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IFASS (International Forum of Accounting Standard Setters) (dark green) Image
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IASB Chair's farewell speech to IFASS members

09 Mar 2021

The spring meeting of the International Forum of Accounting Standard Setters (IFASS) concluded today with a farewell speech of IASB Chair Hans Hoogervorst to his fellow standard setters.

Mr Hoogervorst began his speech with some quips about departing presidents and his intention to leave peacefully. In fact, he noted, there was no need for an armed insurrection of angry national standard-setters as his designated successor, Andreas Barckow, is the former Chair of the German standard-setter and thus really understands what national standard-setters need from the IASB - an insider so to say.

Mr Hoogervorst then looked back over his ten years as Chairman. He noted he was truly proud of what the IASB has achieved during that time: completing reforms following the global financial crisis and delivering major improvements to financial instruments accounting, to revenue recognition and to lease accounting — often in the face of fierce lobbying. In his second term, the IASB focused on improvements to presentation. Not all projects of that phase are finished yet, but all of them delivered or promise progress at making disclosures more relevant.

While mentioning big standards and adoption of IFRSs around the world, Mr Hoogervorst could not help but comment on the adoption of IFRS 17 in Europe and that some parties still hope to limit the scope of the annual cohorts requirement that are intended to insure that contracts cannot continue contributing to profits long after they have expired. His questions were:

  • Is it really worth it?
  • Will European insurers really look good if they apply a carve-out that most investors will view as a short-cut that distorts performance?
  • Is it in the interests of the industry itself to lose the full benefits of applying the same standard across the world?

A bracket around Mr Hoogervorst's speech were the crises at the beginning at the end of his chairmanship. He joined  the IASB with little experience with accounting at a time when the accounting for financial instruments came under attack during the financial crisis. He noted that people were pointing the finger at accounting when the blame was really much closer to home. At that time he was convinced that the criticism of accounting was a typical case of shooting the messenger. Mr Hoogervorst noted that during the COVID-19 crisis and recession the state of the global economy is even more perilious that ten years earlier with debt exploding around the world. He stated that he would not be surprised if accounting comes under pressure again, as it did in 2008, when the economic stress that has been building up finally erupts. But, he noted, that is exactly the point when proper accounting matters the most.

Concluding his speech Mr Hoogervorst thanked the national standard setters and stressed that IFASS was a wonderful example of what can be achieved when highly skilled people from around the globe work together to solve common challenges, which was even more impressive given the anti-globalisation backdrop of the last five years where a politically expedient solution is often valued above the right accounting solution. He asked the standard setters to continue to stand up for independent standard-setting and to give his successor and his team the same support they have given him in the last decade.

Please click to access the transcript and a recording of the speech on the IASB website.

IFASS (International Forum of Accounting Standard Setters) (dark green) Image
IASB (International Accounting Standards Board) (blue) Image

IASB offers insights on forthcoming agenda consultation

09 Mar 2021

The International Forum of Accounting Standard Setters (IFASS) is currently holding its spring meeting as a virtual conference. During one presentation today, the IASB offered insights on the forthcoming request for information on the IASB's third agenda consultation and asked participants on outreach proposals and ideas.

The request for information is expected to be published at the end of March 2021, with Board deliberations to take place during the second half of 2021 and a final work plan to be published in the first half of 2022. This will allow the incoming Board Chair to be involved in determination of the Board's priorities for 2022-2026.

As one of the first points of the presentation, the IASB commented on the connection and distinction between the IFRS Foundation's current initiative on sustainability reporting and the IASB's agenda consultation. Sustainability reporting is a hot topic at the moment and respondents might not be clear about what would be addressed where. The IASB is currently working on its management commentary project and could do more on sustainability aspects, should stakeholders wish so, as long as this is connected to financial statements. The IFRS Foundation is intending to set up a sustainability standards Board that would deal with sustainability reporting as such. While there is some connecting middle ground, respondents should not confuse the two initiatives. As the IFRS Foundation Trustees move forward quickly with their initiative, their decisions would be available before the Board makes decisions on its future agenda.

The presenter then explained that the request for information will consist of three parts: (1) strategic direction and balance of the Board's activities, (2) criteria for assessing which projects to add to the work plan, and (3) priority of financial reporting issues. The IASB asks that respondents consider parts one and two first instead jumping immediately to part three.

