The Committee discussed the comment letter analysis for one tentative agenda decision and two new submissions. One topic was deferred to the next meeting.

Comment letter analysis

IFRS 16 Leases—Economic Benefits from Use of a Windfarm: In June 2021, the Committee published a tentative agenda decision in response to a submission about the definition of a lease. The submitter asked whether, applying IFRS 16:B9(a), an electricity retailer (customer) has the right to obtain substantially all the economic benefits from use of a windfarm throughout the term of an agreement with a windfarm generator (supplier). The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis to account for this matter. Many of the respondents to the tentative agenda decision agreed with the conclusion. Nonetheless, some of them raised some further matters for the Committee to consider. The staff presented an analysis of these matters and the Committee decided to finalise the agenda decision with the addition of two references to previous agenda decisions to address issues raised by respondents.

IFRS 9 Financial Instruments and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance—TLTRO III Transactions: In its June 2021 meeting, the Committee discussed a submission asking how banks account for the European Central Bank (ECB)’s Targeted Longer-Term Refinancing Operations (TLTRO). Specifically, the submission asked whether the TLTRO III tranches are loans at a below-market interest rate which should be accounted for as a government grant. The staff have analysed the comment letters and recommended finalising the agenda decision with minor editorial changes.

This agenda item was not discussed due to lack of time and was deferred to the next meeting.

New submissions

IFRS 15 Revenue from Contracts with Customers—Principal versus Agent: Software Reseller: The Committee received a submission asking whether a reseller of software licences is a principal or agent in respect of the standard software licences provided to the customer. The staff found that the fact pattern is highly specific and even small or subtle differences in the specific facts and circumstances could change the conclusion when applying the requirements about principal versus agent considerations in IFRS 15. The staff were therefore of the view that it would be inappropriate for the Committee to conclude whether the reseller is a principal or agent in the fact pattern submitted. The Committee decided to publish a tentative agenda decision that only sets out the applicable requirements in IFRS 15 and explains how a reseller might apply those requirements.

IAS 37 Provisions, Contingent Liabilities and Contingent Assets—Negative low or new energy vehicle credits: The Committee received a submission asking whether an entity with negative low emission vehicle credits has a present obligation that meets the definition of a liability in IAS 37. If the answer to this question is "no", the submitter asked whether the Committee’s views would be different if the entity had entered into a binding contract to purchase positive new energy credits before the end of the reporting period the entity, but that contract is settled after the end of the reporting period. The Committee decided to publish a tentative agenda decision outlining whether an entity with negative low emission vehicle credits has a present obligation that meets the definition of a liability in IAS 37.

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

• Rent Concessions: Lessors and Lessees (IFRS 16 and IFRS 9)
• Special Purpose Acquisition Companies (SPAC): Classification of Public Shares as Liabilities or Equity (IAS 32)

More In­for­ma­tion

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

The agenda items for discussion are as follows:

• Due Process Handbook – Update 
• IFRS 17 - Update on Consultation 
• Disclosure Requirements in IFRS Standards A Pilot Approach – Final comment letter and Feedback Statement
• Subsidiaries without Public Accountability: Disclosures - Draft Comment Letter 
• PIR: IFRS 9 – Classification & Measurement - Draft Comment Letter 
• Research on subsequent measurement of goodwill - Response to IASB and Feedback Statement 

The meeting agenda and papers and details of how to register are available on the UKEB website. 

The recording of this meeting is available on the UKEB website.

The Amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The Amendments are effective for annual periods beginning on or after 1 January 2023, with earlier application permitted.

EFRAG recommends the endorsement of the Amendments. EFRAG’s assessment is that the Amendments meet all the technical endorsement criteria of the IAS Regulation and are conducive to the European public good.

A press release and the endorsement advice letter to the European Commission are available on the EFRAG website. EFRAG has also updated its endorsement status report.

The report includes multiple examples of good practice and identifies areas where the FRC expects to see improvements next year.  The FRC has seen good reporting on governance, resourcing, and the integration of stewardship and ESG factors into investment decision-making. However, it highlights that there is room for improvement in explaining how stewardship-related conflicts of interest are managed, how managers review and assure their stewardship activities and how they monitor and hold to account service providers operating on their behalf.

The report outlines key areas of focus for applicants to report on in the future, including:

• reflections on the effectiveness of investor actions relating to how market-wide and systemic risks are being managed;
• stewardship in asset classes other than listed equity; and
• echoing the FRC’s recent review of corporate governance reporting, calling for a focus by reporters on outcomes for each Principle of the Code and including relevant evidence to back this up, for example case studies that can illustrate both process and impact.

Early in 2022 the FRC will publish a research report that looks at how stewardship governance, resourcing and engagement has evolved and the influence of the new Code.

A press release and the report is are available on the FRC website.

