The field-testing will provide the opportunity to test the proposals, identify any issues specific to UK companies, and will help to influence the further development of these proposals by the IASB. 

The UKEB will use the results of the field testing to prepare its comment letter to the IASB.

For more information, see the press release on the UKEB website.

This was the last meeting with Hans Hoogervorst as Chair.

The following topics were on the agenda:

Board work plan update: The staff provided an update of its activities. The Board completed amendments to: IAS 8 (Definition of Accounting Estimates); IAS 1 (Disclosure of Accounting Policies); IFRS 16 (Covid-19-Related Rent Concessions beyond 30 June 2021); and IAS 12 (Deferred Tax related to Assets and Liabilities arising from a Single Transaction).

At future meetings, the Board will be asked whether it wants to add projects for the interaction of IFRS 10 and IFRS 16 (sale of a subsidiary with a leaseback) and amendments to IFRS Practice Statement 2 relating to information about possible future events that have not affected the entity’s financial performance or financial position and have uncertain outcomes, similar to the proposals in the Exposure Draft Management Commentary.

The Board currently has six consultation documents open for comment and expects to publish in the next six months an Exposure Draft on disclosure by subsidiaries without public accountability and a Request for Information as part of its post-implementation review of the classification and measurement requirements in IFRS 9.

Board members provided no comments.

Initial application of IFRS 17 and IFRS 9: In May, the Board discussed an accounting mismatch between financial assets and insurance contract liabilities that could arise at the beginning of the comparative period on transition to IFRS 17 when financial assets have been derecognised during the comparative period. The Board decided to propose a narrow-scope amendment to IFRS 17 to permit an entity to apply a classification overlay in the comparative period(s) presented on initial application of IFRS 17 and IFRS 9. The proposal will have a 60-day comment period (which the Trustees have approved).

Equity Method—Identifying the principles in IAS 28 Investments in Associates and Joint Ventures:  The staff have identified what they consider to be the principles in IAS 28, and principles they say are missing. They plan to use the analysis to address application questions. They do not intend incorporating the principles into IAS 28.

Goodwill and Impairment: The Board reaffirmed the project’s objective and scope.   

Primary Financial Statements: The Board decided to require that, if a numerator or a denominator of a ratio meets the definition of an MPM, that numerator or denominator should be included in the scope of the MPM requirements in order to ensure all subtotals of income and expenses used in communicating performance are in the scope of MPMs. The Board decided not to explore expanding the scope of MPM to include measures based on line items presented in the statement(s) of financial performance, the cash flow statement, the statement of financial position or ratios. 

Maintenance and Consistent Application:

IFRS Interpretations Committee Agenda Decisions

No Board members objected to the publication of two agenda decisions: Costs Necessary to Sell Inventories (IAS 2) and Preparation of Financial Statements when an Entity is No Longer a Going Concern (IAS 10).

Supplier Finance Arrangements

The Board decided to start a narrow-scope standard-setting project on supplier finance arrangements to add qualitative and quantitative disclosure requirements to IAS 7, and ‘sign-posts’ to existing disclosure requirements in IFRS 7. The requirements would explain the type of arrangements within its scope, rather than include specific definitions.

Classification of Debt with Covenants as Current or Non-current (IAS 1)

The Board decided to amend IAS 1 to specify that, if the right to defer settlement for at least twelve months is subject to an entity complying with conditions after the reporting period, then those conditions do not affect whether the right to defer settlement exists at the end of the reporting period (the reporting date) for the purposes of classifying a liability as current or non-current. There would be additional disclosure requirements and ‘non-current liabilities subject to conditions that need to be met within one year’ would need to be presented separately in the primary financial statements. As a consequence, the Board also decided to defer the effective date of the 2020 amendments by one year.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting. An analysis of how the work plan of the IASB has changed as a result of this meeting is available here.

The International Federation of Accountants (IFAC) examined global practices for sustainability reporting and assurance over that information, including the prevalence of assurance, level of assurance, and the standards used by practitioners. It found wide variations in how sustainability information is being reported by companies, and how accountants are providing assurance services to vet the information. More information is available on the IFAC website.

The seven Founding Partners of The Investor Agenda are calling on governments to commit to implementing mandatory climate risk disclosure requirements aligned with the TCFD recommendations, ensuring comprehensive disclosures that are consistent, comparable, and decision-useful. Please click for more information here.

The Value Balancing Alliance (VBA), whose goal it is to enable stakeholders to compare the non-financial performance of companies like financial performance today, has published a position paper on the standardisation of disclosure requirements. Please click to access the paper here.

