Amendments have been made to the standard to improve the consistency of the disclosure exemptions in relation to the statement of cash flows and related disclosures.

The amendments to FRS 101 provide an exemption from the disclosure of cash flows required by paragraph 24(b) of IFRS 6 Exploration for and Evaluation of Mineral Resources. A similar amendment has been made to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland for qualifying entities.

An amendment has also been made to the exemption from paragraph 33(c) of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, removing the condition that this exemption is only available when equivalent disclosures are made in the relevant consolidated financial statements of the group in which the entity is consolidated. This is for consistency with the exemption from the presentation of a statement of cash flows.

A press release and the amendments are available on the FRC website.

The temporary relief, which follows the announcement in March for annual reports, will permit listed companies an additional month in which to publish their half yearly financial reports. Currently, under the Transparency Directive, listed companies are required to publish half yearly financial reports no later than 3 months from the end of the period to which the report relates.

The FCA has indicated that the temporary extension will be kept under review and, at a suitable time, will announce how the policy will be removed in a fair, orderly and transparent way.

The full bulletin is available on the FCA website.

Background

The COVID-19 pandemic has led to some lessors providing relief to lessees by deferring or relieving them of amounts that would otherwise be payable.  In some cases, this is through negotiation between the parties, but can be as a consequence of a government encouraging or requiring that the relief be provided. Such relief is taking place in many jurisdictions in which entities that apply IFRSs operate.

When there is a change in lease payments, the accounting consequences will depend on whether that change meets the definition of a lease modification, which IFRS 16 Leases defines as “a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term)”.

On 24 April 2020, the Board published an exposure draft with a proposed amendment intended to provide practical relief to lessees in accounting for rent concessions arising as a result of the COVID-19 pandemic. Given the urgency of the matter, the exposure draft was published with a 14-day comment period. On 15 May 2020, the Board considered the feedback received and decided to finalise the amendment with some changes.

Changes

The changes in Covid-19-Related Rent Concessions (Amendment to IFRS 16) amend IFRS 16 to

1. provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification;
2. require lessees that apply the exemption to account for COVID-19-related rent concessions as if they were not lease modifications;
3. require lessees that apply the exemption to disclose that fact; and
4. require lessees to apply the exemption retrospectively in accordance with IAS 8, but not require them to restate prior period figures.

The main change from the proposal in the exposure draft is that the IASB had proposed that the practical expedient should only be available for lease payments originally due in 2020. However, after having considered the feedback to the exposure draft, the IASB decided to extend this period to June 2021 to also capture rent concessions granted now and lasting for 12 months.

The IASB considered but decided not to provide any additional relief for lessors as the current situation is not as equally challenging for them and the required accounting is not as complicated.

Effective date

The amendment is effective for annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted, including in financial statements not yet authorised for issue at 28 May 2020. The amendment is also available for interim reports.

Proposed Taxonomy Update

The IASB has also published a proposed Taxonomy Update to reflect the amendment to IFRS 16. Comments on the proposed Taxonomy update are requested by 29 June 2020.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the final amendment (freely available on the IASB website as part of the COVID-19 response)
• Our UK Accounting Plus project page on IFRS 16 and COVID-19
• Our related Need to know publication
• Access to the proposed Taxonomy Update on the IASB website

The review was originally scheduled to be completed in the fourth quarter of 2020. An updated work programme released today shows that this date has been moved to the first quarter of 2021.

Please see this communication on the EC website (entry number four under item 2).

In doing so, HM Treasury has specified, in an Addendum, minimum reporting requirements as per the Financial Reporting Manual (FReM). Although specifying minimum requirements HM Treasury notes that such requirements do not replace the FReM but rather set out minimum financial reporting requirements. Entities may go beyond the minimum requirements where they are able to.  

There are reduced reporting requirements in the performance report including the option of only producing the summary information in the performance overview as set out in paragraph 5.28 of the FReM. This is instead of providing the performance analysis as set out in paragraphs 5.2.6 and 5.2.9-5.2.10 of the 2019-2020 FReM.

Within the accountability report, the only optional requirements relate to the Statement of Parliamentary Supply (SoPS). Entities applying the FReM are no longer required to adhere to the comply or explain requirement in paragraph 3.1.7(b) of the 2019-20 FReM, that SoPS disclosures must follow the form of the illustrative disclosures. Entities are also permitted to omit the requirements set out in 3.1.8 (a) and (b) in relation to supporting text and the presentation of figures in thousands in the SoPS.

There will be no change to the format and content of the financial statements which should continue to be published in line with the requirements of the 2019-20 FReM.

The Addendum is available on the HM Treasury website.

