The objective of the statement is to provide clarifications to Islamic financial institutions for the application of AAOIFI financial accounting standards (FASs) and the AAOIFI's Conceptual Framework considering certain pertinent issues arising due to economic factors and regulatory interventions in the wake of the COVID-­19 pandemic. AAOIFI is of the view that the FASs are robust and flexible enough to address the challenges posed by the prevalent uncertainty in the environment, but emphasises that institutions are encouraged to provide additional disclosures on voluntary basis to enable the users of the financial statements to better understand the financial position and performance of the institutions.

Please click to access the statement on the AAOIFI website.

On Wednesday 10 June 2020 at 11am (BST) the live webinar on the Board’s exposure draft General Presentation and Disclosures will be held and will explain the Board’s detailed proposals for subtotals and categories in the statement of profit and loss. The webinar will last approximately 45 minutes and will include a question-and-answer session. More information is available here.

On Friday 5 June 2020 at 11am (BST) the live webinar on the Board’s discussion paper Business Combinations — Disclosures, Goodwill and Impairment will be held and will provide an overview of the discussion paper. The webinar will last approximately 45 minutes and will include a question-and-answer session. More information is available here.

The consultation draft has been informed by the 300 responses the IIRC received on three topic papers published in February, ongoing observation of market practice internationally, as well as the detailed deliberations of the IIRC’s Framework Panel, a diverse group of reporting experts from the business, investor and accountancy communities. Feedback on the draft is requested through an online survey and via participation in one of over 20 virtual roundtables hosted by the IIRC’s partners globally.

Please click for more information, access to the draft and access to a companion document setting out the basis for the proposed Framework revisions on the IIRC website.

The FRC previously updated its guidance for companies in May 2020 to include going concern considerations for interim reporters. This second May update still covers those areas included in that earlier guidance which include:

• Key areas of focus for boards in maintaining strong corporate governance and high-level guidance on some of the most pervasive issues that should be considered when preparing annual reports and other corporate reporting.
• Management information
• Risk management and internal controls systems
• Dividends and capital maintenance
• Corporate reporting
• Strategic Report and Viability Statement
• Financial statements – going concern and material uncertainties, significant judgements and estimation uncertainty and events after the reporting date.
• Interim reporting considerations

Exceptional items

The FRC indicates that companies will need to consider whether any additional items of income and expenditure arising from COVID-19 should be separately disclosed as ‘exceptional’ items in accordance with their existing policies. These might include restructuring costs, impairment charges, incremental health and safety costs and the costs of onerous contracts.  When making such disclosures the FRC highlights that companies should:

• be even-handed in identifying any gains as well as losses;
• not describe amounts as ‘non-recurring’ or ‘one-off’ if they are also expected to arise in future periods;
• not disclose costs (sometimes described as ‘stranded’, ‘sunk’ or ‘excess’) as exceptional solely because of a reduction in, or elimination of, the related revenue streams due to Covid-19; and
• not identify incremental costs as exceptional if they result in incremental revenue that is not also described as exceptional; for example, additional staff costs related to managing unusually high levels of sales of in-demand items.

Additionally the FRC highlights that where the impacts of COVID-19 are so pervasive and therefore difficult to quantify, additional narrative disclosures should be provided. Companies are discouraged from providing disclosures attempting to quantity the effect of COVID-19 where a split of discrete items has been made on an arbitrary basis. Companies should also consider the requirements of IAS 1 when presenting sub totals on the face of the income statement. Sub-totals based on a hypothetical or ‘pro-forma’ basis (for example adding back an estimate of ‘lost’ revenue) shown as either a line item or in a ‘third column’ would be inconsistent with the requirements of IAS 1.   

Alternative Performance Measures

With respect to APMs the FRC indicates that they should:

• have clear and accurate labelling;
• have an explanation of their relevance and use;
• be reconciled to the closest IFRS measure;
• not be given more prominence than the equivalent IFRS measures; and
• be presented consistently year on year.

Where the effects of COVID-19 have led to a change in APMs the FRC highlights that sufficient disclosure should be provided to inform the reader of the change and why the new measures provide more relevant and more reliable information. The FRC warns that it does not expect to see companies disclosing APMs which attempt to provide a measure of ‘normalised’ or ‘pro-forma’ results, excluding the impact of COVID-19 due to their high subjectivity and therefore unreliability.