The Association of Chartered Certified Accountants (ACCA) has published a report examining how a selection of organisations in the Business Network of the International Integrated Reporting Council (IIRC) are communicating integrated thinking in their integrated reports. Please click to access the report here.

Ahead of the merger with the Sustainability Accounting Standards Board (SASB) to form the Value Reporting Foundation (VRF) the International Integrated Reporting Council (IIRC) has publishesd its latest integrated report Driving Cohesion. Please click to access the report here.

The IIRC has also published an updated translation of the International Framework in Russian, to support the understanding and adoption of integrated reporting in Russia. Please click to access the translation here.

The Sustainability Accounting Standards Board (SASB) has announced the availability of French translations of its standards. Please click for more information here.

The Global Reporting Initiative (GRI) has released research conducted internally by GRI South Asia that finds that sustainability reporting is on the rise in three target countries – India, Bangladesh, and Sri Lanka. Please click for more information here.

The Carbon Disclosure Project (CDP) has released a regional Asia Pacific Analysis of 2020 corporate Eenvironmental disclosures. Please click for more information here.

The CDP has also released a Q&A with comments from CDP Europe on what the proposed CSRD means for companies. Please click for more information here.

Also on the proposed CSRD, the Accounting Standards Committee of Germany (ASCG) has published key messages. Please click for more information here.

The ASCG is also the first national standard setter to publish publicly available information on how Germany will support the ISSB financially. Please see the ASCG press release here.

The Reporting Exchange has moved to a new website: https://www.arabesque.com/

Deloitte has commented on the SEC's requests for input on climate-related and other ESG disclosures. Please see our comment letter here.

Deloitte has also published a Heads Up Newsletter — Do ESG Matters Affect Accounting and Financial Reporting Today? Please click to access the newsletter here.

On 27 May 2021, the IASB issued the ED in an effort to update the 2010 IFRS Practice Statement 1 'Management Commentary'. The workshop was hosted by EAA President Thorsten Sellhorn, EFRAG Secretariat Vincent Papa, and Peter Kajueter and included discussions on the objectives-based approach, selecting and presenting information, and reporting on sustainability matters.

Recording of the pre­sen­ta­tion as well as the slide deck are now available on the IASB website.

Meeting activities included the following:

• Executive session:
  • Report of the Chair of the Trustees — Erkki Liikanen updated the Trustees on recent meetings with key stakeholders both on the current work of the Foundation and the development of the Foundation’s strategy on sustainability reporting.
  • Report of the Executive Director — The Trustees received a report from the Executive Director Lee White on activities since the last meeting.
  • Update on sustainability reporting — The Trustees discussed progress on sustainability reporting and development of the proposed ISSB. They focused on the development of a business plan and target operating model for the ISSB, and on funding.
  • Agenda consultation — The Trustees received a presentation on the IASB’s Agenda consultation.
  • IASB Chairman’s report — The Chair of the IASB informed the Trustees on the Board’s activities in March to May 2021.
  • Committee reports — The Trustees discussed reports from the Business Process and Technology Committee, the Audit, Finance and Risk Committee, the Human Capital Committee, the Nominating Committee, and the DPOC. (A report of the DPOC meeting is attached to the meeting summary.)
• Other meetings:
  • Following their meeting, the Trustees held their annual meeting with the IFRS Foundation Monitoring Board to discuss the Foundation’s operations and strategy.

For more information, see the full summary on the IFRS Foundation Trustees’ and DPOC meeting on the IASB’s website.

The proposals follow the introduction of climate-related disclosure rules for most prominent listed commercial companies in December 2020 and are aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

The first proposal, contained in consultation paper (CP21/18), is to extend the application of the FCA’s climate-related disclosure requirements for commercial companies with a UK premium listing to issuers of standard listed equity shares (excluding standard listed investment entities and shell companies). The FCA proposes to implement the new rule and associated guidance in a way that mirrors the existing rule and guidance for premium listed commercial companies. It is also seeking feedback on the rationale for (and potential approach to) extending the application of the requirements to issuers of standard listed debt (and debt-like) securities, standard listed issuers of GDRs and standard listed issuers of shares other than equity shares.

Under the proposals, issuers of standard listed equity shares (excluding standard listed investment entities and shell companies) would need to include a statement in their annual report setting out:

• whether they have made disclosures consistent with the TCFD’s recommendations and recommended disclosures in their annual financial report.
• where they have not made disclosures consistent with some or all of the TCFD’s recommendations and/or recommended disclosures, an explanation of why, and a description of any steps they are taking or plan to take to be able to make consistent disclosures in the future and the timeframe within which they expect to be able to make those disclosures.
• where they have included some, or all, of their disclosures against the TCFD’s recommendations and/or recommended disclosures in a document other than their annual financial report, an explanation of why.
• where in their annual financial report (or other relevant document) the various disclosures can be found.

