The two boards informed each other about their respective activities and exchanged views on technical topics in which they both have an interest, including rate-regulated activities and the IASB’s third agenda consultation. The UKEB also updated the AcSB on its activities relating to its assessment of IFRS 17 for adoption for use in the UK. For more information about the latest meeting, see the press release on the UKEB website.

The UKEB would like to hear views from as many UK stakeholders as possible to ensure those views are reflected in its response to the IASB. 

Additionally the UKEB Secretariat seeks feedback on the IASB's Post Implementation Review of IFRS 9 Financial Instruments, Classification & Measurement via a survey.

Further details and information on how to register for the roundtables are available on the FRC website. The survey can be accessed here.

Respondents to the consultation especially stressed the need for proper due process and transparency during the work that is already being carried out before the new Sustainability Standards Board has been established, the need for an orderly and transparent transition to the new governance structure, and the need to build on existing standards and frameworks for sustainability reporting and accounting and to cooperate with other standard setters in the field, especially the IFRS Foundation's ISSB.

The summary of responses is available on the EFRAG website.

Please click to access the updated alignment dashboard prepared for the December 2021 IPSASB meeting on the IPSASB website.

In this context, please see also our 2021 edition of IPSAS in your pocket published in February.

The report provides an assessment of the UK audit market as a whole and also sets out the FRC's expectations of how audit firms should deliver audit quality improvements so that the market works more effectively and in the public interest.

The report indicates that whilst there have been some successful improvement measures made at audit firms, 'audit quality remains mixed and inconsistent across the firms and in some instances, between audits at the same firms'. 

The FRC still finds deficiencies relating to lack of professional scepticism by auditors and also in the challenge of management assumptions.  However it has also seen some examples of good practice in the use of internal and external specialists to challenge management's assumptions, the delaying of audit opinion sign-offs to ensure sufficient time was available and robust challenge of the component auditor's work by group auditors.  

Due to an 'unacceptable' level of audits requiring improvements with respect to smaller firms which audit public interest entities, the FRC has increased its supervisory resources in that area to drive through improvements.  The FRC has recently published a guide on what make a good audit which sets out its views on what constitutes a good or high-quality audit, focusing on two key areas: how the audit itself is run and what makes for a high-performing audit practice.  It indicates that this will be 'particularly useful for the smaller firms as they continue to build their capability and capacity'.

The Developments in Audit Report also includes an overview of the FRC's supervisory work, audit market trends and new UK auditing standards.

A press release and the Developments in Audit Report are available on the FRC website.

The Committee will discuss the following:

• IFRS 15 — Principal versus agent: software resellers
• IFRS 16 — Economic benefits from use of a windfarm
• IAS 37 — Negative low or new energy vehicle credits
• IFRS 9 — TLRO III transactions
• Work in progress

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries as well as observer notes from the meeting on this page as they become available.

More in­for­ma­tion about the issues is set out below:

Click to access all our comment letters to the IASB, IFRS Foun­da­tion, and IFRS In­ter­pre­ta­tions Committee.

Background

In January 2020, the Board issued Classification of Liabilities as Current or Non-current, which amended IAS 1 Presentation of Financial Statements. The amendments clarified how an entity classifies debt and other financial liabilities as current or non-current in particular circumstances. The amendments are effective for annual reporting periods beginning on or after 1 January 2023, with earlier application permitted.

In December 2020, the IFRS Interpretations Committee published a tentative agenda decision in response to informal feedback and enquiries about how an entity applies the amendments to particular fact patterns. After considering feedback to its tentative agenda decision, the Committee handed the matter over to the IASB as that feedback provided information about situations the Board did not specifically consider when developing the 2020 amendments.

In response to that new information, the Board tentatively decided to amend IAS 1 with respect to classification (as current or non-current), presentation and disclosures of liabilities for which an entity’s right to defer settlement for at least 12 months is subject to the entity complying with conditions after the reporting period.

Key proposals

The main proposals in ED/2021/9 Non-current Liabilities with Covenants (Proposed amendments to IAS 1) would: 

• Modify the requirements introduced by Classification of Liabilities as Current or Non-current on how an entity classifies debt and other financial liabilities as current or non-current in particular circumstances: The Board proposes that conditions an entity must comply with within twelve months after the reporting period would have no effect on whether an entity has the right to defer settlement of a liability for at least twelve months after the reporting period, i.e. such conditions have no effect on the classification of a liability as current or non-current. When an entity classifies such a liability as non-current, however, it would be required to disclose information that enables users of financial statements to assess the risk that the liability could become repayable within twelve months. An entity would also present separately, in its statement of financial position, liabilities classified as non-current for which the entity’s right to defer settlement for at least twelve months after the reporting period is subject to compliance with certain conditions within twelve months after the reporting period.
• Defer the effective date of the 2020 amendments to no earlier than 1 January 2024.

The deadline for submitting comments on these proposals is 21 March 2022.

Effective date

The Board intends to decide on the effective date after exposure, but the date would be no earlier than 1 January 2024. The amendments would be applied retrospectively in accordance with IAS 8. Earlier application would be permitted.

Alternative views

The exposure draft contains alternative views by two Board members. Both members dissented because they disagree with the Board’s proposal to require an entity to present separately, in its statement of financial position, non-current liabilities subject to covenants. They would have preferred these conditions to be communicated through the notes to the financial statements.

Additional information

The following additional information is available on the IASB website and on IAS Plus:

• IASB press release
• Access to the exposure draft (includes basis for conclusions)
• Snapshot overview of the proposals
• Our UK Accounting Plus Project page on IAS 1 — Classification of debt with covenants as current or non-current
• Our related Need to know publication

The webinar will also present highlights from the FRC's forthcoming publication, 'Effective Stewardship Reporting: examples from 2021 and expectations for 2022'.

Further details and how to register for the event are available on the FRC website. 

EFRAG published its Final Comment Letter in October 2021.

The feedback statement summarises the main comments received by EFRAG on its draft comment letter and explains how the comments were considered by EFRAG during its technical discussions leading to the publication of EFRAG's final comment letter.

A press release and the feedback statement are available on the EFRAG website.