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Chairman of the IFRS Foundation Trustees presents sustainability consultation paper at ISAR 37, engages in panel discussion

06 Nov 2020

At the thirty-seventh session of the United Nations Conference on Trade and Development (UNCTAD) Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) this week, Erkki Liikanen, Chairman of the IFRS Foundation Trustees, introduced the Trustees' consultation paper that was published in September to assess demand for global sustainability standards and what role the Foundation might play in the development of such standards.

During the introduction of the consultation paper Mr Liikanen noted that when the challenges are global, the most optimal solution would be global. He explained that there have calls for the IFRS Foundation to play a role in this area as the Foundation has a well-established model of global standard-setting, working in close cooperation with both public and private stakeholders.

The presentation was followed by a lively panel discussion on "Climate-related financial disclosures in mainstream entity reporting: Good practices and key challenges", that among other speakers saw participation of representatives of TCFD, CDSB, CDP, and UNEP FI.

Please click for the following additional information:

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IASB (International Accounting Standards Board) (blue) Image

Seventh IASB research forum — recordings available

05 Nov 2020

The International Accounting Standards Board (IASB) hosted its seventh Research Forum on 2–3 November 2020 as a virtual conference. Recordings of the individual sessions are now available on the IASB website.

The forum saw the presentation of four academic papers, followed by a responses of an academic and of an IASB/NNS representative, and two panel discussions around research opportunities related to IFRS 9 and to IFRS 15. The audience was invited to participate in the discussions. The recordings are now available on the IASB website.

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EFRAG publishes its final comment letter on the IASB exposure draft ED/2019/7 General Presentation and Disclosures

05 Nov 2020

EFRAG has published its final comment letter in response to the IASB's Exposure Draft ED/2019/7 General Presentation and Disclosures (the ED).

The proposed new standard is intended to replace IAS 1 Presentation of Financial Statements.

In its final comment letter, EFRAG:

  • supports the IASB's proposals to present an operating, investing and financing category in the statement of profit or loss to improve comparability and reduce diversity in practice, but has reservations over some of the proposals in the ED;
  • expresses the view that separate presentation of integral and non-integral associates and joint ventures could provide relevant information for users of financial statements. However EFRAG is concerned that the IASB’s proposed definition would involve significant judgement and makes a number of suggestions in this regard;
  • supports the IASB's proposal to continue requiring entities to present an analysis of expenses using either by-function or by-nature method, based on whichever method provides the most useful information to the users of financial statements. However EFRAG recommends that the IASB further investigates the cost/benefit profile of its requirement to disclose on a by-nature basis in the notes when presenting by-function on the face of the financial statements, and, if appropriate, consider focusing on information that is most needed by users.
  • welcomes the IASB's efforts to define unusual income and expenses and to require entities to disclose such items in the notes, but notes that the definition of unusual items seems to be rather narrow;
  • questions the cost/benefit profile of the requirement to present the split of tax and non-controlling interest components for all the items when a performance measure is adjusted; and
  • welcomes the IASB's efforts to provide guidance on Management Performance Measures (‘MPMs’) but considers that not only subtotals on the face of the statement of profit or loss but also other measures, such as indicators of financial position or ratios, should be included in the scope of this requirement. EFRAG also considers that the IASB should articulate better the link between MPMs and IFRS 8

For more information, see the press release and the comment letter on the EFRAG website.

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IASB and EAA virtual academic research seminar on goodwill — recording available

04 Nov 2020

On 30 October 2020, the International Accounting Standards Board (IASB) and European Accounting Association (EAA) held a virtual research seminar for academics related to the IASB’s Discussion Paper 'Business Combinations — Disclosures, Goodwill and Impairment' and relevant academic literature. A recording of the event is now available.

The purpose of the session was to obtain feedback from academics on the proposals in the March 2020 DP and to discuss relevant academic evidence.

Please click for more information and access to the recording (2 hours) on the IASB website.

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Summary of the October 2020 ITCG meeting

04 Nov 2020

The IASB has published a summary of the IFRS Taxonomy Consultative Group (ITCG) meeting held on 7 October 2020.

The ITCG discussed the following:

  • IFRS Taxonomy content — Disclosure of early application of new or amended IFRSs

For more information, see the summary on the IASB’s website.

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IASB issues podcast on latest Board developments (October 2020)

04 Nov 2020

The IASB has released a podcast featuring IASB Vice-Chair Sue Lloyd and Executive Technical Director Nili Shah discussing deliberations at the October 2020 IASB meeting.

The podcast discusses:

  • Work plan changes as a result of COVID-19;
  • 2020 Agenda consultation;
  • Management commentary;
  • Disclosure initiative — Subsidiaries that are SMEs;
  • Equity method of accounting; and
  • Maintenance and consistent application.

The podcast (15 minutes) can be accessed through the press release on the IASB website.

The detailed notes taken by Deloitte observers at the meeting are available here.

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FRC publishes the results of major local audit inspections

04 Nov 2020

The Financial Reporting Council (FRC) has published its audit quality inspection findings into the quality of major local audits in England for the year ended 31 March 2019. This is the first time the FRC has publicly reported on the quality of major local audits.

The FRC reviewed 15 audits across the seven largest audit firms covering both the financial statement opinion and the Value for Money arrangements conclusion work. The FRC paid particular attention to the valuation of property (including investment property), multi-employer pension deficits, occurrence and completeness of expenditure, first year audit procedures, the impairment of receivables and the fraud risk assessment and response thereto.