Part one of the request for information regarding the strategic direction and balance notes that the IASB's work is currently following six lines:

  • New IFRS Standards and major amendments to IFRS Standards
  • Maintenance and consistent application of IFRS Standards
  • Digital financial reporting
  • The IFRS for SMEs Standard
  • Stakeholder engagement
  • Understandability and accessibility

In this part of the request for views the IASB is seeking stakeholders’ views on whether the Board should increase, leave unchanged or decrease its current level of focus on each line of work. And while there is a little room for additional work, respondents are asked to assume that the Board’s overall level of resources will remain substantially unchanged during the 2022 to 2026 period.

Part two of the request for information regarding criteria for assessing which projects to add to the work plan notes that the Board will use a specified list of seven criteria to assess the potential financial reporting issues that could be added to its work plan to develop new IFRS Standards and major amendments to IFRS Standards. The criteria are derived from the Due Process Handbook and the 2015 Agenda Consultation. The relative importance of any specific criterion will vary depending on the particular circumstances. Generally, the Board will evaluate potential project for its work plan primarily on the basis of whether the project will meet investors’ needs, while also taking into account the costs of producing the information.

Finally, part three of the request for information regarding the priority of financial reporting issues describes 22 projects. The Board will seek stakeholders’ views on what priority they would give each of the potential projects described in the RFI — high, medium or low — and whether their prioritisation refers to all or only some aspects included in the project description.

Stakeholders will have the opportunity to provide feedback on the request for information through comment letters, an online survey, outreach meetings, and consultative group meetings. Standard setters participating in the IFASS meeting were especially asked to share thoughts on possible additional outreach activities. Comments included:

  • There are currently many consultations. Stakeholders might be thoughtful of their resources and how they allocate them.
  • Priorities have changed during the COVID-19 pandemic and the pandemic might have changed the way stakeholders look at issues.
  • The IASB might consider setting aside some additional resources to be able to react to changed stakeholder reactions to the request for information.
  • The current virtual environment might offer additional opportunities of participating in outreach activities, including in other standard setters' outreach events.
  • Outreach events of the IASB should, where possible, be held in the local language.
  • The IASB should collaborate with local IFASS members in selecting participants for outreach events.
IFRS IC (IFRS Interpretations Committee) (blue) Image

Applicants invited for IFRS Interpretations Committee membership

09 Mar 2021

The Trustees of the IFRS Foundation have invited applications for candidates to fill two vacancies on the IFRS Interpretations Committee.

Specifically, the Trustees are seeking individuals who have a preparer focus and individuals with direct and relevant experience in the application of IFRSs. Members are expected to attend approximately six two-day meetings each year held in London. Terms of membership will begin 1 July 2021 and will expire on 30 June 2024. Membership is unpaid, but the IFRS Foundation meets members' reasonable expenses of travel on IFRS IC business.

Applications are accepted until 6 April 2021.

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

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Pre-meeting summary for the March 2021 IASB supplementary meeting

08 Mar 2021

The IASB will hold a supplementary meeting on 10 March 2021, by video conference. We have posted our pre-meeting summary for the meeting that allow you to follow the IASB’s decision making more closely. We have summarised the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

IFRS 16 and COVID-19: The sole topic is its proposal to extend the period to which the practical expedient for COVID-19 related rent concessions can be applied by a year. The staff recommend that the Board finalise the proposal that it cover payments originally due on or before 30 June 2022. If the Board agrees, the staff expect to be able to publish the final amendments by the end of March. 

Our pre-meet­ing summary is available on our March supplementary meeting notes page and will be sup­ple­mented with our popular meeting notes after the meeting.

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Leaf - sustainability (green) Image

Standard setters discuss non-financial reporting

08 Mar 2021

The International Forum of Accounting Standard Setters (IFASS) is currently holding its spring meeting as a virtual conference. One presentation today saw a discussion of non-financial reporting against the backdrop of the possible development of EU non-financial reporting standards.

The discussion first saw an introduction to the final report on preparatory work for possible EU non-financial reporting standards. The presenter explained that the European Commission (EC) had asked the European Financial Reporting Advisory Group (EFRAG) to undertake preparatory work for the possible elaboration of EU non-financial reporting standards in view of the political ambition and urgent timetable of the European Green Deal and sustainable finance agenda. The task force set up by EFRAG to (a) assess the current state of non-financial reporting and the currently existing reporting standards and frameworks and to (b) report on the best way forward came to the conclusion that the current fragmented non-financial reporting landscape does not offer a solution that could be taken per se as an EU reporting framework. The final report of the task force, therefore, proposes setting up a European Sustainable Standard (ESS) setter that would develop EU non-financial reporting standards under an ambitious roadmap that would see first drafts of standards by mid-2022.

