The podcast discusses the meeting of the Transition Resource Group (TRG) for Insurance Contracts on 4 April 2019 and the IASB discussion of possible amendments to IFRS 17 on 9 April 2019. The IASB's discussion considered some of the TRG findings.

The 10-minute podcast can be accessed on YouTube.

The purpose of the TRG is to seek feedback on potential issues related to implementation of IFRS 17 Insurance Contracts. Specifically, the TRG discussed the following two papers:

• Investment components within an insurance contract
• Reporting on other questions submitted

The meeting summary and audio recordings of each session are available on the TRG meeting page on the IASB’s website. For more information, see Deloitte's related IFRS in Focus newsletter. The IASB's discussion on amendments to IFRS 17 on 9 April also considered the TRG findings.

This issue features:

• Spotlight — Crypto-assets: The standard-setting perspective
• Preview — The Essentials: Analysing lessee financial statements and Non-GAAP performance measures
• We need your views
• Stay up to date
• Resources for investors

The Investor Update newsletter is available on the IASB’s website.

The Board discussed the following topics and questions:

• Sweep issues. The Board discussed additional stakeholder concerns relating to IFRS 17 (and IFRS 9) that have arisen in the project on the amendments to IFRS 17. On the effective date of the proposed amendments to IFRS 17, the staff recommended that the effective date is aligned with that of IFRS 17. On all other issues, the staff recommended that the Board not undertake any further action. The Board agreed unanimously with the staff recommendations.
• Annual improvements.
  • The Board discussed a number of minor changes the staff have become aware of through the ongoing implementation activities on IFRS 17 that would fall within the scope of the annual improvements process. There were some questions by the Board and additional clarifications will be added to the wording proposed by the staff. The Board agreed unanimously to include these changes in the forthcoming exposure draft.
  • The Board also agreed to include the minor changes to IFRS 17 identified as candidates for the annual improvements process in June 2018 in the forthcoming exposure draft.
• Overview of the amendments to IFRS 17. The Board was provided with an overview of all the amendments to IFRS 17 that the Board has tentatively decided to propose, the likely effects of the proposed amendments to IFRS 17, and a cost-benefit analysis for all amendments. This part of the session was educational in nature, and no vote was taken.
• Due process steps and permission for balloting.
  • The Board was asked to confirm its tentative decisions from the November 2018 meeting relating to the mandatory effective date of IFRS 17 and the fixed expiry date for the temporary exemption in IFRS 4 from applying IFRS 9. The Board confirmed that it wants to propose deferring the effective dates (unanimous vote).
  • The Board was asked to confirm that it wishes to proceed with an exposure draft to amend IFRS 17. The Board confirmed that it is satisfied that it has complied with the applicable due process steps and that it should begin the balloting process for the exposure draft (unanimous vote).
  • No Board member indicated a planned dissent at this stage.

The staff will now begin drafting the exposure draft, which it expects to issue by the end of June 2019. The comment period will be discussed at the May 2019 Board Meeting after obtaining permission from the Due Process Oversights Committee for a reduced comment period.

The newsletter highlights the Lab’s recently released report on artificial intelligence and provides a roundup of the Lab’s latest activities, including two conferences (on digital reporting and performance metrics).

The newsletter also provides an update of the Lab’s three current projects:  

1. Climate change and workforce reporting;
2. Sources and uses of cash;
3. Digital future - virtual reality, augmented reality and video

The full newsletter is available on the FRC website here.

The update reports on the EFRAG TEG meeting held on 20-21 March and the EFRAG CFSS and EFRAG TEG meeting held on 20 March.  The update also lists EFRAG publications issued in March which included:

• EFRAG’s final endorsement advice on the IASB’s publication Definition of a Business (Amendments to IFRS 3).
• Videos from EFRAG’s conference Fostering Innovation in Corporate Reporting.

Please click to download the March EFRAG Update from the EFRAG website.

The guidance includes:

• Accounting approach, presentation and disclosures with example disclosures in an appendix
• Transfers in and out
• Annuity buy ins/but-outs and longetivity swaps.
• Audit implications

The guidance is available to members on the PRAG website. Our related Need to know publication is available here.

