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Post-implementation review of IFRS 10–12

Date recorded:

Findings from the first phase and determining the next step (Agenda Paper 7A)

In September 2019, the first phase for the post-implementation review (PIR) of IFRS 10-12 was outlined to the Board. In this meeting the staff will present their findings from the first phase and ask the Board to approve a Request for Information (RFI) proposal.

The paper outlines the areas of each Standard considered by the staff and the stakeholder feedback for each area that has been collected so far.

Staff recommendation

The staff recommend that:

  • a) the Board proceed with the PIR and publish a request for information . The objective of the RFI would be to gather evidence on the requirements identified in the first phase of the review from a broader group of stakeholders. Publication of an RFI does not imply that any standard-setting is required.
  • b) the RFI include questions on:
    • i) IFRS 10, relating to:
      1. power over an investee.
      2. the link between power and returns, with a focus on identifying agency relationships.
      3. accounting requirements in IFRS 10, with a focus on changes in ownership interests.
      4. the investment entity consolidation exception.
    • ii)IFRS 11, relating to:
      1. collaboration arrangements outside the scope of IFRS 11.
      2. classifying joint arrangements as joint operations based on other facts and circumstances.
      3. accounting requirements in IFRS 11, with a focus on joint operations.
    • iii) IFRS 12, relating to the quality of information and whether and how well the disclosure objectives are met by an entity applying the requirements.
  • c) the RFI does not include questions on the interaction of IFRS 10, IFRS 11 and IFRS 12 with other IFRS Standards.

Board Discussion

All Board members agreed with the direction of the staff recommendations in relation to the RFI.

One Board member raised a concern around some areas potentially being outside of the scope of the IFRS 10-12 PIR project and any responses in those areas requiring to be considered for the agenda consultation instead e.g. collaborative arrangements. The Board member also suggested that it would be useful to provide context to the questions within the RFI.

Some Board members requested that the questions proposed for the RFI be more specific than the topics outlined in the paper to ensure that responses provided were useful for development by the Board as opposed to simply commenting that there is a lot of judgement involved.

Some Board members requested that the RFI provide clarification that when a question is asked is will not necessarily result in any changes being made.

The Vice Chair commented that it would be useful to gauge from the RFI whether educational material will be helpful to preparers to explain how the debits and credits work in complicated fact patterns when applying IFRS 11.

One Board member suggested that separate questions would be needed in the RFI on control and joint control as there are subtle differences between the two.

In relation to IFRS 12 it was noted by some Board members that more analysis would need to be done by the Board to understand what disclosures are being made and whether they are meeting the objectives of the standard. This would be in addition to the RFI questions on this standard.

Board Decisions

The Board unanimously voted in favour of publishing the RFI.

The Board unanimously voted in favour of including the topics recommended by the staff in the RFI.

Background to IFRS 10, IFRS 11 and IFRS 12 and due process relation to the post-implementation review (Agenda Paper 7B)

The paper outlines the due process required for a PIR of the Standards. It includes the background to development of the three Standards as well as details of other projects undertaken since the Standards were issued.

The paper was not intended to be discussed and the Board had no questions.

Work undertaken in the first phase (Agenda Paper 7C)

The paper summarises the work undertaken in the first phase of the PIR including a summary of the outreach performed and the academic literature review undertaken.

The key messages from the outreach work are that IFRS 10 and IFRS 12 work well and improved financial reporting. Several application issues relating to the accounting for interests in joint operations were noted in relation to IFRS 11. Further details on the messages from the outreach can be found in the paper.

The paper was not intended to be discussed, and there were no questions.

Next steps

The RFI is expected to be published in December.

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