The UK Endorsement Board's final comment letter has been informed through desk-based research and outreach with its stakeholders.  The final comment letter recommends that the IASB:

1. Retains sufficient flexibility in its work plan to address the interaction between IFRS and any future international sustainability standards to be developed by the International Sustainability Standards Board (ISSB).
2. Allocates more resource to its work on digital financial reporting.
3. Includes in its work on Standards development a structured and cohesive research programme which anticipates and addresses emerging issues.
4. Resource the suggested priorities by pausing projects such as the Management Commentary and the Second Comprehensive Review of the IFRS for SMEs projects and rationalising the Extractive Activities project.
5. Adds three large-scope high-priority projects to its work plan: climate-related risk, intangibles, and statement of cash flows and related matters.  The final comment letter recommends suggested scope for these projects.  It also suggests that where projects impact multiple standards, that the IASB applies a thematic approach where amendments to all relevant Standards can be addressed at once as part of the same project.

The final comment letter and the feedback statement are available on the UKEB website.

Mr Barckow, who is the former president of the German standard setter ASCG, noted that his previous role had prepared him well for the new job as "technical issues are technical issues, wherever you sit". However, he also noted that working for a global standard setter means building consensus and creating standards that work globally, which would be more difficult given the wider variety of economic backgrounds and reporting challenges. Concluding his remarks on his experience in his new role, Mr Barckow noted that as IASB Chair he would surely want to "make my mark, set out my ideas and pursue my priorities", but he noted that given the enduring pandemic and its consequences on everybody's lives he counted as one of the first big successes of his chairmanship that the changeover from his predecessor Hans Hoogervorst has been effective, seamless and quiet.

Mr Barckow then turned to the IASB's agenda for the coming years and in this context noted the IASB agenda consultation and consultations and changes in general, the interaction with the new possible sister board ISSB, and intangibles. On the agenda consultation, he noted, while the Board was seeking feedback on areas of focus, on criteria for new projects and on possible new projects themselves, the IASB has an ongoing work plan based on feedback to the previous agenda consultation and also needs to allocate resources to undertake post-implementation reviews of major standards. Mr Barckow also noted that the IASB has to be mindful of how many consultations and how much change it imposes on stakeholders.

Working with a sister board, the proposed International Sustainability Standards Board (ISSB) would also require resources, as Mr Barckow explained. The necessary connectivity and joined-up standard-setting would mean that each Board commits resources and at the same time benefits from the other Board’s expertise and resources while while acknowledging each other’s independence.Mr Barckow stressed that working together and developing requirements from joint principles and concepts was, in fact, one of the key selling points for having both Boards in the same organisation.

Turning to intangibles, Mr Barckow noted that IAS 38 Intangible Assets is more than 20 years old and has never been revisited other than for consequential changes resulting from other projects while the significance of intangibles, especially self-generated intangibles, has increased substantially over the last two decades. Therefore, he stated, he would like the IASB to explore what can be done to increase transparency in this area.

Concluding his speech, Mr Barckow commented on the relationship between the IASB and national standard setters. He noted that as a result of his previous role as national standard setter he could step back and look at the IASB’s work from the perspective of a national standard setter and to identify what is working well and where the IASB can get better. And he had learned in recent years what national standard setters are able to do. Mr Barckow mentioned the many examples of excellent research and outreach by national standard setters he had seen and that he was keen to explore whether the IASB can tap into those capabilities even more. He noted:

National standard-setters are essentially the eyes and ears of the IASB. They also have valuable expertise. You will always be closer to local stakeholders, especially investors, than the IASB can ever be, no matter how much outreach we do. Furthermore, you are more likely to see issues arising in your jurisdiction far sooner and help us to resolve them before they boil up in other jurisdictions as well. You provide a very helpful interface when it comes to the IASB liaising with stakeholders from your jurisdiction — whether in conducting outreach, addressing agenda item requests that have come to the IFRS Interpretations Committee or developing educational material, to name but a few.

And this was, Mr Barckow concluded, why the relationship with national standard setters will always be an important cornerstone in the IASB's work.

Please click to access a transcript of Mr Barckow's full speech on the IASB website.

Below is an analysis of all changes made to the work plan since our last analysis on 24 July 2021.