The BEIS report is one of a number of reviews that are taking place, or have taken place, looking at different aspects of the audit market, including a Competition and Market Authority's (CMA) study into audit, the Brydon review on the future of audit and the Kingman review of the Financial Reporting Council (FRC).

The BEIS Committee's inquiry into the future of audit was launched on 12 November 2018 (link to Parliament website).  The object of the inquiry was to examine how the three reviews, indicated above, would complement each other, given the links between the quality of the product, its regulation and the health of competition. The BEIS Committee wanted to ensure that what emerged from these reviews was a coherent framework for auditing that could regain the confidence of investors and the public.  

The BEIS report is the output of a series of hearings that have been held with leaders of the Big Four audit firms, investors, academics, Audit Committee Chairs, the UK audit regulator, mid-tier firms and Government stakeholders.

Among the recommendations are proposals for at least an operational split of audit and non-audit services, with a structural split to be considered if this is deemed ineffective after three years; piloting joint audits between a Big 4 firm and a challenger firm in the 'upper reaches' of the FTSE 100, in conjunction with a cap on the market share of individual firms. These are alongside wider calls for a stronger regulator, a UK version of Sarbanes-Oxley and expanding the scope of audit.

Rachel Reeves MP delivered a keynote speech launching the committee’s report into the future of audit in Chartered Accountants’ Hall.

The full report and the keynote speech are available on the Parliament website.

The paper notes that good financial information underpins the capital markets but the institutional framework intended to promote confidence in corporate reporting can in fact compromise quality, because of piecemeal, reactive and ad hoc development over many decades. The press release notes:

The financial statements of listed companies have become more and more complex over the years. At the same time the system that underlies this complex financial reporting is characterised by internal inconsistency, duplication and omission. This makes the system less effective than it could be or should be. It is time everyone involved, from standard-setters, regulators to government, to recognise and address the challenges that have built up over decades.

Please click to access the following information on the ICAEW website:

• Press release
• Overview of the paper
• Background paper Financial Reporting: Who Does What?

The Board will consider the package of amendments to IFRS 17 Insurance Contracts it has been considering since June 2018. The staff conclude that none of the amendments either unduly disrupts implementation, or where there could be disruption, that the potential disruption is justified. In June 2018 the Board decided to propose some minor changes that it planned to include in the next Annual Improvements cycle. These will instead be included with the Exposure Draft for the package of IFRS 17 amendments. The staff also recommend that the effective date of IFRS 17 and of the proposed amendments be for annual periods beginning on or after 1 January 2022 (with earlier application permitted). The staff will be seeking clearance from the Due Process Oversight Committee to have a shorter than normal comment period.

The Board will consider the feedback it received on the Exposure Draft Accounting Policies and Accounting Estimates (Amendments to IAS 8). The staff’s preliminary view is that the Board should proceed with the project.

The project looking at goodwill and impairment returns to the Board. The staff recommend that the acquirer of a business be required to provide information to help a user of the financial statements assess whether a business combination was a good investment decision and whether that business is performing as expected. The paper sets out the recommended disclosures.

In Dynamic Risk Management the staff recommend that negative balances within the target profile should not be permitted within the DRM model; the changes to the risk management strategy and the target profile must occur infrequently; and the risk management strategy must be clearly documented within a specified time horizon and cannot be defined in a way that is contingent. They also recommend that separate line items in the primary financial statements should not be required for derivatives designated in the DRM model from other derivatives or for accumulated changes in fair value of designated derivatives. That information would be provided in the notes to the financial statements. Also, net interest margin should include the aligned portion but not the misaligned portion.

For the Disclosure Initiative the Board will be asked for clearance to proceed with an Exposure Draft to propose adding two examples to the Materiality Practice Statement related to accounting policies.

The Board will consider the potential to explore a form of predecessor approach for some business combinations under common control.  

In the Primary Financial Statements project the staff recommend that the Board clarify that MPMs (management performance measures) are subject to the general requirement that information included in the financial statements must provide a faithful representation. They also recommend that entities can only identify a measure as an MPM if they use the same measure in their public communications. The staff also have recommendations to clarify presentation issues related an entity’s “main business activities.”

There are also updates on Implementation Matters, the Research Programme and (orally) Management Commentary.  

More information

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