Comments on Tentative Agenda Decision

IAS 12 Income Taxes—Multiple Tax Consequences of Recovering an Asset (Agenda Paper 2): The staff recommend finalising the agenda decision which confirms that an entity should reflect the distinct tax consequences of recovering the asset's carrying amount under the income tax and capital gain tax regimes.

Research Summary

Supply Chain Financing—Reverse Factoring (Agenda Paper 3): The research summary provides a summary of the prevalence of supply chain financing arrangements, the key terms of reverse factoring arrangements and the accounting for reverse factoring arrangements.

Work in progress (Agenda Paper 4)

There are no new matters that have not yet been presented to the Committee.

The full agenda and pre-meeting summaries for the meeting can be found here. We will update this page for any changes to the agenda and our Deloitte meeting notes as they become available. 

In the draft comment lettert, EFRAG welcomes the tentative decisions taken by the IASB during its deliberations on the second phase of its project on the IBOR reform. In particular, EFRAG supports providing a practical expedient allowing an entity to apply paragraph B.5.4.5 of IFRS 9 Financial Instruments to account for modifications related to IBOR reform; supports the tentative decisions taken on hedge accounting; and observes that the proposed disclosures will assist users of financial statements in understanding the effects of IBOR reform on an entity.

​EFRAG notes the IASB proposal to clarify that a change in the basis on which the contractual cash flows are determined after initial recognition of financial instrument constitutes a modification even if the​ contractual terms of that financial instrument are not amended. As an assessment of the impact of this clarification is not possible within the limited timeframe available for this urgent project, EFRAG agrees with this proposal provided that this new definition is limited to the changes directly related to the IBOR reform.

Comments on EFRAG's draft comment letter are requested by 15 May 2020. For more information, see the press release and the draft comment letter on the EFRAG's website.

As a response to the additional challenges facing stakeholders as a result of the COVID-19 pandemic, the IPSASB has decided to provide them with additional time to undertake outreach and prepare their responses. A press release on the IPSASB website announces that the new comment letter deadline for the three exposure drafts is now 1 November 2020.

To inform its work, the SFN drew on a survey of the initiatives planned or undertaken by securities regulators and market participants to address the opportunities and challenges posed by sustainable finance. The report reflects the expectations from regulators and market participants that IOSCO should take an active role in facilitating global coordination and addressing transparency. The report notes:

[T]he SFN work to date points to a need to improve the comparability of sustainability-related disclosures. The lack of consistency and comparability across third party frameworks could create an obstacle to cross border financial activities and raise investor protection concerns.

The SFN has identified several actions that could contribute to enhanced comparability of sustainability related disclosure:

• Alignment of frameworks and requirements
• Identification of relevant components of disclosure
• Increased public accountability and assurance standards
• Increased engagement with asset managers on the integration of ESG factors in investment decision processes

Building on these, the report sets out the role that IOSCO can play and a proposal for next steps:

In response to these demands, IOSCO is looking to play an important role in addressing the challenges identified by the SFN while avoiding duplicating work done or being carried out by other standard-setting bodies or similar organizations. In particular, facilitating the provision of disclosure, both qualitative and quantitative, that is decision useful for both investors and companies is an area where IOSCO should be able to contribute meaningfully.

Therefore, IOSCO has decided to establish a Sustainability Task Force (STF). With a view to improve sustainability–related disclosures made by issuers and asset managers, the STF will identify and develop categories of disclosure which are material for investors and which are capable of falling within the supervisory and regulatory competence of securities regulators. The STF will then examine the categories of disclosure to assess whether industry specific or more broad metrics would provide decision useful information and comparability between different issuers. For this work, the STF will engage with the industry, voluntary third-party disclosure standard-setters and other relevant organisations.

Please click for the press release and the final report on the IOSCO website.

The amendments are aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets.

The European Union effective date is the same as the IASB effective date (1 January 2020).

The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 22 April 2020.

EFRAG has updated its endorsement status report to reflect that the European Union has adopted the amendments.

The guide sets out considerations to help banks and their auditors deal with three areas of the standard affected by the economic consequences of coronavirus: 

• forecasting and multiple economic scenarios;
• significant increase in credit risk; and
• reporting and disclosure

The guide draws together statements from the International Accounting Standards Board, European Securities and Markets Authority and the Basel Committee on Banking Supervision about how the principles in IFRS 9 may be applied to the situation created by COVID-19. 