Standard-setting projects

• Disclosure initiative — Subsidiaries that are SMEs — An exposure draft was published on 26 July 2021 with comments requested by 31 January 2022; feedback received will be discussed in H1 2022; in addition, the project was renamed to Disclosure initiative — Subsidiaries without public accountability: Disclosures
• Disclosure initiative — Targeted standards-level review of disclosures — The discussion of feedback is now expected in Q1 2022 (previously H1 2022)
• Rate-regulated activities — The discussion of feedback is now expected in October 2021 (previously Q4 2021)

Maintenance projects

• Classification of debt with covenants as current or con-current — An exposure draft is now expected November 2021 (previously Q4 2021)
• Initial application of IFRS 17 and IFRS 9 — Comparative Information — An exposure draft was published on 28 July 2021 with comments requested by 27 September 2021; feedback received will be discussed in October 2021
• IAS 21 — Lack of exchangeability — The discussion of feedback is now expected in Q1 2022 (previously Q4 2021)
• Supplier finance arrangements — An exposure draft is now expected November 2021 (previously Q4 2021)

Research projects

• Extractive activities — A decision on the project direction is now expected in H1 2022 (previously September 2021)
• Goodwill and impairment — A decision on the project direction is now expected in H1 2022 (previously September 2021)
• Pension benefits that depend on asset returns — Research will now be reviewed in October 2021 (previously Q4 2021)
• Post-implementation review of IFRS 10-12 — A feedback statement is now expected in Q1 2022 (previously H1 2022)
• Post-implementation review of IFRS 9 — A request for information is still expected in September 2021, which would mean "this week"

Other projects

• Agenda consultation 2020 — The discussion of feedback is now expected in November 2021 (previously Q4 2021)

The above is a faithful comparison of the IASB work plan at 24 July 2021 and 27 September 2021. For access to the current IASB work plan at any time, please click here.

The objective of the FAQs is to inform UK company stakeholders of developments in sustainability standard setting by the International Financial Reporting Standards Foundation (IFRS Foundation).

The press release and the FAQs are available on the FRC website.

The FRC published its consultation paper on its proposals to update and strengthen the UK's Audit Firm Governance Code in August 2021.

The webinar will be held on 12 October 2021 with the roundtable event on 19 October 2021.  The objective of the roundtable event is to allow stakeholders the opportunity to discuss the proposals in more detail and share views directly.  The FRC is particularly keen to hear from the following stakeholders:  

• Investors and users of audited accounts
• Finance Directors  
• Audit Committee Chairs and Audit Committee Members
• Academics

A press release which includes details of how to register for the events is available on the FRC website.

Overall, we believe that the Board’s time is appropriately allocated to the different activities and that this allocation will remain largely appropriate for the next few years. However, we believe that two key areas will require further direct attention by the Board:

• Sustainability reporting related issues: As noted earlier, we support the IFRS Foundation continued efforts to establish a sustainability standard-setter under its institutional framework. We also noted that it will be crucial that the two Boards cooperate on fundamental elements that will be common to both Boards to ensure connectivity between financial and sustainability reporting. Amongst others, this would include work on the conceptual framework and on management commentary (beyond the project currently on the work plan of the IASB Board). We believe that the proposed projects on disclosure of intangible assets and on climate and other sustainability-related risks disclosures discussed in the request for information would also benefit from the collaboration between the Board and a future new board working on international sustainability reporting standards.
• Digital reporting: We note that currently the time spent by the Board in this area is largely focused on taxonomy. We believe that Board should explore how digital reporting is changing the way investors consume information with a view to determine how this should be reflected in the way IFRS Standards are written. This seems to be a critical factor to consider as part of the Board’s project on improving disclosure.

Please click to download our full comment letter, which also includes a list of the key projects that we believe should be added to Board’s work plan, here.

The guide is a companion to the <IR> Framework.  Like the <IR> Framework, the guide is written in the context of private sector, for-profit companies of any size, but can also be applied by public sector and not-for-profit organizations. 

The Guide explores the basics of integrated reporting, identifies potential catalysts for change, and offers a steppingstone approach to implementation.  Specifically the guide is intended for those interested in:

• learning the basics of integrated reporting;
• identifying the catalyst for integrated reporting;
• preparing for a successful transition to integrated reporting;
• selecting a starting point for the integrated report; and
• developing a roadmap for <IR> Framework adoption.

The press release and guide are available on the Value Reporting Foundation website.

Although the FRC did identify some examples of good disclosure it’s overall conclusion is that there is still significant scope for improvement.

In preparing their upcoming annual reports, the FRC expects companies to prepare viability and going concern disclosures which:

• Include sufficient company-specific qualitative and quantitative information to enable a reader to fully understand the assessment made. Such disclosures might usefully include; details of drawn and undrawn facilities in place and reliance upon such facilities; explanation of any reliance on any government support programmes; details of covenants including headroom; and information on post balance sheet changes to liquidity.
• Are proportionate to the uncertainties to which the company is exposed and to its financial position.
• Are based on assumptions which are clearly consistent with those used in other forward-looking areas of the financial statements such as impairment testing and the assessment of the recoverability of deferred tax assets.
• Clearly explain the inputs and assumptions used in forecast scenarios (providing quantitative as well as qualitative information).
• Explain the sensitivity analysis, stress and reverse stress tests carried out to support the assessment and provide details of the inputs (quantitative as well as qualitative detail) and outcomes of any such analysis.
• Disclose information on how they are resilient to risks which could threaten either their going concern status or longer-term viability including how they are resilient to principal risks and how the impact of such risks could be mitigated if they were to crystallise.

