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 Economic Crime and Corporate Transparency Act 2023 will, amongst other things, simplify and increase transparency of reporting by companies, particularly small companies and micro-entities.

Under the Act:

• the option to prepare and file abridged accounts will be removed;
• the option for small companies to omit their profit and loss account and directors’ report from the filed accounts will be removed;
• micro-entities will be required to file their profit and loss account but the option to not prepare a directors’ report will be retained;
• there are powers to make regulations to restrict publication of some of the information within small and micro-entity profit and loss accounts, which are expected to be the subject of further consultation – the full P&L still being filed; and
• companies claiming an audit exemption will be required to include a statement by the directors on the face of the balance sheet confirming which exemption is being taken and to confirm that the company qualifies for the exemption.

It is expected that there will be further announcements from Companies House and The Department for Business and Trade (DBT) as to when these changes will be introduced. The Act also paves the way for filing of accounts at Companies House to become fully electronic, removing the ability to file hard copy.

The Act also introduces additional requirements regarding company formation and names, confirmation statements and identity verification of persons with significant control. It grants additional powers to Companies House (for example over company registration, verification, investigation and enforcement) and tightens registration and increases transparency requirements on limited partnerships.

A copy of the press release, full Act and fact sheets are available on the Government website.  Impact assessments are available on the government website here.

Drawing on the lessons learned from Financial Reporting Lab participants, the report, Materiality in practice:applying a materiality mindset, is intended to act as a toolkit to help companies apply a materiality mindset to reporting.  The report covers three key areas:

• Think about investor needs and decision-making.  Understanding how investors use information to make decisions helps boards and management when making materiality assessments.  This aspect of the toolkit provides readers with an understanding as to what information investors look for in an annual report and how they use that for decision-making.   
• Take a holistic approach to materiality.  The report encourages companies to think holistically about what information is material to their stakeholders when preparing annual reports.  It identifies that boards and management can benefit from aligning their materiality assessments more with investor needs and explores how companies can take a more holistic and connected approach to materiality.
• Embed a materiality mindset.  This part of the report provides guidance and tips on how to embed a materiality mindset into corporate reporting.

Applying a holistic mindset is also important for sustainability-related reporting as highlighted in two previous reports by the Financial Reporting Lab (ESG data production and ESG data distribution and consumption).  The findings of those reports have now been brought together into one useful summary.

A press release, the full report and the summary of the previous two Financial Reporting Lab reports are available on the FRC website.

Proposed amendments to the SORP include:

• updates to the section of the SORP which outlines the contents of an LLPs annual report and financial statements to take into account the Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/46) which came into effect for financial years beginning on or after 6 April 2022.  These regulations require certain LLPs and groups to make climate-related financial disclosures aligned with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.
• additional guidance for certain specific scenarios in relation to the sharing of group profits and amounts payable to former members in response to stakeholder feedback received as part of the 2021 LLPs SORP consultation.

Overall we believe that the proposed revisions are appropriate.

Our full comments to all questions raised in the invitation to comment are contained within the comment letter.

The following topics were discussed

Dynamic Risk Management: The IASB discussed the staff’s preliminary view on the scope of the Dynamic Risk Management (DRM) model, that is the type of risk management activities for which the application of the DRM model would be appropriate and provide useful information. The staff presented their view on what would be the relevant characteristics of a risk management strategy and activities can be inferred from the elements of the DRM model, such as the Current Net Open Position and the Risk Mitigation Intention, as well as the business activities that give rise to the interest rate risk exposure. The IASB did not make any decision at this meeting.

Rate-regulated Activities: The IASB made decisions on the proposals in the Exposure Draft Regulatory Assets and Regulatory Liabilities, in particular on the direct (no direct) relationship concept and the boundary of a regulatory agreement.

Maintenance and consistent application: The purpose of this session was to ask IASB members whether they object to several agenda decisions that have been published by the IFRS Interpretations Committee. No IASB member had any objections to the agenda decisions.

Equity Method: The IASB decided that its previous tentative decisions on application questions for investments in associates also apply to parents that elect to use the equity method to investments in subsidiaries in their separate financial statements, and to investments in joint ventures.

Amendments to the Classification and Measurement of Financial Instruments: The IASB discussed feedback on the Exposure Draft Amendments to the Classification and Measurement of Financial Instruments, in particular feedback received about elements of interest that are consistent with a basic lending arrangement and contractual terms that change the timing or amount of contractual cash flows. The IASB did not make any decisions.

