Date recorded:

The IASB met in London over four days, from Monday 18 to Thursday 21 July 2022. The following items were discussed:

Primary Financial Statements

The IASB discussed entities with specified main business activities—issues specific to the investing category; entities with specified main business activities—issues specific to the financing category; disclosure of operating expenses by nature in the notes; and unusual items. The IASB supported all of the staff recommendations. The IASB discussed the definition of unusual items, but it remains unclear as to the direction the IASB will take.

Maintenance and consistent application

At this meeting, the IASB discussed feedback received in response to ED/2021/10 Supplier Finance Arrangements. The IASB also approved the remaining due process steps to finalise the amendment to IAS 1 for Non-current Liabilities with Covenants. The IASB will require entities to apply the amendments for annual reporting periods beginning on or after 1 January 2024. No IASB members objected to the finalisation of three agenda decisions: Negative Low Emission Vehicle Credits (IAS 37); Classification of Public Shares as Financial Liabilities or Equity (IAS 32); and Transfer of Insurance Coverage (IFRS 17). Note that the agenda decision relating to the transfer of cash was not presented to the IASB at this meeting.

Post-implementation Review (PIR) of IFRS 9—Classification and Measurement

In September 2021, the IASB published Request for Information (RFI) Post-implementation Review—IFRS 9 Financial Instruments—Classification and Measurement. At this meeting, the IASB discussed the feedback on the accounting for modifications of financial assets and financial liabilities. The staff will also provide preliminary views in relation to the key application challenges identified. The IASB decided to add a project to its research pipeline to explore potential clarification of the requirements for assessing modification of financial assets and financial liabilities and the application of the effective interest method.

PIR of IFRS 9—Impairment

In November 2021, the IASB decided to begin the PIR of the IFRS 9 impairment requirements in the second half of 2022. The anticipated timeline is that between September 2022 and February 2023, IASB members and the staff will perform outreach with preparers, auditors, users of financial statements, regulators and standard-setters. In addition, the staff will review academic research and other materials relevant to this PIR. The publication of the RFI is targeted for the first half of 2023 with the comment period being 120 days.

Disclosure Initiative— Targeted Standards-level Review of Disclosures

The purpose of this meeting was to analyse the possible courses of action available to the IASB to respond to the feedback provided by the Accounting Standards Advisory Forum (ASAF) on Exposure Draft ED/2021/3 Disclosure Requirements in IFRS Standards—A Pilot Approach. The staff sought feedback on which aspects of the project the IASB should proceed with, and which aspects should stop. There seemed to be little to no support for finishing the project but more support for a “middle ground” approach to drafting disclosure requirements with the aim of providing a better framework for entities to use judgement to identify and disclose useful information to users of financial statements. There were also reservations around IAS 19 and IFRS 13 that would need to be considered.

Contractual Cash Flow Characteristics of Financial Assets

In May 2022, the IASB decided to start a standard-setting project to clarify particular aspects of the IFRS 9 requirements for assessing a financial asset’s contractual cash flow characteristics (i.e. the ‘solely payments of principal and interest’ (SPPI) requirements). In June, the IASB agreed that specific SPPI requirements should not be developed for ESG-linked features, but clarification should be provided as application guidance on the concept of a basic lending arrangement; whether and how the nature of a contingent event (i.e. the trigger for a change in the timing or amount of contractual cash flows) is relevant to determining whether the cash flows are SPPI ; and examples in paragraphs B4.1.13 and B4.1.14 of IFRS 9 of applying the SPPI requirements to specific fact patterns (including adding additional examples for financial assets with ESG-linked features). At this meeting, the staff outlined their preliminary analysis of the first two concepts. IASB members were very positive about the preliminary analysis and supported the direction of the project.

Financial Instruments with Characteristics of Equity

At this meeting, the IASB continued its discussions on the feedback received in response to DP/2018/1 Financial Instruments with Characteristics of Equity. Paragraph 23 of IAS 32 requires a contract that contains an obligation for an entity to purchase its own equity instruments for cash or another financial asset to be recognised as a financial liability. The financial liability is recognised initially at the present value of the redemption amount and is reclassified from equity. There is evidence of accounting diversity in practice in the application of the requirements in paragraph 23 of IAS 32. At this meeting the staff set out the current requirements in IAS 32, a brief history of the requirements for contracts containing an obligation to redeem own equity instruments, summary of past IASB and IFRS Interpretations Committee discussions and feedback on the proposals in the 2018 DP. IASB members were generally supportive of the project direction. The staff will continue to work on specific proposals.

Rate-regulated Activities

The IASB decided that the application guidance in the final Standard should not specify the components of total allowed compensation, but rather should focus on helping entities identify differences in timing. The application guidance will focus on the most common differences in timing that may arise from different types of regulatory schemes. The IASB asked the staff to give further thought as to how to word this section and to bring the topic back at a later date. The IASB also decided that when an entity has an enforceable present right to regulatory returns on an asset not yet available for use, those returns form part of the total allowed compensation for goods or services supplied during the period in which the entity provides the capital to construct the asset (the construction period).

Dynamic Risk Management

At this meeting, the IASB continued its deliberations on Discussion Paper DP/2014/1 Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging. The staff set out the areas and topics that need to be further considered in order to complete the development of the DRM model together with a proposed order of future discussions for the next stage of the project. IASB members were generally supportive of the direction being taken.

Management Commentary

In April 2022, the IASB completed its discussion of feedback on ED/2021/6 Management Commentary. The next milestone in the project is for the IASB to determine the project direction. In determining how to progress the project, the IASB will need to consider the evolving reporting landscape as well as stakeholders’ calls for the IASB to collaborate with the ISSB in developing the final requirements. The IASB will also need to consider the possible implications of the commitment to consider opportunities to address similarities and differences between the <IR> Framework and the proposals developed in the Management Commentary project. To facilitate the discussion about possible ways forward on the Management Commentary project in the light of the feedback received on ED/2021/6 and the evolution in the reporting landscape, the staff plan to develop alternatives and present them to the IASB at a future meeting. IASB members acknowledged that the landscape has changed significantly since the ED was published and also noted that the feedback received, although only 8 months old, could be significantly outdated. IASB members agreed that this was an area where the IASB and the ISSB would have to work together and that the IASB would have to make a series of decisions, including whether to finalise parts of the proposals that relate to financial statements only and what the status of the Practice Statement will be.

Goodwill and Impairment

As part of the IASB’s work, the staff have performed further research on disclosures about business combinations. The purpose of this meeting was to provide the IASB with additional research and analysis in response to comments by IASB members in the April 2022 meeting. The IASB was not asked to make any decisions during this session. Most IASB members felt that sufficient research had been done for a tentative proposal to brought to the September meeting that IASB members could decide on, observing that there is unlikely to be additional information that would lead to people changing their general views.

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