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IASB issues third webcast related to its request for information on the IFRS for SMEs Standard

20 Jul, 2020

The IASB has issued the third in a series of webcasts related to the ‘Request for Information: Comprehensive Review of the IFRS for SMEs Standard' issued on 28 January 2020.

This webcast discusses “how the Board has applied the alignment principles in requesting views on how the IFRS for SMEs Standard should be aligned with IFRS Standards in the scope of this review.”

The IASB, in co­op­er­a­tion with the SME Im­ple­men­ta­tion Group (SMEIG), has developed and issued a request for in­for­ma­tion seeking comments on strategic and general questions, specific sections of the IFRS for SMEs, as well as new topics and other matters related to the IFRS for SMEs.

For more in­for­ma­tion, see the press release on the IASB’s website.

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IFRS Foundation Trustees seek to fill Advisory Council vacancies

20 Jul, 2020

The Trustees of the IFRS Foundation are calling for candidates to fill vacancies occurring at the end of 2020 for membership to the IFRS Advisory Council.

New members would serve three-year terms, starting on 1 January 2021, renewable once. This year, the Trustees are par­tic­u­larly seeking interest from corporate gov­er­nance or­gan­i­sa­tions, private equity firms, or­gan­i­sa­tions involved in wider corporate reporting, tech­nol­ogy or­gan­i­sa­tions and or­gan­i­sa­tions rep­re­sent­ing small and medium-sized entities.

For more in­for­ma­tion, see the press release on the IASB’s website.

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European Lab seeks members for its task force on possible EU non-financial reporting standards

18 Jul, 2020

The European Financial Reporting Advisory Group (EFRAG) has published a call for candidates for members of a new project task force on preparatory work for the elaboration of possible EU non-financial reporting standards.

The deadline for applications for membership of the multi-stakeholder project task force to be set up is 17 August 2020.

Please click for more information in the press release on the EFRAG website.

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Recording of European virtual academic research seminar on primary financial statements

17 Jul, 2020

On 10 July 2020, the International Accounting Standards Board (IASB) in conjunction with the European Accounting Association (EAA) held a virtual research seminar for academics. The seminar provided an overview of the IASB’s 'General Presentation and Disclosures' exposure draft (ED) and relevant academic literature.

The purpose of the session was to obtain feedback from academics on the proposals in the December 2019 ED and to discuss relevant academic evidence.

recording of the research seminar is now available on the IASB website.

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ESMA, EBA reiterate that IFRSs do not hamper sustainable investment behaviour

17 Jul, 2020

In April 2020, the European Commission (EC) published a consultation on a renewed sustainable finance strategy and in that context tried to reopen the debate on whether IFRS rules hinder sustainable investment behaviour despite contrary findings from the Fitness Check on the EU framework for public reporting by companies in 2018, corresponding analyses by the European Securities and Markets Authority (ESMA) and the European Financial Reporting Advisory Group (EFRAG) following the Fitness Check, and the European Banking Authority (EBA) report on undue short-term pressure from the financial sector on corporations.

Question 16 of the EC consultation had asked: "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?" Possible answers to choose from had included "impairment and depreciation", "provisions", "contingent liabilities" and "other".

In its response, ESMA writes:

ESMA does not think that there is evidence that IFRS Standards hamper the adequate and timely recognition and consistent measurement of climate and environmental risks. As discussed in ESMA’s report on undue pressures on corporation (ESMA32-22-762), ESMA believes that the primary objective of endorsed accounting standards is and should continue to be to promote transparency, which is the approach which is ultimately the most beneficial for the performance of capital markets, including their capacity to support sustainable and long-term investments.

While climate-change risks and other environmental risks are not covered explicitly by IFRS Standards, the Standards do address issues that relate to them and require companies to consider and disclose their impact, whenever those are material and relevant to the amounts recognised in the financial statements.

In fact when preparing IFRS financial statements, companies need to consider whether emerging risks, including climate and environmental risks, currently or potentially affect the amounts and disclosures reported, and what information about the effect of such emerging risks on the assumptions made in preparing the financial statement is material and thus should be disclosed to users.

On the other hand, comments about the company’s overall approach to climate-related and other business risks do not belong inside the financial statements and should rather be disclosed in the management report. The transparency provided by IFRS Standards therefore constitutes and should continue to constitute only one ofthe pieces of the complex jigsaw, which need to encompass also high quality ESG disclosures.

Similarly, the EBA response to the consultation states:

The EBA report (and relevant studies mentioned in the report) found no evidence to suggest that the fair value measurement and ECL measurement approach under IFRS would result in distortions of the investment process triggeringundue short-term pressures in financial markets. There is no evidence yet on the consequences of the implementation of IFRS 9 on long-term investment practices, yet it is important to continue assessing its impact and monitor its implementation.

In addition, the IASB has confirmed that IFRS Standards (implicitly) cover climate change risks and other emerging risks (if material and relevant for the financial statements) in “IFRS Standards and climate-related disclosures” (November 2019).

Deloitte supports this stance. In our comment letter, we state: "Existing financial accounting requirements do not in our view hamper the adequate and timely consideration of climate and environmental risks in the recognition and measurement of assets and liabilities of entities in their financial statements."

Please click to access the following additional information:

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Report from the May 2020 Emerging Economies Group meeting

16 Jul, 2020

The 19th meeting of the IASB's Emerging Economies Group (EEG) was held via remote participation on 11–12 May 2020. The IASB has published a full report from the meeting.

Par­tic­i­pants at the meeting, which was chaired by IASB member Darrel Scott, discussed business combinations, IFRS 17, applying IFRS Standards in 2020 and the impact of COVID-19, comprehensive review of the IFRS for SMEs Standard, primary financial statements, management commentary, and an update on IASB projects.