The amendments to IFRS 17 are being finalised by the staff. During this process the staff identified five (sweep) issues for which the Board decided to make additional changes to the standard, along with two other matters that were identified after the staff paper had been distributed.

The podcast can be accessed through the press release on the IASB website.

Our comprehensive meeting notes from the session are available here.

Please click to access the updated alignment dashboard prepared for the June 2020 IPSASB meeting on the IPSASB website.

In this context, please also so our 2020 edition of IPSAS in your pocket published in January.

The ED contains proposed amendments that would address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates.

We are largely supportive of the amendments. In particular, we support the key changes that ensure that entities that apply hedge accounting will continue to do so as they transition to new benchmark interest rates and that the accounting for the modification of hedged items, when those modifications arise directly from the reforms, are reflected on a prospective basis via the application of IFRS 9:B5.4.5. We consider these as being the two most important elements of the proposals.

Please click to download our full comment letter.

Below is an analysis of all changes made to the work plan since our last analysis on 24 April 2020.

Standard-setting projects

• no changes
  

Maintenance projects

• Annual improvements — 2018-2020 cycle — removed from the work plan as the IASB completed this cycle of annual improvements by issuing Annual Improvements to IFRS Standards 2018–2020 on 14 May 2020; projects that were part of this cycle included:
  
  • Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities (Amendments to IFRS 9)
  • Lease Incentives (Amendment to Illustrative Example 13 accompanying IFRS 16)
  • Subsidiary as a First-time Adopter (Amendment to IFRS 1)
  • Taxation in Fair Value Measurements (Amendment to IAS 41)
• Classification of liabilities — Effective date — an exposure draft ED/2020/3 Classification of Liabilities as Current or Non-current — Deferral of Effective Date (Proposed amendment to IAS 1) was published on 4 May 2020 with comments requested by 3 June 2020; the feedback on the exposure draft will be discussed in June 2020
• IFRS 16 and COVID-19 — the IASB discussed the feedback on the exposure draft published on 24 April 2020 at its supplementary meeting on 15 May 2020 and expects to issue final amendments "on or around 28 May 2020"
• IAS 37 — Onerous contracts — removed from the work plan as the IASB issued Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) on 14 May 2020
• IAS 16 — Proceeds before intended use — removed from the work plan as the IASB issued Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) on 14 May 2020
• IFRS 3 — Updating a reference to the Conceptual Framework — removed from the work plan as the IASB issued Reference to the Conceptual Framework (Amendments to IFRS 3) on 14 May 2020

Research projects

• Dynamic risk management — core model outreach has been clarified to take place in fourth quarter of 2020 (previously second half of 2020)

Other projects

• IFRS Taxonomy update — Amendments to IFRS 17 and IAS 16 — a project newly added to the work plan; a proposed taxonomy update is expected in July 2020
• IFRS Taxonomy update — Covid-19-related rent concessions (Amendment to IFRS 16) — a project newly added to the work plan; a proposed taxonomy update is expected in May 2020

The above is a faithful comparison of the IASB work plan at 24 April 2020 and at 25 May 2020. For access to the current IASB work plan at any time, please click here.

Amendments to IFRS 17 Insurance Contracts: The amendments to IFRS 17 are being finalised by the staff. During this process the staff identified five (sweep) issues for which the Board decided to make additional changes to the Standard, along with two other matters that were identified after the staff paper had been distributed.

Maintenance and consistent application — Sale and leaseback with variable payments: At its April 2020 meeting, the Board decided to amend IFRS 16 for sale and leaseback transactions when the lease has variable payments. At this meeting the Board decided that the proposed amendment be applied retrospectively in accordance with IAS 8, except when hindsight is required, and that early application be permitted.  

Disclosure initiative — Accounting policies: The Board supported the staff recommendations towards finalising the proposal to require entities to disclose ‘material’ accounting policies instead of ‘significant’ accounting policies. However, given the importance of the wording, the staff have been asked to bring revised drafting back for the Board to consider. The finalisation should not be delayed to align with any changes arising from the ED General Presentation and Disclosures. However, the staff will consider whether to align the effective date of this amendment with the amendments to IAS 8 under the Accounting policies and accounting estimates project.

Management commentary: The Board supported the staff recommendations for the disclosure objectives and the type of information that would support those objectives in relation to risk and the external evironment.

Research programme update: The staff updated the Board on the research programme, including recent changes to the timetable and priorities.

There was also an oral update of IBOR Reform and the Effects on Financial Reporting: Based on informal discussions, the overall feedback of the ED is supportive and positive. The comment letter analysis and potential changes will be discussed in the June 2020 meeting.

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