Date recorded:

The IASB met on Monday 24, Wednesday 26 and Thursday 27 May 2021 by video conference. The following topics were discussed:

Initial application of IFRS 17—presentation of comparative information: Prior to the meeting, the staff replaced the original paper with a revised paper that included a new analysis and recommendation (our summary of that revised paper is included in the overall summary attached). The Board discussed the revised paper on the presentation of comparative information on initial application of IFRS 17 and IFRS 9. Insurers have raised concerns about an accounting mismatch between financial assets and insurance contract liabilities that could arise from the continued application of IAS 39. The staff think the Board could consider adding a specific transition requirement to IFRS 17 to enable insurers to present comparative information on a basis that is consistent with how IFRS 9 would be applied going forward, without unnecessarily disturbing the transition requirements in IFRS 9. Although no decisions were made, many Board members expressed support for a narrow-scope amendment to address this issue.

Goodwill and Impairment: The Board continued its discussion of feedback on particular aspects of the DP—the effectiveness of the impairment test and whether to reintroduce amortisation of goodwill. For its next steps, the Board will reconsider the objective and scope of the project first to determine whether all of the topics covered in the DP should remain as one project. The Board supported the staff recommendation that it prioritise the redeliberations around reintroduction of goodwill as this may affect other decisions.

Financial Instruments with Characteristics of Equity:  The Board decided that entities be required to categorise its claims that are financial instruments in a way that reflects differences in their nature and priority, and at a minimum, distinguish between secured and unsecured financial instruments; contractually subordinated and unsubordinated financial instruments; and those issued/owed by the parent and those issued/owed by subsidiaries. Furthermore, to provide information about the risks and returns of particular instruments in the event the entity is liquidated.

Primary Financial Statements: The Board decided to retain the proposal to introduce separate investing and financing categories in the statement of profit or loss. The Board asked the staff did not support the staff recommendation that all income and expenses from liabilities that arise from transactions that involve only the raising of finance and interest income and expenses from other liabilities to be classified in the financing category of profit or loss. The Board asked the staff to explore more options. The Board decided not to proceed with either the proposed addition to the definition of financing activities in IAS 7 or the proposed definition of liabilities (in the new Standard).

Dynamic Risk Management: The staff gave the Board an overview of the challenges identified during the outreach and discussed during the April 2021 meeting that are key to the viability and operability of the Dynamic Risk Management (DRM) model, a proposal of the next steps and the indicative timeline to address each of the identified challenges. It is proposed that the Board will decide on the project direction in H1 2022. No decisions were made.

Maintenance and Consistent Application:

IFRS Interpretations Committee Agenda Decisions

No Board members objected to the publication of two agenda decisions: Attributing Benefit to Periods of Service (IAS 19); and Hedging Variability in Cash Flows due to Real Interest Rates (IFRS 9).

Lease Liability in a Sale and Leaseback

The Board considered the feedback received on Exposure Draft ED/2020/4 Lease Liability in a Sale and Leaseback which proposes to amend IFRS 16. The Board received 87 comment letters. While a few respondents agreed with the proposed amendment, most respondents disagreed with, or expressed concerns about, aspects of the proposals. Nevertheless, most respondents agreed that there is a need to amend IFRS 16 and enhance the measurement requirements for sale and leaseback transactions. Many respondents suggested possible ways forward, including alternative solutions to account for sale and leaseback transactions. The staff plan to submit a paper to a future Board meeting analysing the feedback and providing recommendations on the project direction. No decisions were made.

IFRIC Update April 2021

The staff presented the April 2021 IFRIC Update to the Board. No Board members had questions or comments.

Disclosure Initiative—Subsidiaries that are SMEs: The Board decided that the proposal refer to material rather than significant accounting policies; and a description of resulting changes to the entity’s risk management strategy as a result of the interest rate benchmark reform should be included.

Second Comprehensive Review of the IFRS for SMEs Standard: The Board decided that the status of Section 2 of the IFRS for SMEs Standard will remain unchanged but that it be aligned with the 2018 Conceptual Framework. The Board will assess if there are potential inconsistencies between a revised Section 2 and any other section of the IFRS for SMEs Standard. The Board decided to retain the concept of ‘undue cost or effort’ but acknowledged more work was required on this. In relation to IFRS 9, the Board decided to propose an amendment to the IFRS for SMEs Standard to supplement the list of examples in Section 11 with a principle for classifying financial assets based on their contractual cash flow characteristics.

An analysis of how the work plan of the IASB has changed as a result of this meeting is available on IAS Plus: https://www.iasplus.com/en/news/2021/05/iasb-work-plan

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