The Board will discuss the following:

• Impact of covid-19 on Board timelines
• Leases and COVID-19
• Management Commentary
• Financial instruments with characteristics of equity
• Maintenance and consistent application
• Post-implementation review of IFRS 10–12
• Disclosure Initiative—Subsidiaries that are SMEs
• Amendments to IFRS 17 Insurance Contracts (oral update)
• SME Standard review and update

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.

The significance of the individual issues discussed in the webcasts will vary by industry and by entity, but we believe that the topics covered will be the most pervasive and difficult to address. The first webcast in the series discusses judgements and estimates, events after the reporting period and non-financial assets within the scope of IAS 36. Further webcasts will be made available over time.

Please click here to find an overview of the webcasts that have been published so far.

Background

Interbank offered rates (IBORs) are interest reference rates, such as LIBOR, EURIBOR and TIBOR, that represent the cost of obtaining unsecured funding, in a particular combination of currency and maturity and in a particular interbank term lending market. Recent market developments have brought into question the long-term viability of those benchmarks.

The IASB addresses the issues in a project split into two phases: Phase 1 dealt with pre-replacement issues (issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark). This part of the project was concluded on 26 September 2019 by publishing Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7).

Phase 2 of the project deals with replacement issues, therefore, the proposed amendments published today are intended to address issues that might affect financial reporting when an existing interest rate benchmark is actually replaced.

Suggested changes

The changes proposed in ED/2020/1 Interest Rate Benchmark Reform — Phase 2 (Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) relate to the modification of financial assets, financial liabilities and lease liabilities, specific hedge accounting requirements, and disclosure requirements applying IFRS 7 to accompany the Board’s proposals for classification and measurement and hedge accounting.

• Modification of financial assets, financial liabilities and lease liabilities. The IASB proposes a practical expedient for modifications required by the reform (modifications required as a direct consequence of the IBOR reform and made on an economically equivalent basis). These modifications are accounted for by updating the effective interest rate. All other modifications are accounted for using the current IFRS requirements. A similar practical expedient is proposed for lessee accounting applying IFRS 16. For qualifying modifications, there would be no specific gain or loss associated with the replacement of the IBOR rate.
• Specific hedge accounting requirements. Under the IASB's proposals, hedge accounting would not discontinued solely because of the IBOR reform. Hedging relationships (and related documentation) must be amended to reflect modifications to the hedged item, hedging instrument and hedged risk. Any valuation adjustments resulting from the amendments are recognised as part of ineffectiveness. Amended hedging relationship should meet all qualifying criteria to apply hedge accounting, including effectiveness requirements.
• Disclosures. In order to allow users to understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as well as the entity’s progress in transitioning from IBORs to alternative benchmark rates, and how the entity is managing this transition, the exposure draft proposes that an entity would disclose information about
  • how the transition from interest rate benchmarks to alternative benchmark rates is managed and progress made at the reporting date,
  • the carrying amount of financial assets and financial liabilities that continue to reference benchmarks subject to the reform, disaggregated by significant interest rate benchmark,
  • for each significant alternative benchmark rate to which the entity is exposed, an explanation of how the entity determined which modifications qualified for the practical expedient, including a description of significant judgements the entity made to determine qualifying modifications, and
  • to the extent that the IBOR reform has resulted in changes to an entity’s risk management strategy, a description of these changes and how is the entity managing those risks.

The IASB also proposes to amend IFRS 4 to require insurers that apply the temporary exemption from IFRS 9 to apply the amendments in accounting for modifications directly required by IBOR reform.

The IASB also proposes that the application of all proposed amendments should be mandatory. The IASB has also come to the conclusion that the nature of the proposed amendments is such that they can only be applied to modifications of financial instruments and changes to hedging relationships that satisfy the relevant criteria and, as such, no specific end of application requirements need to be specified.

Comments on the proposed changes are requested by 25 May 2020.