The FRC indicates that the results of its inspections were “concerning” with just 40% (down from 64% in 2018/19) of the audits requiring no more than limited improvement. It comments that “overall, some firms are still not consistently achieving the necessary level of audit quality and therefore need to make further progress”. Most of the findings leading to reviews requiring more than limited improvements were identified in the areas of property valuation (including investment property), sufficiency of audit procedures over the occurrence and completeness of expenditure, the response to fraud risks, the impairment of receivables, valuation of pension assets and the effectiveness of the Engagement Quality Control Review.

With regards to Value for Money conclusion work, the FRC observed that “the quality of VfM conclusion work across all firms remains high”. All 15 reviews were assessed as either good or requiring limited improvements and, unlike the prior year, no reviews were graded as requiring improvement.

A press release and the full report is available on the FRC website.

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October 2020 IASB meeting notes posted

04 Nov 2020

The IASB met on Tuesday 27, Wednesday 28 and Thursday 29 October 2020 via video conference. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

Board work plan update: This was the first periodical update of the work plan, replacing the research update. The staff have been reviewing the timing of consultation documents and recommend some changes to the timing of consultations (such as delaying the Management commentary ED until May 2021) and extending some comment periods (such as for the DP on BCUCC), all of which the Board supported. The work plan on the IFRS Foundation website was updated after the meeting.

2020 Agenda consultation: The IASB is preparing to issue a Request for Information (RFI) in the first quarter of 2021, as part of the public consultation on its work plan that it is required to undertake every five years. The Board decided that the RFI describe 27 potential projects identified from outreach undertaken.

Maintenance and consistent application — Deferred tax related to assets and liabilities arising from a single transaction: In July 2019, the Board published an ED proposing amendments to IAS 12. The Board confirmed the proposal to narrow the scope of the recognition exemption so that it will not apply to transactions that give rise to equal amounts of taxable and deductible temporary differences. The Board also decided to remove the capping proposal.  

Management commentary: This was the last decision-making meeting for the ED. The Board gave the staff permission to begin the formal drafting and balloting processes. The staff papers included the working draft of their guidance on the provision of information about matters that could affect an entity’s long-term prospects, intangible resources and relationships, and ESG matters, but this was to elicit feedback rather than seeking any formal decisions. The ED is expected to be published in May 2021.

Extractive activities: The staff presented findings on the diversity of accounting policies applied to exploration and evaluation expenditure within the scope of IFRS 6. The staff’s research indicates that diversity is primarily due to the extent to which an entity recognises exploration and evaluation expenditure incurred during the reporting period as an asset and the unit of account that an entity decides to apply to its exploration and evaluation expenditure asset. Most of the entities in the sample use area of interest accounting.  The ‘full cost’ and successful efforts methods are the most common accounting policies for oil and gas companies not applying ‘area of interest’ accounting. The Board was not being asked to make any decisions. Board members mentioned that a potential solution could be to amend IFRS 6 by requiring further disclosures but that the staff have to increase engagement with financial statement users for a better understanding of the disclosures that they would consider relevant.

Equity method: Work on reviewing aspects of IAS 28 began in May. The Board decided that the objective of this review be to assess whether application problems with the equity method for associates and joint ventures can be addressed by identifying and explaining the principles of IAS 28. The Board decided not to consider whether the equity method is a one-line consolidation method or a measurement method, whether it should be replaced by one of the measurement bases in the Conceptual Framework or whether significant influence should be the basis for when to apply the equity method.

Disclosure initiative — Subsidiaries that are SMEs: The IASB is developing a Standard setting out reduced disclosure requirements for subsidiaries apply IFRS Standards but meet the definition of an SME. At this meeting the IASB decided on how entities will communicate that they have applied the reduced disclosure requirements and how the disclosure requirements of IAS 8 should be applied by these entities.

The staff gave an oral update on Dynamic Risk Management (DRM). The staff is setting up meetings to discuss the DRM model with 25 banks from different jurisdictions between now and the end of January 2021. The staff expect to present the feedback from this outreach to the Board in March or April 2021. The Board will then decide the project direction.

The staff gave an oral update on the IFRS Taxonomy, and the proposed updates (PTU/2019/1 Interest Rate Benchmark Reform—Amendments to IFRS 9, IAS 39 and IFRS 7 and PTU/2020/2 Amendments to IFRS 17, Extension of the Temporary Exemption from Applying IFRS 9 and Property, Plant and Equipment—Proceeds before Intended Use). Concerns continue to be raised about the paucity of comment letters (only one was received for PTU/2019/1 and none for PTU/2020/2).

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

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EFRAG-IASB joint webinar on business combinations and subsequent accounting for goodwill – summary report

04 Nov 2020

On 16 October 2020, EFRAG, along with the IASB, hosted an outreach event to discuss business combinations and the subsequent accounting for goodwill. A summary report is now available.

The online event covered the following topics:

  • Improving disclosure about business combinations;
  • improvements to the goodwill impairment test; and
  • a possible reintroduction of amortisation of goodwill.

During the discussion, participants from a range of backgrounds such as enforcement, auditing, academia, valuation and preparation of accounts, shared their views and concerns around the proposals contained in the Discussion Paper Business Combinations —  Disclosures, Goodwill and Impairment.

Please click to access the summary report on the EFRAG website.

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EFRAG publishes October 2020 issue of 'EFRAG Update'

03 Nov 2020

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during October 2020.

The update reports on the EFRAG Board webcast meeting on 8 and 30 October 2020, the EFRAG webcast on 15 October 2020 and the EFRAG TEG webcast meeting on 21-22 October.  The publication also covers the activities of the European Reporting Lab.

The update also lists EFRAG publications issued in October including:

The October EFRAG Update can be found on the EFRAG website here.

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