Maintenance and consistent application

Date recorded:

Cover paper (Agenda Paper 12)

In this session, IASB members were asked to make the final decisions on its project on Supplier Finance Arrangements and were given the opportunity to comment on the November 2022 IFRIC Update.

Supplier Finance Arrangements—Transition, Effective Date and Due Process

In November 2022, the IASB decided to proceed with its project on Supplier Finance Arrangements, with some changes to the proposals in the November 2021 Exposure Draft (ED). The proposals will amend IAS 7 and IFRS 7 by adding disclosure requirements for an entity’s supplier finance arrangements.

The purpose of this paper was to:

  • Ask the IASB whether it agrees with the staff recommendations with respect to the effective date and transition requirements for the amendments
  • Set out the steps in the IFRS Foundation Due Process Handbook that the IASB has taken in developing the amendments
  • Ask the IASB to confirm it is satisfied that it has complied with the due process requirements
  • Ask whether any IASB member intends to dissent from the amendments

Staff recommendations on effective date and transition

The staff recommended that the IASB require entities to apply the amendments for annual reporting periods beginning on or after 1 January 2025, with earlier application permitted.

The staff also recommended that the IASB require entities to apply the amendments retrospectively in accordance with IAS 8 and does not provide specific transition exemption for first-time adopters.

IASB discussion

Several IASB members were concerned that an effective date of 1 January 2025 would be too late and suggested to bring the effective date forward by a year. They acknowledged that it will be a tight turnaround for translation and endorsement processes but given the IASB only amends a few paragraphs, it should be doable. It was suggested that prospective application could be introduced to alleviate the early effective date as one year of data a year earlier was seen as more helpful than two years of data a year later.

Other ISSB members were less enthusiastic about an earlier effective date as they did not want to set a precedent for other amendments. The evidence for an earlier effective date was not compelling in their view, especially if early application is allowed. In their view, entities are not prepared for the amendments and an early effective date would cause confusion.

One suggestion in response to this was to have a later effective date for the presentation requirements and an earlier effective date for the disclosure requirements. This way, endorsement processes could be sped up and a significant part of the information would be available early.

The Chair signalled that he was in favour of the early effective date but acknowledged the concerns. Therefore, he suggested to bring this topic back in February to make a decision. This way, the staff have another month to respond to the concerns raised during the meeting.

IFRIC Update November 2022 (Agenda Paper 12B)

In this session, IASB members had the opportunity to comment on the November 2022 IFRIC Update. No comments were made.

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