Please click to access the following information on the ICAEW website:Please click to access the following information on the ICAEW website:

• Press release
• The full version of the guide

Below is an analysis of all changes made to the work plan since our last analysis on 27 March 2020.

Standard-setting projects

• The Board extended the consultation period for the Exposure Draft General Presentation and Disclosures until 30 September 2020
  

Maintenance projects

• Changes in accounting policies and estimates — Final amendments are now expected in the fourth quarter of 2020 (previously no date given)
• Amendments to IFRS 17 'Insurance Contracts' — Final amendments are now expected in June 2020 (previously second half of 2020)
• Deferred tax related to assets and liabilities arising from a single transaction — The discussion of exposure draft feedback is now expected in June 2020 (previously second quarter of 2020)
• Disclosure initiative — Accounting policies — The last work plan stated that feedback to the exposure draft would be discussed (no date given); this has now changed to final amendments to be expected in  the fourth quarter of 2020 without redeliberations having occurred yet
• Disclosure initiative — Disclosure review — An exposure draft is now expected in the first half of 2021 (previously second half of 2020)
• IBOR reform and its effects on financial reporting — Phase 2 — An exposure was published on 9 April 2020; discussion of the feedback received is expected to occur in the third quarter of 2020
• IFRS 16 and COVID-19 — A project newly added to the work plan; an exposure draft is expected "by 27 April 2020"
• The Board extended the consultation period for the Request for Information Comprehensive Review of the IFRS for SMEs Standard until 27 October 2020

Research projects

• Business combinations under common control — A discussion paper is now expected in the third quarter of 2020 (previously second quarter of 2020)
• Dynamic risk management — Outreach on the core model is now expected in the second half of 2020 (previously second quarter of 2020)
• Extractive Activities — Research findings will now be discussed in June 2020 (previously second quarter of 2020)
• Goodwill and impairment — The feedback received on the discussion paper will be discussed in the first half of 2021 (previously second half of 2020); the consultation period for the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment has been extended until 31 December 2020
• Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — in the last work plan, the research review was announced for April 2020; this has now been given an entry "fourth quarter of 2020" although the Board will actually discuss the feedback at the upcoming Board meeting

Other projects

• 2020 Agenda Consultation — A request for information is now expected in the first half of 2021 (previously second half of 2020)

The above is a faithful comparison of the IASB work plan at 27 March 2020 and at 18 April 2020. For access to the current IASB work plan at any time, please click here.

The following papers were posted for the March meeting, but were deferred because of the COVID-19 pandemic:

• Financial Instruments with Characteristics of Equity: At the December 2019 Board meeting, the Board discussed the staff’s preliminary analysis on how the fixed-for-fixed requirement in IAS 32 could be clarified. At this meeting the staff recommend that the Board articulate its foundation principle by stating that in a derivative on own equity that meets the fixed-for-fixed condition, the amount of functional currency units to be exchanged with each underlying equity instrument is fixed and does not vary other than (if applicable) with preservation adjustments and passage of time adjustments. The staff also set out recommendations for how the preservation and passage of time adjustments should be expressed.
• Post-implementation review of IFRS 10, 11 and 12: The staff recommend that the Board proceed with the PIR and publish a request for information to gather more information about the application of these Standards.
• Maintenance and Consistent Application: In 2017, the IFRS Interpretations Committee received a question about a particular commodity loan transaction and observed that the transaction may not be captured within the scope of any IFRS Standard. The staff recommend that the Board consider referring to commodity transactions as a potential project in its Request for Information on the 2020 Agenda Consultation.
• Disclosure Initiative—Subsidiaries that are SMEs: In the January 2020 meeting, the Board agreed to move the project from the research programme to the standard-setting programme. The objective is to develop a reduced disclosure IFRS Standard that would apply on a voluntary basis to subsidiaries that are SMEs, adapted from the disclosure requirements of the IFRS for SMEs. The staff expect to start drafting an ED or a DP in Q4 2020.