Primary Financial Statements: The IASB discussed sweep issues that arose when the staff balloted the new IFRS 18 Presentation and Disclosure in Financial Statements. The IASB decided to require an entity to present a line item for cost of sales separately from any other expenses classified by function in the statement of profit or loss only if the entity classifies operating expenses by function that include cost of sales. The IASB also decided to clarify that for the statement of financial position an entity uses the characteristics of duration and timing of recovery and settlement to classify assets and liabilities as either current or non-current and the characteristic of liquidity to classify assets and liabilities by order of liquidity; and the characteristics of nature and function to aggregate assets and liabilities into separate line items. Other characteristics, like duration, liquidity, measurement basis, type and tax effects, assist an entity identifying the nature or function of the assets and liabilities. The IASB furthermore decided to confirm that an entity that presents one or more function line item will be required to disclose in a single note the amounts for these expenses that are included in each line item in the operating category only.

Second Comprehensive Review of the IFRS for SMEs Standard: The IASB continued the redeliberation of its proposals in the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard. The IASB decided to align the Standard with IFRS 15; clarify how an entity applies the rebuttable presumption in paragraph 9.5 of the Standard; retain the requirements in the Standard for recognising development costs for intangible assets and for borrowing costs for qualified assets; and expose for public comment a proposal to align the Standard with Supplier Finance Arrangements (which amended IAS 7 and IFRS 7) and Lack of Exchangeability (which amended IAS 21).

Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures: The IASB decided to make amendments to the sections related to IFRS 2, IFRS 3, IFRS 7, IFRS 12, IFRS 15, IFRS 16, IAS 2, IAS 7, IAS 12, IAS 19, IAS 29, IAS 37 and IAS 41 to clarify the disclosure requirements and make them more consistent across the Standards.

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

In the podcast, three of the eight projects discussed during the meeting are discussed in depth:

• Amendments to IFRS 9 — Classification and measurement;
• Equity method; and
• Second comprehensive review of the IFRS for SMEs.

The podcast can be accessed here on the IFRS Foundation website.

An analysis of changes to the work plan resulting from the IASB discussions can be found here.

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 full agenda for the meeting is sum­marised below:

Agenda papers for this meeting are available on the IFRS Foun­da­tion's website.

A summary of the agenda is set out below:

Agenda papers for the meeting are available on the IFRS Foundation website

Below is an analysis of all changes made to the work plan since our last analysis on 26 September 2023.

Stan­dard-set­ting projects

• Business Combinations — Disclosures, Goodwill and Impairment — An exposure draft is expected in Q1 2024 (pre­vi­ously H1 2024)
• Disclosure Initiative — Subsidiaries without Public Accountability: Disclosures — An IFRS Accounting Standard is now expected in Q2 2024 (previously H1 2024)
• Second Comprehensive Review of the IFRS for SMEs Accounting Standard — The IFRS for SMEs Accounting Standard is now expected in H2 2024 (previously 2024)

Strategy and governance projects

• ISSB Consultation on Agenda Priorities — The feedback on the request for information is now expected in December 2023 (previously Q4 2023)

Main­te­nance projects

• Amend­ments to the IFRS for SMEs — International tax reform — Pillar Two Model Rules — The project has been removed from the work plan due to the issuance of the IFRS for SMEs amendments on 29 September 2023
• Climate-related and Other Uncertainties in the Financial Statements — A decision on the project’s direction is now expected in Q1 2024 (previously H1 2024)
• International Applicability of the SASB Standards — The project is now considered a maintenance project; SASB amendments are expected in December 2023
• Power purchase agree­ments — First feedback on the project resulting from the discussions of the IASB advisory groups will be discussed in December 2023
• Provisions — Targeted Improvements — A decision on the project direction is now expected in December 2023 (previously Q4 2023)

Research projects

• Ex­trac­tive ac­tiv­i­ties — The project summary is now expected in December 2023 (previously Q4 2023)

Other projects

• IFRS Accounting Taxonomy Update — Amend­ments to IAS 12, IAS 21, IAS 7 and IFRS 7 — The proposed IFRS Taxonomy update was published on 5 October 2023 and feedback received will be discussed in Q1 2024
• IFRS Accounting Taxonomy Update — Primary Financial Statements — The proposed IFRS Taxonomy update is now expected in H1 2024 (pre­vi­ously 2024)
• IFRS Sustainability Disclosure Taxonomy — Discussion of the proposed taxonomy feedback is now expected in November 2023 (previously Q4 2023)

The above is a faithful com­par­i­son of the IASB and ISSB work plan at 26 September 2023 and 30 October 2023. For access to the current work plan at any time, please click here.