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Disclosure Initiative — Subsidiaries that are SMEs

Date recorded:

Background

The objective of the project is to develop an IFRS Standard (reduced disclosure IFRS Standard) that will permit subsidiaries that are small and medium-sized entities (SMEs) to apply IFRS Standards but with reduced disclosure requirements.

At this meeting, the Board discussed further matters identified from the staff analysis and were asked whether they agree with the staff’s proposed recommendations under the following papers:

Exceptions to the process for adapting disclosure requirements (Agenda Paper 31A)

The staff’s recommendations in this agenda paper set out the exceptions to the principles related to disclosure requirements of other standards and adapt them if there is a recognition and measurement differences between IFRS and IFRS for SME Standards.

The members of the Board discussed their overarching comments on the proposed recommendations and pointed out that the purpose of establishing the Standard is to reduce the disclosure requirements for subsidiaries that are SMEs. The members of the Board have expressed concerns that some recommendations in the paper are not specifically focused on the recognition and measurement differences; rather, they are focused on improving the Standard, which should be considered when the Board performs the review. Despite the concern raised, the Board has generally supported the staff recommendations on the following points:

  • The staff recommended departing from the agreed approach to adapting disclosure requirements under IFRS 12 and disclosure requirements from IAS 7 about changes in liabilities arising from financing activities.

Discussion and Voting

A concern was raised in relation to the recommendation in relation to IAS 7 on adapting a reconciliation requirement between the opening and closing balances in the statement of financial position for liabilities arising from financing activities. The presentation of reconciliation should be presented as an option rather than as a required disclosure, specifically for subsidiaries that are SMEs who are part of a group who chose not to present this requirement.

When asked to vote, 7 out of 13 Board members voted in favour of the staff’s recommendation.

  • The staff recommended additional disclosure requirements which relate to disclosure improvements in IFRS 7:17, 22A and 24A; IFRS 13:93(i) and 93(ii); IFRS 15:118-120; and IFRS 16:53(b) and 47(b).

Discussion and Voting

The Board focused the discussion on the additional disclosure requirements recommended by the staff relating to IFRS 15. The Board suggested including the entire provisions of the disclosures under IFRS 15:119(a)-(e) to the proposed reduced disclosure framework as this will provide the users of understanding the performance obligations that tie in the revenue recognition.

When asked to vote, 9 out of 13 Board members voted in favour of the staff’s recommendation.

  • The IFRS for SMEs Standard contains several disclosure requirements for which there is not an equivalent disclosure requirement in IFRS Standards. The staff recommended removing or varying Paragraphs 28.41 (g), 15.19 (d), 20.14 and 33.7 of the IFRS for SMEs Standard for subsidiaries that are SMEs to align with the change in IFRS Standards. The staff believe the disclosure requirements under paragraphs 28.43, 28.42 and 3.25 of the IFRS for SMEs Standards have no direct equivalent in IFRS Standards and so have not been removed or varied in IFRS Standards. The staff recommended these remain applicable for subsidiaries that are SMEs.

Discussion and Voting

When asked to vote, 7 out of 13 Board members voted in favour of the staff’s recommendation.

  • The staff recommended that subsidiaries that are SMEs should be required to make the disclosure required by IFRS 6:25.

Discussion and Voting

IFRS 6:15 requires an entity to classify exploration and evaluation assets as tangible or intangible. This requirement is a presentation requirement. It therefore follows that the disclosures for tangible assets or intangible assets would be required to be made regardless of whether the entity applies the reduced disclosure IFRS Standard.

When asked to vote, 10 out of 13 Board members voted in favour of the staff’s recommendation.

  • The staff recommended that subsidiaries that are SMEs apply paragraphs 20.13(b) and 11.42 of the IFRS for SMEs Standard. The Board currently considers whether to align the disclosure requirements for all financial liabilities as part of the second comprehensive review of the IFRS for SMEs Standard, rather than as part of the Subsidiaries that are SMEs project, and amend the reduced disclosure IFRS Standard if the IFRS for SMEs Standard is amended.

Discussion and Voting

No specific concerns were raised by Board members on the recommendation proposed by the staff.

When asked to vote, 11 out of 13 Board members voted in favour of the staff’s recommendation.

  • The staff recommended that the expanded version of paragraph 28.41(e) of the IFRS for SMEs Standard be included in the reduced disclosure IFRS Standard.

Discussion and Voting

The Board noted that the recommendation by the staff to include an expanded version may be more onerous. Other than this concern, the Board supported the recommendations based on the reasons stated in the agenda paper.

When asked to vote, 10 out of 13 Board members voted in favour of the staff’s recommendation.

  • The staff recommended that the Board does not include disclosure objectives in the reduced disclosure IFRS Standard.

Discussion and Voting

No specific concerns were raised by the Board on the recommendation proposed by the staff and supported the recommendations based on the reasons stated in the agenda paper.

When asked to vote, 10 out of 13 Board members voted in favour of the staff’s recommendation.

When to consider disclosure requirements for new and amended IFRS Standards (Agenda Paper 31B)

This paper examined possible dates as to when the Board could propose amendments to the reduced disclosure IFRS Standard for new and amended IFRS Standards that affect disclosure requirements, by examining approaches the Board takes in other areas of its work and the cut-off dates for the content of a consultation document.

The staff recommended that if the Board decides to propose a reduced disclosure IFRS Standard, amendments to that reduced disclosure IFRS Standard should be proposed when an exposure draft of a new or amended IFRS Standard that affects the disclosure requirements is published.

The staff also recommended that if the Board decided to propose a reduced disclosure IFRS Standard, the cut-off date for the content of the consultation document should include IFRS Standards and IFRIC Interpretations issued as at 1 January 2021 and exposure drafts published but not finalised as at 1 January 2021, except for Exposure Draft General Presentation and Disclosure.

Discussion and Voting

The Board agreed with the staff recommendations based on the reasons stated in the agenda paper. No specific areas of concern were raised.

When asked to vote, all 13 Board members voted in favour of the staff’s recommendations.

Omitted Topics and Specialised activities (Agenda Paper 31C)

This agenda paper discussed two matters that have arisen in developing the analysis of adaptions to the disclosure requirements of the IFRS for SMEs Standard for a possible reduced disclosure IFRS Standard: topics that are omitted from the IFRS for SME Standard and topics which relate to specialised activities.

The staff recommended that if the Board proposes a reduced disclosure IFRS Standard, a subsidiary applying the Standard that discloses earnings per share is required to apply the disclosure requirements of IAS 33:4-13.

The staff recommended that the reduced disclosure IFRS Standard includes an adapted version of IAS 34’s disclosure requirements. The staff considers this approach avoids a subsidiary applying the reduced disclosure IFRS Standard providing disclosure in its interim financial reports it is not required to provide in its annual financial report and is less cumbersome than amending IAS 34 by way of consequential amendment or by providing updated references in a table of concordance.

The staff confirmed that the Board is in agreement that IFRS 14 should be included in the analysis of adaptions to the disclosure requirements of the IFRS for SMEs Standard and the principles of BC157 of the IFRS for SMEs Standard be applied to suggest disclosure requirements.

Discussion and Voting

The Board agreed with the staff recommendations based on the reasons stated in the agenda paper. No specific areas of concern were raised.

When asked to vote, all 13 Board members voted in favour of the staff’s recommendations.

Related Topics

Correction list for hyphenation

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