The new topics are:

Maintenance and Consistent Application:

• Sale and leaseback with variable payments. At its March 2020 meeting, the IFRS Interpretations Committee (Committee) discussed a submission about a sale and leaseback transaction with variable payments. The Committee published a tentative agenda decision but its discussions highlighted that IFRS 16 is not as complete as it could be regarding the subsequent measurement of the lease liability arising in a sale and leaseback transaction. They therefore recommended that the Board make a narrow-scope amendment to IFRS 16. The staff propose amending IFRS 16 to state that for lease modifications or changes in the lease term of a sale and leaseback transaction, the seller-lessee remeasures the lease liability by discounting the revised expected payments for the lease using a revised discount rate.
• Lack of exchangeability. At its November 2019 meeting, the Board decided to propose an amendment to IAS 21 to address the accounting when the spot exchange rate is not observable (because of a lack of exchangeability between two currencies). The staff are recommending a definition of a lack of exchangeability, indicators for assessing exchangeability and disclosure requirements.

Deferred tax related to assets and liabilities arising from a single transaction. In July 2019 the Board published the Exposure Draft Deferred Tax related to Assets and Liabilities arising from a Single Transaction, proposing an amendment to IAS 12 to narrow the scope of the recognition exemption (which affects initial recognition of leases and decommissioning liabilities). The staff will present a summary of feedback received. No decisions are expected at this meeting.

Second comprehensive review of the IFRS for SMEs Standard: The staff will publish a survey on 20 April 2020, with comments to be received by 27 July 2020, for stakeholders who do not have an existing process or do not have sufficient capacity or resources to submit a comment letter.

Management Commentary: The discussion will focus on disclosure objectives and the type of information that would support those objectives. The three areas are business model, strategy and resources and relationships.

There will also be an oral update on amendments to IFRS 17 Insurance Contracts.

More information

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

The Q&A is designed to provide companies with additional information to help them in planning activities over the coming months, focusing on the holding of AGMs and other general meetings and in the filing of company accounts.  In particular:

• in respect of AGMs and other general meetings, the FRC envisages companies holding 'closed' meetings with a minimum number of people by telephone or similar. Companies may also be granted the ability to over-ride their Articles for a short period and shareholders will have the ability to vote by proxy; and
• in respect of filing deadlines, the FRC is monitoring companies' abilities to meet deadlines and will take action if further aid appears necessary.

Please click here to access the Q&A on the FRC website.

On 14 May 2020, the government announced that legislation will be introduced to ensure those companies are required by law to hold AGMs will be able to do so safely to address the spread of coronavirus. A further Q&A has been jointly produced by BEIS and the FRC accordingly.

On 20 May 2020, the government introduced the Corporate Insolvency and Governance Bill in Parliament.  The overarching objective of the Bill is to provide businesses with the flexibility and breathing space they need to continue trading in a COVID-19 environment. The measures are designed to help UK companies and other similar entities by easing the burden on businesses and helping them avoid insolvency during this period of economic uncertainty.

On the Board's timelines in view of the COVID-19 pandemic, the staff recommended that the Board:

• (a) delay by one year the effective date of Classification of Liabilities as Current or Non-current (Amendments to IAS 1) to annual reporting periods beginning on or after 1 January 2023.
• (b) extend the consultation period by (approximately) three months for the following consultation documents:
  • the Exposure Draft General Presentation and Disclosures;
  • the Request for Information Comprehensive Review of the IFRS for SMEs Standard; and
  • the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment.

All Board members agreed with the staff recommendations and also agreed that the exposure draft on delaying the effective date of the IAS 1 amendments should have a comment period of 30 days. The Board gave the permission to begin the balloting process for the exposure draft and no Board member intends to dissent.

On accounting for COVID-19-related rent concessions, the staff recommended that the Board amend IFRS 16 to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. Entities applying the exemption would account for the changes as if they were not lease modifications. The exemption would have to be applied retrospectively but comparative figures would not be restated. A lessee would recognise any difference arising on initial application of the amendment in opening retained earnings (or other component of equity, as appropriate) in the annual reporting period that includes the date of initial application.

All Board members agreed with the staff recommendations and also agreed that the exemption would be effective immediately, when the final amendment is issued. The Board will ask the Trustees to approve a comment period of 14 days. The Board gave the permission to begin the balloting process for the exposure draft and no Board member intends to dissent. 

Note: The shortened comment periods for both exposure drafts were discussed in a DPOC call yesterday.

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