Consistent with the current rule for premium listed commercial companies the FCA proposes to issue guidance to help in-scope companies determine whether their disclosures are consistent with the TCFD’s recommendations and recommended disclosures. The guidance would also clarify the limited circumstances in which the FCA would expect in-scope companies to explain rather than disclose.

The consultation paper also includes a section asking for views on select Environmental, Social and Governance (ESG) topics in capital markets. Specifically, the FCA wants to generate discussion and engage stakeholders on issues related to green, social or sustainable debt instruments and ESG data and rating providers.

The second proposal, contained within consultation paper (CP21/17) is to introduce climate-related financial disclosure rules and guidance for asset managers, life insurers, and FCA-regulated pension providers consistent with the TCFD’s recommendations. Key elements of the proposals include:

• Entity-level disclosures. Firms would be required to publish, annually, an entity level TCFD report on how they take climate-related risks and opportunities into account in managing or administering investments on behalf of clients and consumers. These disclosures would need to be made in a prominent place on the main website for the firm’s business and would cover the entity-level approach to all assets managed by the UK firm.
• Product or portfolio-level disclosures. Firms would be required to produce, annually, a baseline set of consistent, comparable disclosures in respect of their products and portfolios, including a core set of metrics. Depending on the type of firm and/or product or portfolio, these disclosures would either:

– be published in a TCFD product report in a prominent place on the main website for the firm’s business, while also being included, or cross-referenced and hyperlinked, in an appropriate client communication, or

– be made upon request to certain eligible institutional clients.

The scope of the FCA’s proposals would cover 98% of assets under management in both the UK asset management market and held by UK asset owners. The proposals would not apply to firms with less than £5 billion in assets relating to relevant activities.

The FCA is inviting feedback to both consultations by 10 September 2021 and intends to confirm its final policy on climate-related disclosures before the end of 2021. The FCA will separately consider stakeholder views on the ESG-related discussion topics in capital markets, with a view to publishing a Feedback Statement in the first half of 2022.

A press release and both consultations are available on the FCA website.

In March 2021, the IASB published the exposure draft 'Disclosure Requirements in IFRS Standards — A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19)' that contains proposed guidance for itself when developing and drafting disclosure requirements in IFRSs in future as well as proposed amendments to IFRS 13 'Fair Value Measurement' and IAS 19 'Employee Benefits' that result from applying the proposed guidance to those standards.

There will be three different panel discussions in the webinar. The panellists from EFRAG TEG, EFRAG TEG working groups and observers will provide the views of users, preparers, auditors, enforcers and for IAS 19, an actuary, on the topic. The panellists, EFRAG and the IASB will also respond to questions from the audience.

Views will be sought on the following:

General approach:

• Would (detailed) disclosure objectives enable you to apply more effective judgement and provide more useful information to users?
• What implementation and application issues arise from applying judgement to meet the needs of users?
• Can a pure objective-based approach work or are minimum disclosure requirements necessary?
• Is relevant, company-specific information more important than companies providing comparable information?
• Would the proposals be auditable and enforceable?
• Would the proposed approach be costly to implement?

Proposed changes to IAS 19:

• How important is information about the cash flow effects of defined benefit plans?
• Is a sensitivity analysis for defined benefit obligations necessary? 
• Should specific disclosure objectives only exist for defined benefit obligations or for other types of employee benefits (e.g., hybrid plans) as well?

Proposed changes to IFRS 13:

• Is information about material fair value measurements important, irrespective of the level of the fair value hierarchy they are in?
• Is the proposal to provide alternative fair values preferable compared to the sensitivity of the significant unobservable inputs for level 3 instruments?
• Which information should be provided to explain the significant reasons for changes in the fair value measurements?  

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

A recording of the joint outreach event is also available on the EFRAG website.  

This classification overlay would:

• apply to financial assets that are related to insurance contract liabilities and to which IFRS 9 has not been applied in the comparative period(s);
• allow an entity to classify those financial assets in the comparative period(s) in a way that aligns with how the entity expects those assets would be classified on initial application of IFRS 9;
• apply for comparative periods that have been restated for IFRS 17 (that is, from the transition date to the date of initial application of IFRS 17); and
  
• apply on an instrument-by-instrument basis.