Effective date

The exposure draft proposes that the amendments would be effective for annual periods beginning on or after 1 January 2021 and would be applied retrospectively. Early application would be permitted.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• Short Snapshot overview of the proposed amendments (link to IASB website)
• Our UK Accounting Plus project page on IBOR reform and the effects on financial reporting — Phase 2
• Our related Need to know publication

In 2019, the European Securities and Markets Authority (ESMA) was commissioned by the EC to carry out research on potential short-term pressures in securities markets. The results, published in December 2019, included the finding that ESMA's investigation did not identify any need for amending existing accounting requirements. Rather, ESMA suggested three other areas where decisive action would support long-term investment behaviour:

• amending the Non-Financial Reporting Directive to establish principles for high quality non-financial information along with a limited set of specific disclosure requirements;
• promoting a single set of international ESG disclosure standards; and
• requiring the inclusion of non-financial statements in annual financial reports.

Notwithstanding these findings, the new EC consultation document contains the following question:

Question 16: Do you see any further areas in existing financial accounting rules (based on the IFRS framework) which may hamper the adequate and timely recognition and consistent measurement of climate and environmental risks?

The question can be answered with yes/no/don't know. However, only when answering "yes", a new question 16.1 pops up that allows the respondent to elaborate. Four areas where the accounting rules may prove contrary to sustainable finance are then suggested (impairment and depreciation rules, provision rules, contingent liabilities, and other) and it is possible to provide details.

Please click to access the consultation on the EC website. Comments are requested by 15 July.

The IFRS Foundation initiated the new compilation series in October 2019 and will continue it by publishing new volumes biannually in April and October. For more information, see the press release and compilation on the IASB website.

The objective of the document is to indicate the accounting implications of COVID-19-related government initiatives, including how IPSAS and other IPSASB guidance deal with transactions and events which arise because of the pandemic. The publication does not constitute an authoritative pronouncement of the IPSASB, nor does it intend to amend, or override the requirements of existing IPSAS or provide further implementation guidance.

Please click to access the publication on the IPSASB website.

Specifically, the Trustees are seeking individuals who have a preparer focus. For more information, see the updated release on the IASB’s website.

The statement notes that the responsibility for developing and maintaining high quality standards resides with the IASB and welcomes the IASB's recent educational material that addresses the application of accounting for expected credit losses in accordance with IFRS 9 Financial Instruments during the period of economic uncertainty arising from the COVID-19 outbreak. IOSCO also notes that the related financial instruments principles-based disclosure requirements in IFRSs (i.e. IFRS 7, IAS 1) should result in disclosure that considers the impact of the important emerging issues.

Please click to access the statement on the IOSCO website.

The update reports on the EFRAG Board meeting on 17 March, the EFRAG Technical Expert Group (TEG) meeting on 4 and 5 March and webcast on 20 March, the EFRAG TEG and EFRAG User Panel meeting on 4 March 2020, the EFRAG TEG and EFRAG Consultative Forum of Standard Setters (EFRAG CFSS) meeting on 25 March and the European Lab Steering Group meeting on 6 March.  

The update also lists EFRAG publications issued in March: 

• EFRAG's pre-consultation document, in anticipation of the IASB's forthcoming Exposure Draft IBOR Phase 2;
• EFRAG's announcement of the composition of the EFRAG Advisory Panel on Intangibles;
• EFRAG and the IFRS Foundation Trustees's jointly published article on the networking stakeholder event co-hosted with the IFRS Foundation Trustees on 18 February 2020;
• EFRAG's letter to the IASB requesting them to consider extending some of the consultation periods on recent or soon to be issued publications as in response to the Covid-19 pandemic;
• EFRAG's Letter to the IASB on amendments to IFRS17 Insurance Contracts;
• EFRAG's invitation for companies to participate in the field-test on the IASB's project Primary Financial Statements; and
• EFRAG's call for candidates to become members of the new Project Task Force on reporting of non-financial risks and opportunities and linkage to the business model of the European Lab.

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

The consultation page can be accessed here. Please note that you need to register in order to access the public consultation.