. This will include both allowing more time for its implementation and ensuring the UK approach is clearly differentiated from, what the FRC describes as, “the much more intrusive approach” adopted in the US.

The FRC is not planning to take forward the remainder of the original proposals. These include those relating to:

• the role of audit committees on environmental, social and governance reporting
• modifications to existing code provisions around diversity and over-boarding
• Committee Chairs engaging with shareholders
• the proposals relating to the now withdrawn Statutory Instrument, i.e. in relation to an audit and assurance policy, reporting on distributable profits and resilience statement requirements

A small number of changes that streamline and reduce duplication associated with the Code that were overwhelmingly supported by stakeholders in the interests of reducing burdens will be taken forward.

The announcement confirms the intention to issue an updated Code in January 2024. The FRC has further confirmed that it plans to explore ways of ensuring any guidance issued to support implementation of the Code is proportionate and limits burdens whilst not weakening effective governance.

It is also confirmed that the Audit Reform Bill, and therefore the legislation required to establish the Audit, Reporting and Governance Authority, was not included in the King’s Speech.

The full FRC policy update statement is available on the FRC website. 

Comments are requested by 31 December 2023.

The press release and the draft Conformance Suite for the UKSEF Taxonomy are available on the FRC Website.

The 2024 suite incorporates changes to all of the FRC’s Taxonomies - UK IFRS, FRS 101, FRS 102, UKSEF, and Charities – available in English or Welsh. In addition, the Suite contains taxonomy documentation, supporting documents, key information sheets and release notes.

The key changes to the 2024 Taxonomy Suite are:

• Tags have been updated and added to enable UK Endorsement Board (UKEB) endorsed 2021 Narrow-scope amendments and Lease Liability in a Sale and Leaseback (Amendment to IFRS 16), and International Tax Reform—Pillar Two Model Rules (Amendments to IAS 12) and corresponding amendments to FRS 102.
• SECR tags units have been updated.
• The Original and Revised Data dimension labels have been updated, and guidance tags created, to clarify the meaning of these terms in the taxonomy.
• Recommendations on high quality disclosures of Expected Credit Losses have been digitised. Some pre-existing tags have been updated, and new tags have been created to enable preparers to tag with the granularity described in the recommendations.
• The Charities extension has been updated.

The Irish extension has not been updated and there will not be a new Irish extension for 2024.

The press release (including a link to the FRC 2024 Taxonomy Suite) is available on the FRC website.