While the standard setters participating in the IFASS meeting acknowledged the enormous amount of work invested into the comprehensive assessment in a very short time, there were many questions and concerns. Apart from questions regarding the maturity of the data available and the operationalisability of the new framework given assurance questions, the main comments concerned a perceived competition between international initiatives, especially the IFRS Foundation's plans to set up an international Sustainability Standards Board (SSB), and the ESS. Speakers noted the need for a global solution as the underlying problems are global as well and as companies act globally. They acknowledged the current fragmented reporting landscape, but pointed at frameworks and standards that can be used to fill gaps until a truly global solution is available (TCFD and SASB were most commonly mentioned). One participant also asked whether the standard setter for ESS was intended to fill the gap until the SSB would take over. Generally, the fear was expressed that ESS would drive international standard-setting in this area further apart as moving ahead single-handedly would lead to one more set of standards being out there that would need to be converged with global standards in the end.

The presenter responded by pointing out the urgency of non-financial reporting standard-setting and the wish to keep up the momentum of EU developments. He also underlined that the development of ESS was by no means intend to occur in isolation but open to co-operation and contribution of other interested parties. Finally, he noted the fact that EU standards would automatically take prevalence as they would be the most complex and comprehensive standards and as their application would be mandatory. He also pointed out that convergence would not be necessary on all topics as the EU standards would cover more areas than envisioned by the IFRS Foundation.

The presentation was somewhat overtaken by the fact that the Trustees of the IFRS Foundation published a statement announcing the strategic direction and further steps of their sustainability initiative while the presentation was given. The IASB Vice Chair commented on that and noted that she was relieved to see that the philosophy behind the EU ideas and the Trustees' decisions seemed to be consistent and that there were many commonalities. She noted that the IFRS Foundation was moving much faster than people seemed to realise and would hit the ground running in their standard-setting work as it would build on existing frameworks such as the TCFD. She concluded by also noting the need of a global solution and the importance of working together.

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Leaf - sustainability (green) Image

Final reports on possible EU non-financial reporting standards

08 Mar 2021

In July 2020, the European Commission (EC) sent two letters to the European Financial Reporting Advisory Group (EFRAG) asking it to undertake preparatory work for the possible elaboration of EU non-financial reporting standards. The first letter tasked the European Reporting Lab with appointing a multi-stakeholder project task force to carry out the preparatory work for possible standards. The second letter was directed ad personam to the EFRAG Board President to consider a possible need for changes to the governance and financing of EFRAG if it were to be tasked with the development of EU non-financial reporting standards. On both tasks, final reports have now been submitted to and published by the EC.

The Commission notes that while EU sustainability standards are necessary to meet the political ambition and urgent timetable of the European Green Deal and necessary to ensure consistency of reporting rules at the heart of the EU's sustainable finance agenda, coordinating the development of EU sustainability reporting standards with existing and emerging global initiatives is also important.

The first report proposes a roadmap for the development of a comprehensive set of EU sustainability reporting standards. The report contains 54 proposals organised into four groups and describes a three-layered target architecture that would contain sector agnostic standards, sector specific standards, and entity specific standards. It also contains an ambitious standard-setting roadmap that would see a first set of draft standards by mid-2022.

The second report proposes reforms to EFRAG's governance structure to establish a non-financial reporting pillar with a robust governance structure and due process, and a sustainable funding structure. The non-financial reporting pillar would basically mirror the financial reporting pillar, and an Administrative Board sitting above the two pillars would join them. The report notes that establishing a non-financial reporting Board must not come at the cost of weakening the financial reporting pillar.

Please click for access to the reports on the EC website:

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IFRS Foundation Trustees announce strategic direction and further steps of their sustainability initiative

08 Mar 2021

At their 2-4 March 2021 meeting, the IFRS Foundation Trustees continued their analysis and discussions of the feedback received to their consultation paper on sustainability reporting and concluded on the future strategic direction.

The feedback received on the first three questions that was discussed by the Trustees in February 2021 already indicated that there is a need for a global set of internationally recognised sustainability reporting standards and for the IFRS Foundation to play a role in the development of these standards.