In the discussion, all Board members who spoke supported the amendment. When asked to vote, 13 Board members stated that they are satisfied that the Board has complied with the applicable due process steps and should begin the balloting process to publish an exposure draft; 12 Board members agreed with setting a 60-day comment period for the exposure draft; and no Board member intends to dissent from the proposals in the exposure draft.

The staff expects to publish the exposure draft by the end of July and aims at publishing a final amendment at the end of the year.

For a detailed summary of this session, please see Deloitte's observer notes.

The TRWG is chaired by the IFRS Foundation and includes participants from the Climate Disclosure Standard Board, Financial Stability Board's Task Force on Climate-related Financial Disclosures, IASB, Value Reporting Foundation, and World Economic Forum. The IOSCO and IPSASB are observers of meetings related to review of technical observations and proposals. In addition, the TRWG works with the Global Reporting Initiative and CDP on technical matters.

The TRWG will hold three types of meetings: strategic, operational and technical, and working level. The meeting summaries of its 5 May 2021, 17 May 2021, and 9 June 2021 strategic meetings are now available.

For more information, see the TRWG page on the IASB’s website.

Board work plan update: The staff will provide an update of its activities. The Board completed amendments to: IAS 8 (Definition of Accounting Estimates); IAS 1 (Disclosure of Accounting Policies); IFRS 16 (Covid-19-Related Rent Concessions beyond 30 June 2021); and IAS 12 (Deferred Tax related to Assets and Liabilities arising from a Single Transaction).

At future meetings the Board will be asked whether it wants to add projects for the interaction of IFRS 10 and IFRS 16 (sale of a subsidiary with a leaseback) and amendments to IFRS Practice Statement 2 relating to information about possible future events that have not affected the entity’s financial performance or financial position and have uncertain outcomes, similar to the proposals in the Exposure Draft Management Commentary.

The Board currently has six consultation documents open for comment and expects to publish in the next six months an exposure draft on disclosure by subsidiaries without public accountability and a request for information as part of its post-implementation review of the classification and measurement requirements in IFRS 9.

Accounting for derecognised financial assets when insurers first apply IFRS 17: In May, the Board discussed an accounting mismatch between financial assets and insurance contract liabilities that could arise at the beginning of the comparative period on transition to IFRS 17 when financial assets have been derecognised during the comparative period. The staff recommend that the Board propose a narrow-scope amendment to IFRS 17 to permit an entity to apply a classification overlay in the comparative period(s) presented on initial application of IFRS 17 and IFRS 9. The staff are seeking a 60-day comment period for the ED (which the Trustees cleared this week).

Equity Method—identifying the principles in IAS 28 Investments in Associates and Joint Ventures:  The staff have identified what they consider to be the principles in IAS 28, and principles they say are missing. They plan to use the analysis to address application questions. They do not intend incorporating the principles into IAS 28.

Goodwill and Impairment: The Board will continue its discussion of feedback on particular aspects of the DP—focusing this month on the project’s objective and scope, which the staff recommend be reaffirmed. 

Primary Financial Statements: The staff recommend that the Board require that, if a numerator or a denominator of a ratio meets the definition of an MPM, that numerator or denominator should be included in the scope of the MPM requirements in order to ensure all subtotals of income and expenses used in communicating performance are in the scope of MPMs. The staff recommend that the Board not explore expanding the scope of MPM to include measures based on line items presented in the statement(s) of financial performance, the cash flow statement, the statement of financial position or ratios. 

Maintenance and Consistent Application:

IFRS Interpretations Committee Agenda Decisions

The Board will be asked if any members object to the publication of two agenda decisions: Costs Necessary to Sell Inventories (IAS 2) and Preparation of Financial Statements when an Entity is No Longer a Going Concern (IAS 10).

Supplier Finance Arrangements

The staff recommend that the Board start a narrow-scope standard-setting project on supplier finance arrangements to add qualitative and quantitative disclosure requirements to IAS 7, and ‘sign-posts’ to existing disclosure requirements in IFRS 7. The requirements would explain the type of arrangements within its scope, rather than include specific definitions.

Classification of Debt with Covenants as Current or Non-current (IAS 1)

The staff recommend that the Board amend IAS 1 to specify that, if the right to defer settlement for at least twelve months is subject to an entity complying with conditions after the reporting period, then those conditions do not affect whether the right to defer settlement exists at the end of the reporting period (the reporting date) for the purposes of classifying a liability as current or non-current. There would be additional disclosure requirements and ‘non-current liabilities subject to conditions’ would need to be presented separately in the primary financial statements. If the Board decides to amend IAS 1 as recommended the staff also recommend deferring the effective date of the 2020 amendments by one year.

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