In addition to setting out its expectations of what better practice viability and going concern disclosures should contain, the FRC also provides its expectations with respect to each statement. It expects:

Viability statements to:

• Clearly justify the period of assessment taking into account, for example, debt repayment profiles, the nature of the business and its stage of development, planning and investment periods, strategy and business model and capital investment.
• Provide longer-term information and extend their period of assessment beyond the common period of three years.  
• Draw attention to any assumptions or qualifications on which the assessment is dependent.
• Clearly map principal risks considered to the viability scenarios tested.

Going concern disclosures to:

• Clearly identify any material uncertainties related to events or conditions which may cast significant doubt on an entity’s ability to continue as a going concern.
• Highlight the company-specific significant judgements made by management in determining whether or not the adoption of the going concern basis is appropriate and whether or not there are material uncertainties in respect of going concern to disclose.

A press release and the full report is available on the FRC website.  A webinar to discuss the report will be held on October 20.  A press release including details of how to register for the webinar is available on the FRC website. 

The Board will continue yesterday's discussion on Friday at 11:45. We have updated our agenda for the meeting accordingly.

The Committee discussed the comment letter analyses for two tentative agenda decisions, input on a Board project and two initial considerations.

IFRS 16 Leases—Non-refundable VAT on Lease Payments: In March 2021, the Committee discussed a submission about whether a lessee includes non-refundable VAT as part of the lease payments. In that meeting, the Committee members generally agreed with the accounting conclusion but some of them were not convinced that the matter is not material or widespread based on the limited outreach performed by the staff. The responses from the comment letters reflected similar views and some respondents requested an explanation of the accounting treatment of the non-refundable VAT in the agenda decision. The Committee decided to finalise the agenda decision.

IAS 32 Financial Instruments: Presentation—Accounting for Warrants that are Classified as Liabilities on Initial Recognition: In March 2021, the Committee discussed a submission asking whether the issuer reclassifies a warrant (which is classified as a financial liability at initial recognition) as equity when the exercise price is subsequently fixed. The staff concluded that the matter, in isolation, is too narrow to be answered and recommended publishing a tentative agenda decision to explain this. On the other hand, they believed that the broader issues of reclassifying financial instruments are better addressed as part of the Board’s Financial Instruments with Characteristics of Equity (FICE) project. In the meeting, the Committee members generally agreed with the staff's recommendations as did most respondents to the tentative agenda decision. The Committee decided to finalise the agenda decision.

Input on Board project

Proposed amendments to IFRS 16 Leases—Lease Liability in a Sale and Leaseback: In November 2020, the Board published ED/2020/4 Lease liability in a Sale and Leaseback, which proposed an amendment to IFRS 16. The comment period ended in March 2021 and the Board discussed the feedback on the ED at its meeting. The staff analysed the feedback and provided recommendations on the project direction in the agenda paper.

Most of the Committee members supported the ‘expected payment method’ as an interim provision but a number of them suggested to leave it open at this stage because none of the approaches is perfect.

Initial consideration

IAS 7 Statement of Cash Flows—Demand Deposits with Restrictions on Use: The Committee received a submission asking whether an entity includes demand deposits with restrictions on use as a component of cash and cash equivalents ("C&CE"). The terms and conditions of the demand deposit do not prevent the entity from accessing amounts held in the demand deposit, but the entity cannot use the cash other than for the purpose specified in the agreement. The staff analysed that such demand deposits should be included in C&CE in the statement of cash flows and could be presented as C&CE in the statement of financial position, unless presenting it separately in an additional line item is relevant to an understanding of the entity's financial position. The information about the restrictions is required to be disclosed under various IFRS Standards.

The Committee decided not to add the matter to the standard-setting agenda and instead to publish a tentative agenda decision with edits that were suggested during the meeting.

IFRS 9 Financial Instruments—Cash Received via Electronic Transfer as Settlement for a Financial Asset: The Committee received a submission asking the timing of recognition of cash received via Bacs, a formal automated settlement process, as settlement for a financial asset. The submitter asked whether it is acceptable for the entity to derecognise the trade receivable and recognise the cash on transfer initiation date, rather than the transfer settlement date. The staff concluded that the trade receivable is generally derecognised on the settlement date, the date when the contractual right to the cash flows from the trade receivable expires. Also, cash should be recognised on the transfer settlement date because the entity has a right to obtain cash from the bank only when cash is deposited in its bank account.

The Committee decided not to add the matter to the standard-setting agenda and instead to publish a tentative agenda decision with edits that were suggested during the meeting.

Work in progress: The staff are in the process of analysing three matters:

• Principal versus agent—IT resellers (IFRS 15)
• Deficits in low/new energy vehicle credits (IAS 37)
• Rent Concessions—lessors and lessees (IFRS 16 and IFRS 9)

More In­for­ma­tion

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