Please click for access to the full report on the IASB website.

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Pre-meeting summaries for the July 2020 IASB meeting

16 Jul, 2020

The IASB will meet via video conference on 22 and 23 July 2020 for its regular meeting. We have posted our pre-meeting summaries for the meetings that allow you to follow the IASB’s decision making more closely. For each topic to be discussed, we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

Disclosure Initiative: Accounting Policies: In August 2019, the Board published the Exposure Draft (ED) Disclosure of Accounting Policies, which proposed amendments to IAS 1 and IFRS Practice Statement 2. At this meeting the staff recommend that the IASB amend the transition requirements to require entities to disclose material accounting policy information for the current period and disclose comparative accounting policy information if, applying IAS 1:38, it is relevant to understanding the current period’s financial statements. They also recommend that the amendments apply to annual reporting periods beginning on or after 1 January 2023 with early application permitted and that the effective date of the amendments to IAS 8 resulting from the Accounting Policies and Accounting Estimates project be changed to the same date.

Management Commentary: The Board will discuss potential guidance on reporting financial resources. The papers discuss requirements and possible supporting guidance on reporting progress in managing key matters, a disclosure objective for performance and position; and possible guidance supporting that objective, including on identifying key facets of performance and position that need to be addressed in management commentary. They also discuss measures and indicators.

Extractive activities: The staff papers summarise their assessment on how activities within the scope of IFRS 6 would be accounted for in the absence of that Standard, applying the requirements in IAS 16 and IAS 38.

The staff concluded that costs incurred during the exploration phases would not meet the requirements of IAS 16 or IAS 38 for recognition as an asset. The staff also assessed expenditure acquiring the legal rights from a third party and concluded that it could meet the definition of an intangible asset and the recognition criteria, but that application of IAS 36 without the specific requirements in IFRS 6:18-22 would generally lead to an immediate writeoff of exploration and evaluation assets. Applying the guidance in IAS 38:54-55, exploration and evaluation expenditure incurred subsequent to the acquisition of the legal right would be recognised as an expense as it is incurred.

Maintenance and Consistent Application - Lack of exchangeability: In April the IASB decided on how to amend IAS 21 to address the accounting when the spot exchange rate is not observable (because of a lack of exchangeability between two currencies). At this meeting the staff are recommending that the proposed changes be applied prospectively. They also recommend that the ED be open for comment for 120 days.

IBOR Reform and the Effects on Financial Reporting: The IASB will discuss feedback on the proposals for qualifying hedging relationships and groups of items. The staff recommend that the IASB permit, rather than require, entities to reset cumulative fair values to zero for the purpose of performing the retrospective effectiveness assessment as proposed in paragraph 102S of the ED and confirm the proposals in the ED related to the accounting for qualifying hedging relationships subject clarifications and drafting suggestions as explained in the staff analysis. That completes the deliberations and, if the IASB agrees, the staff expect to finalise the amendments.

IFRS Taxonomy: The staff will report on plans to update the IFRS Taxonomy for the COVID-19-Related amendments to IFRS 16. There is no paper for this session.

More information

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

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Asia-Oceania virtual academic research seminar on primary financial statements

16 Jul, 2020

On 21 August 2020, the International Accounting Standards Board (IASB) in conjunction with the Australian Accounting Standards Board (AASB) will hold a virtual research seminar for academics across the Asia-Oceania region. The seminar will provide an overview of the IASB’s 'General Presentation and Disclosures' exposure draft (ED) and relevant academic literature.

The purpose of the session is to obtain feedback from academics on the proposals in the December 2019 ED and to discuss relevant academic evidence.

Please click for more information on the AASB website.

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IASB publishes proposed IFRS Taxonomy update

16 Jul, 2020

The IASB has published PTU/2020/2 'IFRS Taxonomy 2020 — 'Amendments to IFRS 17', 'Extension of the Temporary Exemption from Applying IFRS 9' and 'Property, Plant and Equipment — Proceeds before Intended Use''.

The proposed update includes elements to reflect

  • amendments to the new and old insurance contracts Standard, IFRS 17 and IFRS 4, issued in June 2020; and
  • amendments to IAS 16 regarding proceeds before the intended use issued in May 2020.

For more information, see the press release and proposed update on the IASB’s website. Comments are requested by 14 September 2020.

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FRC publishes audit quality inspection reports of the major audit firms

15 Jul, 2020

The Financial Reporting Council (FRC) has published individual audit quality inspection reports for the major audit firms.

The results highlight that 67% of the 88 audits reviewed required “no more than limited improvements” with 33% of audits requiring “more than limited improvements” which the FRC has indicated “remains acceptable”.

Whilst the FRC acknowledges that there have been some improvements including in the areas of group audit oversight and effective integration of specialists into the audit team, it highlights that “firms are still not consistently achieving the necessary level of audit quality”. The FRC flags that improvements can be made in the areas of impairment of goodwill and intangibles, revenue and contracts and provisions including loan loss provisions. Finding across firms were also identified in the auditing of inventory, group oversight, going concern and investment property valuations.

The reports set out the principal findings arising from the audit quality inspection work carried out by the FRC’s Audit Quality Review (AQR) team for 2019/20. The priority sectors for inspection were Financial Services, General Retailers, Business Support Services, Construction and Materials and Retail Property. The reviews focused on going concern and the viability statement, the other information in the annual report, long-term contracts, the impairment of assets and fraud risk assessment.

The press release and links to individual reports are available on the FRC website.

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