Amendments to IFRS 17 Insurance Contracts: The Board continued its discussions about ED/2019/4 Amendments to IFRS 17. The Board unanimously supported all of the staff recommendations (about the amendments identified in November as not requiring significant redeliberation and about insurance acquisition cash flows and reinsurance contracts held).

IBOR reform and the effects on financial reporting: The Board decided that IFRS 9 and IAS 39 be amended to allow entities to continue a hedging relationship (i.e. no derecognition) when modifications to the interest rate benchmark on which a financial instrument’s contractual cash flows are based are a direct consequence of IBOR reform and are done on an economically equivalent basis.

Accounting policies and accounting estimates (Amendments to IAS 8): The Board gave the Staff permission to prepare the final amendments to IAS 8. They will apply to annual periods beginning on or after 1 January 2022 and are expected to be published in the first half of 2020.

Implementation matters:

Onerous contracts: The Board gave staff permission to prepare the final amendments to IAS 37. They will apply to annual periods beginning on or after 1 January 2022 and are expected to be published in the first half of 2020.

Annual improvements: The Board gave staff permission to prepare the final amendments for annual improvements to IFRS 1 (subsidiary as a first-time adopter), IFRS 9 (fees included in the ‘10 per cent’ test for derecognition of financial liabilities) and IAS 41 (taxation in fair value measurements). The amendments will apply to annual periods beginning on or after 1 January 2022. The amendment to the illustrative example accompanying IFRS 16 takes effect when it is published. Staff do not expect to publish the package of amendments until the second quarter of 2020.

IFRS 3 reference to the Conceptual Framework: The Board decided to confirm the proposal to add, within the section headed ‘Exception to the recognition principle’, an exception to the recognition principle for liabilities and contingent liabilities within the scope of IAS 37 or IFRIC 21. It also decided to clarify that updating the reference to the Conceptual Framework does not change IFRS 3 requirements for recognition of assets and liabilities whose fair values are subject to measurement uncertainty.

Subsidiaries that are SMEs: The Chair of the Australian Accounting Standards Board gave a presentation on their proposal for a simplified disclosure standard, similar to the one the IASB is looking to develop. (It was an information-only session).

Business combinations under common control: The Board decided that the acquisition method, as set out in IFRS 3, be required for transactions that affect non-controlling shareholders of the receiving entity. However, the receiving entity should recognise any excess of the fair value of the acquired identifiable net assets over the consideration transferred as an increase in the receiving entity’s equity (contribution), not as a gain on a bargain purchase in profit or loss.

SME Standard review and update: The Board gave staff permission to prepare the Request for Information, with a comment period of 180 days. 

Financial instruments with characteristics of equity: The Board began its discussion about classifying financial instruments that will, or may, be settled in the issuer’s own equity instruments (both derivative and non-derivative instruments), focusing on what clarifications could be made to the underlying principle of the fixed-for-fixed condition.

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

In light of the feedback received on the proposed amendments, the staff recommended that the DPOC:

• amend the description of agenda decisions by removing the statement that "explanatory material should be seen as helpful, informative and persuasive";
• amend the description of agenda decisions by replacing "new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained" with "additional insights that might change an entity’s understanding of the principles and requirements in IFRS Standards";
• amend the due process relating to agenda decisions by asking Board members whether they object to the publication of an agenda decision with explanatory material so that an agenda decision will only be published if no more than three Board members (of a Board of 14 members) object to publishing the finalised agenda decision at the Board meeting immediately following the finalisation of decision;
• not to provide the Board with a due process tool equivalent to an agenda decision.

After comprehensive discussion, the DPOC agreed with all staff recommendations. Detailed descriptions of the staff recommendations can be found in the corresponding agenda paper for the meeting. There is also an audio recording of the call (discussion of the paper in question begins at about 27 minutes into the recording) and a summary report of the meeting on the IASB's website.

