Cover paper (Agenda Paper 31)

The IASB published Exposure Draft ED/2021/7 Subsidiaries without Public Accountability: Disclosures in July 2021, with a comment letter deadline of 31 January 2022. The ED sets out the proposal for a new IFRS Accounting Standard that would permit an eligible subsidiary to apply reduced disclosure requirements when applying IFRS Accounting Standards.

The purpose of this meeting was for the IASB to discuss the feedback from comment letters and outreach events on the ED. The IASB was not asked to make any decisions.

The agenda papers for this session were discussed together (see Agenda Paper 31A for the discussion summary).

Feedback from comment letters (Agenda Paper 31A)^­

This paper summarised the comment letters on the ED.

Most respondents agreed with the objective of the draft Standard. Many reiterated the expected benefits of the proposals—reducing costs and simplifying preparation of financial statements.

There were mixed views on the proposed scope of the draft Standard. Many respondents suggested widening the scope to allow more entities to apply the proposals. Some respondents agreed with the proposed scope but suggested the IASB considers widening the scope at a later stage, for example, after the draft Standard has been implemented.

Many respondents agreed with the IASB’s approach to developing the disclosure requirements of the draft Standard. Some respondents disagreed with starting with the IFRS for SMEs Accounting Standard and suggested that the IASB should start with IFRS Accounting Standards in developing the disclosure requirements.

Many respondents provided comments on the proposed disclosure requirements in the draft Standard. Comments were wide-ranging and across different IFRS Accounting Standards. The proposed disclosure requirements that attracted the most comments were those from IFRS 7, IAS 19, IFRS 12, IFRS 15, IAS 1 and application of paragraph 16 of the draft Standard (when a subsidiary provides additional disclosures).

There were mixed views on the structure of the draft Standard. Many agreed with the proposal to have a separate IFRS Accounting Standard and organise disclosure requirements by Standard. Although many disagreed with including footnotes in the main body of the draft Standard to identify those disclosure requirements in other IFRS Accounting Standards that continue to apply.

IASB discussion

The agenda papers for this session were discussed together.

On scope, many IASB members spoke in favour of retaining the scope as proposed in the ED. Particularly, they were opposed to extend the scope. One IASB member said that while being neutral about jurisdictions restricting the population of entities that can apply the standard, the IASB would have to think about how to prevent jurisdictions from widening the population as the standard was not written with a broader population in mind.

One IASB member said that the IASB needs to be cautious about forcing this standard on jurisdictions that adopt IFRS Accounting Standards “as issued”. These jurisdictions have no mechanism for rejecting this standard. If they disagree with a reduced disclosure framework, they have to introduce an endorsement mechanism which is contrary to the “adopt as issued” model the IASB prefers.

On the approach for deriving the reduced disclosure framework, one IASB member noted that some jurisdictions did a top-down approach when developing their reduced disclosure framework and this proved problematic. Another IASB member said that the approach does not matter as long as the result is appropriate, which, in his view, it is.

On requiring all disclosures in IFRS 17, IASB members confirmed that they are still supportive of that as the population of entities who meet the scope requirement and write insurance contracts will be very small. It was suggested to consider reduced IFRS 17 disclosures when the standard comes up for its first comprehensive review. One IASB member said that this standard is unlikely to be finalised before IFRS 17 becomes effective and therefore, this is not a missed chance to include reduced IFRS 17 disclosures so that entities within the scope of this standard would never have to move to full IFRS 17.

On structure of the standard, IASB members generally did not agree to publish the standard as a separate framework (similar to the IFRS for SMEs Accounting Standard), although this would alleviate the issue of jurisdictions having to adopt the standard if there is no endorsement mechanism. The Chairman cautioned that in that case the IASB would have to reconsider the compliance statement.

The staff highlighted that there were many comments on individual disclosures and that the staff would propose an approach as to how to address those before performing further work. The IASB would then be asked to decide whether it agrees with the approach or wants to follow a different approach. One IASB member said that if disclosures that remain from the IFRS Accounting Standards should be written out, it needs to be ensured that the wording is identical, as otherwise a difference in wording could be interpreted as a different meaning.

There was no vote on the agenda papers.

Feedback from outreach events (Agenda Paper 31B)^­

This paper summarised the feedback from outreach events on the ED.

Many outreach participants agreed with the objective of the draft Standard and said that the proposals, if implemented, will reduce the costs and complexity of financial reporting for eligible subsidiaries. Some participants said that the benefits could extend to the parent and the group.

Outreach participants had mixed views on the proposed scope of the draft Standard. Many of those participants that disagreed with the proposed scope suggested widening the scope to allow more entities to apply the draft Standard. However, participants had different views on how the scope should be widened.

In addition to comments on the scope, participants (both those supporting and those not supporting the proposed scope) raised concerns about how to adopt the draft Standard into a jurisdiction’s financial reporting framework.

Many participants agreed that the approach applied to develop the disclosure requirements in the draft Standard would maintain the usefulness of eligible subsidiaries’ financial statements. Some participants expressed concerns on the suitability of starting with the IFRS for SMEs Accounting Standard. With regards to other aspects of the draft Standard:

• There are mixed views on the structure of the draft Standard. Many participants agreed with disclosure requirements being organised by Standard. However, some participants said that the footnotes, which identify disclosure requirements in other IFRS Accounting Standards that remain applicable, make the draft Standard difficult to apply
• Most participants agreed with the proposed requirements on providing comparative information and the interaction with IFRS 1

The agenda papers for this session were discussed together (see Agenda Paper 31A for the discussion summary).