The updated guidance for companies is available on the FRC website.

The statement highlights:

• the importance of providing relevant and reliable information, which may require issuers to make use of the time allowed by national law to publish half-yearly financial reports while not unduly delaying the timing of publication;
• the importance of updating the information included in the latest annual accounts to adequately inform stakeholders of the impacts of COVID-19, in particular in relation to significant uncertainties and risks, going concern, impairment of non-financial assets and presentation in the statement of profit or loss; and
• the need for entity-specific information on the past and expected future impact of COVID-19 on the strategic orientation and targets, operations, performance of issuers as well as any mitigating actions put in place to address the effects of the pandemic.

ESMA also notes that the statement is also applicable to financial statements in other interim periods when IAS 34 Interim Financial Reporting is applied.

Please click to access the statement on the ESMA website.

This publication includes reports from the EFRAG President Jean-Paul Gauzès and the TEG Chairwoman Chiara Del Prete. It also features EFRAG's continued work on IFRS 17 Insurance Contracts; the work on accounting for long-term equity instruments; research projects on intangibles and crypto-assets and liabilities.

The annual review is available on the EFRAG website.

The event was organised into a general introductory section and the discussion of five key topics (each again introduced by IASB and EFRAG) that where then opened to questions from the audience. The agenda below indicates where during the two-and-a-half hour recording the individual topics were discussed:

• Opening and welcome
• General introduction to the IASB exposure draft General Presentation and Disclosures (begins at about 5:00 minutes)
  
• EFRAG’s view on the topic (begins at about 12:00 minutes)
• Key Topic 1 – Defined lines and subtotals in the income statement – improved comparability or imposed uniformity? (begins at about 21:00 minutes)
• Key Topic 2 – Looking at the new subtotals – what is the impact and will they work for all industries? (begins at about 1:20:00 hours)
• Key Topic 3 – Management performance measures – definition, disclosure and unusual items: Will management still be able to explain the overall performance / generation of income in the context of the activities and business strategy? (begins at about 1:42:00 hours)
• Key Topic 4 – Principles of aggregation and disaggregation – new proposals expected compared to how companies disaggregate information today (begins at about 2:19:00 hours)
• Key Topic 5 – Statement of cash flows – change to the starting point, new disaggregation due to new line items introduced and removal of classification choice for interest and dividends (begins at about 2:27:00 hours, introduction by IASB and EFRAG only, no discussion due to reasons of time)

The recording of the outreach event is available here. You can also access the slides for the event on the EFRAG website.

The 20-minute podcast can be accessed through the press release on Accountancy Europe's website. It is the third in a series of podcasts focusing on different aspects of the crisis. The entire series is available on Accountancy Europe's podcast page.

Deviating slightly from the original proposal but not changing the core practical relief, the Board decided to allow the expedient to be applied to COVID-19-related rent concessions to payments originally due on or before 30 June 2021. The Board also decided to require disclosure of the amount recognised in profit or loss to reflect changes in lease payments that arise from COVID-19-related rent concessions. Finally, the Board decided that in the reporting period in which a lessee first applies the amendment, it is not required to disclose the quantitative information required by paragraph 28(f) of IAS 8. All decisions were supported by 13 Board members.

The amendment will have an effective date of 1 June 2020 with early application permitted. Despite the wording "annual reporting periods" the amendment would also be available for interim reports.

For lessors, the Board decided to take no further action. It argued that as many entities face significant challenges at the moment, there needs to be sufficient reason to undertake standard-setting, which the Board did not see enough evidence for. This decision was supported by all 14 Board members.

The Board did not see a need for re-exposure and no Board member intends to dissent from the issuance of the amendment. The Board is satisfied that it has complied with the applicable due process requirements and gave permission to begin the balloting process for the amendment. These decisions were supported by all 14 Board members.The staff expect issuing a final amendment on or around 28 May 2020.

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

The topics discussed at the meeting included:

• Primary financial statements.
• Financial instruments with characteristics of equity.
• IBOR reform and its effects on financial reporting.
• Management commentary.

For more in­for­ma­tion, see the meeting page and the meeting summary on the IASB's website.