The update reports on the EFRAG Board webcast meetings on 2 and 18 November, the EFRAG TEG webcast meeting on 24-25 November and the EFRAG TEG and EFRAG Consultative Forum of Standard Setters webcast meeting on 24 November. The update also covers the activities of the European Reporting Lab as well as webinars and online outreaches.

The update also lists publications issued in November including:

• The European Union Commission Regulation endorsing IFRS 17 Insurance Contracts;
• EFRAG's Feedback Statement related to its Final Comment Letter on the IASB Exposure Draft ED/2021/04 Lack of Exchangeability;
• EFRAG's Feedback Statement related to its Final Comment Letter on the IASB Exposure Draft ED/2/2021/8 Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Proposed amendment to IFRS 17);
• EFRAG's Feedback Statement related to its Final Comment Letter on the IASB Discussion Paper DP/2020/2 Business Combinations under Common Control; 
• EFRAG's Draft Comment Letter in response to the IASB request for information as a part of the Post-implementation Review of the classification and measurement requirements of IFRS 9 Financial Instruments.

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

The proposed changes aim to reflect developments in the technology that underlies or relates to the IFRS Taxonomy. They also consider variation in standards and practices and will support the usage of the IFRS Taxonomy or comparable taxonomies in different regulatory environments.

Details on the proposed changes are available in the press release on the IASB website and in proposed update itself. Comments are requested by 3 January 2022.

This second paper, Market Value: An Established Basis of Value, includes discussions on:

• Price, cost, value and worth
• How do we define what the ‘market’ is and how does this impact on market value?
• What is the market value conceptual framework?
• Is market value backward looking?
• Are the ‘peaks’ and ‘troughs’ truly captured when using a market value premise?
• How does the valuer utilise assumptions and special assumptions with market value?

Please click to access the perspectives paper through the press release on the IVSC website.

The agenda for the meeting is sum­marised below:

Agenda papers from this meeting are available on the IASB's website.

The role of the FRAB is “to ensure that gov­ern­ment fin­an­cial re­port­ing meets the best pos­sible stand­ards of fin­an­cial re­port­ing by fol­low­ing Gen­er­ally Ac­cep­ted Ac­count­ing Prac­tice (GAAP) as far as pos­sible”. The FRAB in­cludes rep­res­ent­at­ives from the ac­count­ancy pro­fes­sion in the private and public sectors, aca­demia and gov­ern­ment bodies. The board meets reg­u­larly to con­sider pro­posed changes to policy and prac­tice.

Key topics dis­cussed during the November meeting in­cluded:

• An update on the WGA 2019-20 and 2020-21;
• Updates on CIPFA/LASAAC and CIPFA Code 2022-2023 developments;
• An update on FReM 2021-22 and FReM 2022-23 with illustrative statements;
• Updates on IFRS 17 In­sur­ance Con­tracts, IFRS 9 Financial Instruments adaptation, Discount Rates and Accounting for social benefits - IPSAS 42 Social Benefits and IFRS;
• Updates from the NAO regarding the 2020-21 audit and forward look;
• CIPFA Sustainability updates and updates from the Sustainability Working Group; and
• An update on dis­cus­sions held by and de­cisions made by the IFRS In­ter­pret­a­tions Com­mit­tee.

The associated documents for the November 2021 meeting are avail­able on the HM Treas­ury website.

The Advisory Council is the formal advisory body to the Trustees, the IASB, and the ISSB. It advises the IFRS Foundation on its strategic direction, technical work plan and priorities.

The new and reappointed members of the Advisory Council are:

• Michiel van der Lof - EY
• Melissa Taylor - KPMG
• Fergun Condon - Grant Thornton
• Emmanuelle Revolon - International Co-Operative Alliance
• Kevin Dancey - IFAC
• Cliff Nyandoro Magara - Institute of Certified Public Accountants of Kenya
• Garth Jones - AIA Group
• Maria Ángeles Peláez Morón - BBVA
• James Andrus - Council of Institutional Investors
• Trevor Derwin - Deloitte
• Ellen Gaston - Internatonal Monetary Fund
• Sergey Epifanov - PJSC LUKOIL
• M P Vijay Kumar - South Asian Federation of Accountants (SAFA) 
• George Iguchi - Securities Analysts Association of Japan

All appointments take effect 1 January 2022 and are for a three-year period.

The Advisory Council’s Chair, Bill Coen, has also been re-appointed, effective for three years from 1 February 2022.

In addition, the Trustees note that the following members are stepping down from the Council at the end of 2021 or have already stepped down earlier this year: Daniel Civit, Aziz Dieye, Isabelle Ferrand, Russell Guthrie, Tessa Kuijl, Andrew Marshall, James Luke, and Carolyn Rogers.

The press release announcing the new appointments can be found on the IASB's website.