Implementation matters:

• Onerous Contracts: For the planned amendments to IAS 37 the Board decided to replace the examples proposed in the ED with a clarification that the costs that relate directly to the contract consist of both the incremental costs of fulfilling that contract and an allocation of costs that relate directly to fulfilling that and other contracts.
• PPE—Proceeds before intended use: The Board decided that the forthcoming amendments to IAS 16 will be effective for periods beginning on or after date 1 January 2022 and require retrospective application, but only for PPE made available for use on or after the beginning of the earliest period presented in the financial statements in which an entity applies the amendments. The amendments will prohibit the deduction of the proceeds from testing PPE, before it is capable of operating in the manner intended by management, from its cost.
• Sale of a single asset entity containing real estate: The Interpretations Committee referred an issue involving the sale of an entity that has only one asset (real estate) and whether it should be in the scope of IFRS 10 or IFRS 15. The Board asked the staff to provide more analysis so that the Board can assess whether it should make a narrow scope amendment to IFRS 10 or IFRS 15.  

Business Combinations under Common Control: The Board decided that, when applying a predecessor approach for a business combination under common control: the acquirer should recognise and measure assets and liabilities at the carrying amounts included in the financial statements of the transferred entity (rather than at the amounts included in the consolidated financial statements of the common controller); and that the acquisition would be accounted for prospectively—i.e. the comparative information of the acquirer would not be adjusted.

Management Commentary: The Board decided that the revised Practice Statement state that the enhancing qualitative characteristics of comparability, verifiability, and understandability are relevant to management commentary along with guidance on how to apply those characteristics, but decided not to include timeliness as a qualitative characteristic. The Board also began its discussions of the business model. 

Accounting Policies and Estimates (amendments to IAS 8): The Board decided to finalise the proposed amendments to the definition of accounting estimates but not amend the definition of accounting policies.

SME Standard Review and Update: The Board decided that the RFI ask whether the IFRS for SMEs Standard should be updated to align the definitions of Section 15 with IFRS 11 by aligning the definitions of ‘control’ and ‘joint control’ (but not the recognition and measurement requirements) and retain three categories (i.e. jointly controlled operations, jointly controlled assets, jointly controlled entities).

Financial Instruments with Characteristics of Equity: The Board has decided to develop amendments to IAS 32 to address practice issues, clarify the underlying principles in IAS 32 and develop additional application guidance. The Board discussed the overall objectives of the project and the project timetable, which could lead to an Exposure Draft in 2021.

Dynamic Risk Management: The Board discussed the outreach plan, which focuses on assessing the viability and operability of the DRM model and whether it will reflect an entity’s risk management strategy. The outreach will focus exclusively on financial institutions and aim to provide feedback to the Board by June 2020.

Subsidiaries that are SMEs: The Board decided that when it tailors the disclosure requirements for subsidiaries that are SMEs if there is no recognition and measurement difference between full IFRS and IFRS for SMEs they will use the disclosures in IFRS for SMEs. If there is a recognition and measurement difference, they will consider the principles in BC157 of the IFRS for SMEs Standard and adapt the disclosures if supported by one of the principles.  

IBOR Reform and the Effects on Financial Reporting: The Board decided to amend IFRS 9 to clarify that an entity should apply the IBOR practical expedient first, by updating the effective interest rate based on the alternative benchmark rate, and then apply IFRS 9 current requirements (but not with an illustrative example). In the context of the IBOR reform, the Board concluded that the current requirements in IFRS 9 provide an adequate basis to determine if any other modifications to that financial instrument are substantial, and propose no other amendments to IFRS 9.

Amendments to IFRS 17 Insurance Contracts: The Board discussed an update on feedback from outreach.  

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

The new Code sets higher expectations for investor stewardship policy and practice and focuses on how effective stewardship delivers sustainable value for beneficiaries, the economy and society

The Code is voluntary and sets an aspirational standard beyond minimum regulatory requirements in the UK. The Code now comprises 12 ‘apply and explain’ Principles for asset owners and asset managers, with reporting expectations relevant to their role. In addition, there are six, separate ‘apply and explain’ Principles for service providers with reporting expectations.

An organisation applying to become a signatory to the Code will need to provide a Stewardship Report that sets out how they have applied the Code Principles in the preceding 12 months. This must include reporting on the activities they have undertaken, and the outcomes achieved. For the organisation to be listed as a signatory on the FRC’s website, the Report will need to meet the reporting expectations set out in the new Code.

Key changes in the new Code include:

• An extended focus that includes asset owners, such as pension funds and insurance companies, and service providers as well as asset managers. This is intended to help align the approach of the whole investment community in the interest of end-investors and beneficiaries.
• A requirement to report annually on stewardship activity and its outcomes. Signatories’ reports will show what has actually been done in the previous year, and what the outcome was, including their engagement with the assets they invest in, their voting records and how they have protected and enhanced the value of their investments.
• Signatories will be expected to take environmental, social and governance factors, including climate change, into account and to ensure their investment decisions are aligned with the needs of their clients.
• Signatories are now expected to explain how they have exercised stewardship across asset classes beyond listed equity, such as fixed income, private equity and infrastructure, and in investments outside the UK.
• Signatories are required to explain their organisation’s purpose, investment beliefs, strategy and culture and how these enable them to practice stewardship. They are also expected to show how they are demonstrating this commitment through appropriate governance, resourcing and staff incentives.