Also in February 2021, the IOSCO Board issued a statement noting IOSCO's intention to work with the IFRS Foundation in developing a plan to establish a new board for setting sustainability reporting standards that meet the needs of the capital markets.

Based on the further discussion of the feedback to the consultation and encouraged by the IOSCO statement, the Trustees have now concluded on the strategic direction and further steps in their initiative.

The new Sustainability Standards Board (SSB) to be set up would

  • focus on information that is material to the decisions of investors, lenders and other creditors;
  • initially focus its efforts on climate-related reporting, while also working towards meeting the information needs of investors on other ESG matters;
  • build upon the well-established work of the Financial Stability Board’s Task Force on Climate related Financial Disclosures (TCFD), as well as work by the alliance of leading standard-setters in sustainability reporting focused on enterprise value; and
  • work with standard setters from key jurisdictions to issue standards that provide a globally consistent and comparable sustainability reporting baseline, while also providing flexibility for coordination on reporting requirements that capture wider sustainability impacts.

The Trustees also announced that they will consider the prototype climate-related financial disclosure standard published in December 2020 as a potential basis for the new board to develop climate-related reporting standards.

As regards further steps, the Trustees note that they

  • intend to publish a feedback statement that summarises the responses received to their consultation paper, and how that feedback informed their decisions;
  • will publish for public comment the proposed changes to the Foundation’s constitution necessary to formalise establishment of a new board, including its composition; and
  • will continue to engage with the IFRS Foundation Monitoring Board regarding the proposed changes.

The Trustees underline that they remain on track to make a final determination about a new board in advance of the November 2021 United Nations COP26 conference.

Please click to access the Trustees' full announcement on the IASB website.

EFRAG (European Financial Reporting Advisory Group) (dk green) Image

EFRAG’s final comment letter on the IASB's proposed amendment to IFRS 16 and COVID 19

04 Mar 2021

The European Financial Reporting Advisory Group (EFRAG) has issued its final comment letter on the IASB’s Exposure Draft ED/2021/2 Covid-19-Related Rent Concessions beyond 30 June 2021 (Proposed Amendments to IFRS 16).

The proposed amendment would extend the scope of the 2020 amendment by increasing the period of eligibility to apply the practical expedient from 30 June 2021 to 30 June 2022.

EFRAG supports the proposals and agrees that there remains a need to provide relief for lessees given the ongoing challenges that lessees face in assessing whether lease modifications have occurred under the circumstances of COVID-19.  EFRAG supports a continued time restriction to ensure the Amendments only apply to COVID-19-related concessions and to limit the effect of reduced comparability due to the Amendments. 

Additionally EFRAG supports the proposed transition requirements, believes the Amendments should be applied on a modified retrospective basis and believes that early adoption should be allowed at the date of the IASB’s issuance of the extension of the amendment.

A press release and the final comment letter are available on the EFRAG website.

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March 2021 IFRS Interpretations Committee meeting agenda posted

04 Mar 2021

The IFRS Interpretations Committee has posted the agenda for its next meeting, which will be held by video conference on 16 March 2021.

The Committee will discuss the following:

  • Ad­min­is­tra­tive matters
  • Comment letter analysis of IAS 38 Intangible Assets — Configuration or customisation costs in a cloud computing arrangement
  • IFRS 16 — Non-refundable VAT on lease payments
  • IAS 32 — Accounting for warrants that are initially classified as liabilities
  • Work in progress

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries as well as observer notes from the meeting on this page as they become available.

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UK Endorsement Board supports the IASB's proposed amendment to IFRS 16 and COVID 19

04 Mar 2021

The UK Endorsement Board (UKEB) has issued its final comment letter on the International Accounting Standard Board's (IASB's) Exposure Draft ED/2021/2 'Covid-19-Related Rent Concessions Beyond 30 June 2021 (Proposed Amendments to IFRS 16)'.

The Exposure Draft proposes to extend the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification.

The UKEB supports the IASB’s proposal to extend the eligible date of the May 2020 reliefs to assist lessees to 30 June 2022.

The UK Endorsement Board secretariat plan to issue a draft Endorsement Criteria Assessment for public consultation in the same week that the IASB publish the final amendment which is expected by the end of March 2021.  The UKEB aims to complete adoption procedures by early May making the amendment available for use by UK entities with financial years ending on or after 31 March 2021.

For more information, see the press release and final comment letter on the UKEB's website.

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