The newsletter provides an update of the Lab's current projects and a brief overview of its other activities:

• climate change and workforce reporting (noting that a report in this area will be released in January 2020);
• Digital Future; and 
• disclosure of business models, strategy and the longer-term.

The full newsletter is available on the FRC website here.

The FRC's Corporate Reporting Review team will supplement its routine reviews of corporate reporting with four thematic reviews which will "identify scope for improvement, as well as areas of better practices, in a number of areas of stakeholder interest".  The areas of focus for the FRC's Audit Quality Review team have also been announced.

For corporate reporting, the FRC will undertake thematic reviews in the following areas:

• a review of disclosures made under IFRS 16 Leases in the first year of implementation;
• cash flows and liquidity disclosures.  This thematic review will focus on companies' disclosures of cash flows and liquidity risks, exploring in more detail issues identifies in the CRR's routine work and the themes of the Financial Reporting Lab's recently published report Disclosure on the sources and uses of cash.  The thematic review will also focus on how the presentation of the cash flow statement and disclosures can help readers assess the ability of a company to generate cash flows and the cash flows needs of the company.  The FRC has identified a number of areas that can be improved and expects:
  • basic compliance with IAS 7 Statement of Cash Flows and the elimination of what it calls 'basic' errors
  • disclosure of accounting policies for complex transactions where the cash flow presentation is judgemental and, where relevant, any significant accounting judgements applied in the cash flow statement;
  • company specific disclosures of liquidity risk consistent with disclosures given for going concern and the viability statement;
  • where material, disclosure of supplier financing arrangements, including the impact on cash flows and the presence of any concentrations of liquidity risk;
  • disclosure of what constitutes cash and cash equivalents, including any restrictions on the availability of cash; and
  • compliance with the ESMA Guidelines for cash flow based Alternative Performance Measures (‘APMs’).
• a deeper dive into certain findings from the recent thematic review on the application of IFRS 15 Revenue from Contracts with Customers; and
• the effects of the decision to leave the EU on companies’ disclosures.
• reviewing company disclosures with respect to climate change.

As part of the FRC’s audit monitoring programme, the Audit Quality Review (AQR) team will consider audit work on:

• going concern and the viability statement;
• other information in the annual report;
• long-term contracts;
• the impairment of non-financial assets;
• fraud risk; and
• the application of IFRS 15 and 16.

The FRC plans to focus particularly on annual reports and audits in the financial services, retail, construction and manufacturing sectors. 

Click for (all links to the FRC website):

• Press release
• Further information related to the FRC’s planned thematic review of cash flows and liquidity disclosures

It is looking to investigate how Video, Augmented Reality (AR) and Virtual Reality (VR) is, and will be, used in the production and consumption of corporate reporting data.

Below is an analysis of all changes made to the work plan since our last analysis on 25 November 2019.

Standard-setting projects

No changes.

Maintenance projects

• 2019 comprehensive review of the IFRS for SMEs Standard — A request for information is now expected in January 2020 (formerly Q1 2020).
• Amendments to IFRS 17 'Insurance Contracts' — A final amendment is now expected in H1 2020 (formerly Q2 2020).
• Annual improvements (2018-2020 cycle) — All projects that are part of this cycle have now been aligned to say that final amendments are now expected in Q2 2020 (formerly some said Q2 2020 and some H1 2020); projects that belong to the annual improvement cycle are:
  • Fees in the ‘10 per cent’ test for derecognition of financial liabilities (Amendments to IFRS 9);
  • Lease incentives (amendments to illustrative example 13 accompanying IFRS 16);
  • Subsidiary as a first-time adopter (amendments to IFRS 1);
  • Taxation in fair value measurements (amendments to IAS 41).
• Disclosure initiative - Accounting policies — Comments on the Exposure Draft (ED) were due 29 November 2019; feedback on the ED is now expected in February 2020.
• IBOR reform and its effects on financial reporting: phase 2 — An exposure draft is now expected in Q2 2020 (formerly H1 2020).
• Onerous contracts - Cost of fulfilling a contract — A final amendment is now expected in H1 2020 (formerly H2 2020).
• Updating a reference to the Conceptual Framework (amendments to IFRS 3) — A final amendment is now expected in Q2 2020 (previously no date given).