The 2020 Code takes effect for reporting years beginning on or after 1 January 2020.

Additionally the Financial Conduct Authority (FCA) has published a feedback statement to its joint discussion paper entitled ‘Building a regulatory framework for effective stewardship’.  The feedback statement is available on the FCA website. 

Please click for the following additional information on the FRC website:

Please click here for the following additional information on the FRC website:

• Press release
• UK Stewardship Code 2020 (PDF)

Accountancy Europe recommends:

• Expanding the scope of the Non-Financial Reporting Directive beyond large public listed entities;
• Indicating a minimum set of mandatory reporting criteria;
• Requiring companies to disclose their non-financial information in the annual management report;
• Introducing minimum reporting criteria for forward-looking disclosures; and
• Ensuring the reliability of reported information.

Please click to access the call to action on the Accountancy Europe website.

The summary report reveals that of the three future project topics proposed (A) reporting of social matters and human rights; (B) reporting of non-financial risks and opportunities, and linkage to the business model; and (C) reporting on the materiality assessment process and outcomes for Environment, Social and Governance (ESG) matters), the audience ranked (B) the highest (77%), followed by (C) (58%) and (A) (subdivided into three subtopics supported by 7%-19%). Please click to access the full report on the EFRAG website.

In its October meeting, the European Lab Steering Group evaluated feedback from 51 constituents across 15 jurisdictions and decided that project (B) will be the next project on its agenda.

The Feedback Statement, which summarises the responses received to its Discussion Paper 18/8, sets out the FCA's planned next steps in the move towards a greener economy.

In particular, the statement confirms that the FCA plans to issue a consultation paper in 2020 which will propose new disclosure requirements for certain issuers aligned with the Task Force on Climate-related Financial Disclosure's (TCFD’s) recommendations on a 'comply or explain' basis and clarify existing disclosure obligations relating to climate change risks. The FCA also plans to:

• finalise proposed rule changes requiring Independent Governance Committees to oversee and report on firms’ environmental, social and governance (ESG) and stewardship policies by the end of 2019;
• publish a feedback statement in response to a joint Discussion paper with the Financial Reporting Council (FRC) on Stewardship setting out actions to address the most significant barriers to effective stewardship; and
• challenge firms on potential greenwashing, and take appropriate action to prevent consumers being misled.

The Feedback Statement is available on the FCA website.

The report highlights the gap between current reporting and investor expectations as economies increasingly transition towards low carbon and climate resilient futures and calls on companies to bridge this gap. It provides practical guidance about where companies can improve their reporting. The report also outlines what investors want to understand, questions companies should ask themselves, recommended disclosures, and a range of examples of the developing practice of climate-related reporting.

Please click to download the new report Climate-related corporate reporting – Where to next? from the FRC website.  The FRC has also issued a podcast on the report which is available from the FRC website here.

The common enforcement priorities related to 2019 IFRS financial statements include:

• specific issues related to the application of IFRS 16 Leases;
• follow-up of specific issues related to the application of IFRS 9 Financial Instruments for credit institutions and IFRS 15 Revenue from Contracts with Customers for corporate issuers; and
• specific issues related to application of IAS 12 Income Taxes (including application of IFRIC 23 Uncertainty over Income Tax Treatments).

ESMA also highlights potentially significant implications of transition from one interest rate benchmark rate to another on financial reporting and the importance of timely disclosure of its consequences.

In addition, this year’s priorities highlight the requirements to disclose non-financial information, with a focus on environmental matters, and specific aspects of ESMA’s Guidelines on Alternative Performance Measures. ESMA also highlights the importance of disclosures analysing the possible impacts of the decision of the United Kingdom to leave the European Union.

Additionally, the harmonised electronic format for issuers’ annual financial reporting (the European Single Electronic Format, ESEF) will apply to annual financial reports containing financial statements for financial years beginning on or after 1 January 2020. ESMA expects issuers to undertake all the necessary steps to ensure compliance with the new requirements on a timely basis.

ESMA and European national enforcers will monitor and supervise the application of the IFRS requirements outlined in the priorities, with national authorities incorporating them into their reviews and taking corrective actions where appropriate. ESMA will collect data on how European listed entities have applied the priorities and will publish its findings in a separate report.

Please click for the following documents on the ESMA website:

• Press release
• Public statement on enforcement priorities, providing more background on each of the focus areas

The aim of the project is to make recommendations for improvements to current regulation and practice and develop ‘blue sky’ thinking on corporate reporting. A key aim of the project is to challenge the FRC to think more broadly about how to promote greater ‘brevity, comprehensibility and usefulness in corporate reporting’ moving forward.

The survey is open until 15 November. Summary results will be published alongside the future of corporate reporting thought leadership paper in 2020.

Please click to access the survey through the press release on the FRC website. It will take no more than 15 minutes to complete.

EFRAG published its final comment letter on 24 September 2019.

The feedback statement describes the main comments received by EFRAG in response to its draft comment letter and how these comments were considered by EFRAG in finalising its comment letter to the IASB.

A press release and the feedback statement are available on the EFRAG website.

The newsletter highlights its recently published eport: Disclosures on the sources and uses of cash. The newsletter also provides an update on the Lab's climate and workforce project and UK Digital Annual Report and Accounts field trial event.

The full newsletter is available on the FRC website here.