Cover Paper (Agenda Paper 31)

At its June 2022 meeting, the IASB agreed on a project plan for redeliberating the Exposure Draft Subsidiaries without Public Accountability: Disclosures (draft Standard) towards developing an IFRS Accounting Standard (new Standard).

At the June 2023 meeting, the IASB discussed feedback on proposed disclosure requirements in the Exposure Draft Third Edition of the IFRS for SMEs Accounting Standard (SMEs ED).

Feedback on proposed disclosure requirements in the Exposure Draft Third Edition of the IFRS for SMEs Accounting Standard (Agenda Paper 31A)

This agenda paper discussed whether any of the feedback received on the disclosure requirements proposed in the SMEs ED needs to be taken into consideration in finalising the new Standard.

The discussions in this paper only related to the possible effects on disclosure requirements in the new Standard, and did not assess the feedback as it relates to the IFRS for SMEs Accounting Standard. There is no commitment that the disclosure requirements in the two Standards are aligned.

Staff analysis

The proposed disclosures that attracted most responses related to revenue, fair value, and the liabilities arising from financing activities reconciliation supporting the statement of cash flows.

Revenue—IFRS 15

In general, the comments received relating to revenue as part of the SMEs ED have either already been assessed against the principles as part of the review of feedback on the draft Standard or relate to the balance of costs and benefits. The staff recommend that the IASB retain the proposed disclosure requirements relating to IFRS 15 in the draft Standard as revised by the IASB’s tentative decision at its May 2023 meeting.

Fair value disclosures—IFRS 13

All comments on the SMEs ED that related to content that is also included in the draft Standard relate to areas that have already been considered by the IASB in previous meetings or were not discussed because they had not been raised in comment letters. The SMEs ED allows some simplifications from measuring assets and liabilities at fair value where this is not reliably measurable, and therefore disclosure requirements relating to this situation had to be added. For the draft Standard, recognition and measurement is that of full IFRS Accounting Standards, as these exemptions are not available and the related disclosure requirements are not relevant. The staff recommend that the IASB retain the proposed disclosure requirements in the draft Standard for IFRS 13 as no new information has been received to suggest that further disclosure requirements are needed.

Liabilities from financing activities reconciliation—IAS 7

The proposed disclosure requirements in the draft Standard for IAS 7, in particular the requirement in paragraph 130, were added to require a reconciliation of opening and closing liabilities relating to financing activities. The main reason for questioning whether paragraph 130 of the draft Standard would provide useful information was an observation that eligible subsidiaries rely on their group for financing, so the subsidiary as a standalone entity did not have a meaningful standalone position. However, in the staff’s view, since intragroup financing loans would be included in the reconciliation, this gives information to users on the financing arrangements between the eligible subsidiary, its parent and other group entities. Because of this, the IASB tentatively decided to retain paragraph 130 in the new Standard.

Other disclosures

Respondents to the SMEs ED had comments relating to most other sections as well as those discussed elsewhere in this paper. In some cases, there is a recognition and measurement difference between IFRS Accounting Standards and the IFRS for SMEs Accounting Standard, so comments on the disclosure requirements are not considered further.

Staff recommendation

The staff recommended that the IASB should not make further changes to the proposed disclosure requirements in the draft Standard based on comments received on the SMEs ED.

IASB discussion

IASB members agreed that there is no need to review decisions previously made in respect of the draft Standard to take account of comments received on the SMEs ED. This was because the comments received on the SMEs ED were either duplicates of comments previously discussed and considered, or they were specific to the SMEs ED cost-benefit analysis which is not relevant to the draft Standard.

One IASB member noted that some respondents had pointed out that some information would be available in group financial statements and so should not be required by the draft Standard. The IASB member pointed out that if, on the other hand, the information is important, it should be available in the subsidiary’s standalone financial statements rather than requiring users to cross reference group accounts.

IASB decision

All IASB members agreed with the staff recommendation.