Research projects

• Goodwill and impairment — A discussion paper is now expected in February 2020 (formerly Q1 2020).
• Post-implementation review of IFRS 10, IFRS 11 and IFRS 12 — A review of the research is now expected in February 2020 (previously no date given).

Other projects

• IFRS Taxonomy update: interest rate benchmark reform (amendments to IFRS 9, IAS 39 and IFRS 7) — Comments on the proposed update were due 13 December 2019; there are no further dates given.

The above is a faithful comparison of the IASB work plan at 25 November and at 14 December 2019. For access to the current IASB work plan at any time, please click here.

The podcast discusses the amendments tentatively finalised during the meeting and focuses on the expected recovery of insurance acquisition cash flows and the accounting for reinsurance contracts held.

The podcast can be accessed through the press release on the IASB website. Our summary of the meeting and the results of the IASB's votes is available here.

The DECL Taskforce’s first report consisted of recommendations to describe what a comprehensive set of good ECL disclosures might look like, drawing from and building on existing disclosure recommendations and requirements. The second report now adds guidance and illustrative examples that show how the recommendations in the first report can be presented in a way that enhances comparability between banks.

The second report particularly focuses on disclosures that help users to understand the types and extent of credit risk exposure a bank has and how that risk has evolved; the forward-looking information about macro-economic conditions used in estimating ECL; and the sensitivity of ECL provisions to different macro-economic conditions.  

The guidance is aimed primarily at the biggest UK-headquartered banks and building societies, but is likely to be relevant to a much wider group of preparers.

Please click to download the report from the FRC website.

In the Point of View, IFAC sets forth recommendations for various stakeholders including Governments, Businesses, Professional accountancy organisations and accountants.

The IFAC indicates that professional accountancy organisations have a key role to play in influencing climate-change mitigation and adaption as advocates for the profession and providers of accounting training and support. It calls on professional accountancy organisations to commit to keeping accountants informed of how they can support their organisations’ and clients’ efforts to respond to climate risk.

IFAC identifies that accountants themselves are influential in governments, not-for-profits, and businesses large and small. It highlights that accountants “are uniquely positioned to enhance meaningful action on climate change by providing relevant insights and analysis, reporting, and assurance to help organisations create and protect long-term value”. IFAC has signalled its intention to continue to support and facilitate the involvement of professional accountants in climate action in the following areas:

• Providing objective data and insights to help organisations set and achieve appropriate emissions targets.
• Contributing to efforts to integrate climate change risk into governance, strategy, finance, and operations, and enabling reliable and decision-useful climate related information.
• Delivering insights on the financial impacts of climate risk and how it relates to revenues, expenditures, assets, liabilities, and financial capital.
• Providing assurance on climate information serving to enhance confidence in public disclosures and to facilitate capital flows to sustainable organisations.
• Advising on potential changes in tax law dealing with emissions regulations and helping fulfil evolving tax requirements impacted by climate change.  

The call comes as the UN Climate Change Conference meets and follows an earlier Points of View publication, Enhancing Corporate Reporting, which discusses the need for enhancing the corporate reporting system, integrated reporting, and the role of the accountancy profession in enhancing corporate reporting.

A press release and the Points of View publication are available on the IFAC website.

The DPOC will discuss:

• Correspondence received on due process matters; and
• Due process handbook review — agenda decisions.

The correspondence slot regards two letters received by the DPOC that question whether the full due process was adhered to in an agenda decision of the IFRS Interpretations Committee regarding the lease term and the useful life of leasehold improvements.

Agenda papers for the meeting are available on the IASB's website.