Cover paper (Agenda Paper 12)

The objective of this session was to discuss the following maintenance and consistent application topics:

• Lessee derecognition of lease liabilities (IFRS 9)—Potential annual improvement
• Disclosure of deferred difference between fair value and transaction price (IFRS 7 IG)—Potential annual improvement
• Annual Improvements to IFRS Accounting Standards—Early application and due process

Lessee derecognition of lease liabilities (IFRS 9)—Potential annual improvement (Agenda Paper 12A)

The IASB staff have been informed about a potential lack of clarity about a lessee’s accounting for derecognition of a lease liability. The lack of clarity arises because paragraph 2.1(b)(ii) of IFRS 9 includes a cross-reference to paragraph 3.3.1, but not paragraph 3.3.3, of IFRS 9, which can affect the corresponding adjustment a lessee makes when its lease liability has been extinguished and it removes that liability from its statement of financial position. The IFRS Interpretations Committee (IFRS IC) discussed this matter at its meeting in March 2023.

The objective of this paper was to provide the IASB with background on the matter and staff analysis, including consideration of the IFRS IC’s discussion and to ask the IASB whether it agrees with the staff’s recommendation to include a proposed amendment to paragraph 2.1(b)(ii) of IFRS 9 in its next Annual Improvements to IFRS Accounting Standards Cycle.

Staff recommendation

The staff recommended that the IASB:

• Propose an amendment to paragraph 2.1(b)(ii) of IFRS 9 to add a cross-reference to paragraph 3.3.3 of IFRS 9
• Require prospective application of this proposed amendment
• Include this proposed amendment in its next annual improvements cycle

IASB discussion

IASB members supported the staff recommendation. Any questions that go further than this annual improvement could be looked at in the post-implementation review (PIR) of IFRS 16. It was acknowledged that any questions on this issue affect IFRS 9 as well. Therefore, it could also be part of the pipeline project on amortised cost.

IASB decision

All IASB members voted in favour of the staff recommendation.

Disclosure of deferred difference between fair value and transaction price (IFRS 7 IG)—Potential annual improvement (Agenda Paper 12B)

The IASB staff have been informed about an inconsistency between paragraph 28 of IFRS 7 and paragraph IG14 of the Guidance on Implementing IFRS 7. The inconsistency arose when, upon the issuance of IFRS 13 in May 2011, the IASB made a consequential amendment to paragraph 28 of IFRS 7 but made no corresponding amendments to paragraph IG14 of IFRS 7. The IFRS Interpretations Committee (IFRS IC) discussed this matter at its meeting in March 2023

The objective of this paper was to provide the IASB with background on the matter and staff analysis, including consideration of the IFRS IC’s discussion and to ask the IASB whether it agrees with the staff’s recommendation to include a proposed amendment to paragraph IG14 of IFRS 7 in the next Annual Improvements to IFRS Accounting Standards Cycle.

Staff recommendation

The staff recommended that the IASB propose an amendment to paragraph IG14 of IFRS 7 to improve its consistency with paragraph 28 of IFRS 7 and include this proposed amendment in its next annual improvements cycle.

IASB decision

There was no discussion on this paper. All IASB members supported the staff recommendation.

Annual Improvements to IFRS Accounting Standards—Early application and due process (Agenda Paper 12C)

At its February 2023 meeting, the IASB tentatively decided to include proposed amendments on the following topics in the next Annual Improvements to IFRS Accounting Standards Cycle:

• Hedge accounting by a first-time adopter (IFRS 1)
• Gain or loss on derecognition (IFRS 7)
• Credit risk disclosures (IFRS 7 IE)
• Transaction price (IFRS 9)
• Determination of a ‘de facto’ agent (IFRS 10)
• Cost method (IAS 7)

At this meeting the IASB was asked whether to include two additional proposed amendments in the next annual improvements cycle:

• Lessee derecognition of lease liabilities (IFRS 9)
• Disclosure of deferred difference between fair value and transaction price (IFRS 7 IG)

Questions for the IASB

The staff asked the IASB:

• Whether it agrees with the staff recommendation:
  • To permit early application of the proposed amendments
  • To allow a comment period of no less than 90 days for the Exposure Draft (ED)
• To confirm it is satisfied that it has complied with the applicable due process requirements
• Whether the staff should begin the balloting process for the ED
• Whether any IASB member intends to dissent from the publication of the ED

IASB discussion

One IASB member asked why the staff asked for a comment period of ‘no less than 90 days’ rather than ’90 days’. The staff replied that this was to give some flexibility, in case the end of the comment period falls on a Sunday, for example. However, the staff agreed to change the question to exactly 90 days to avoid confusion.

IASB decision

All IASB members agreed with early application, the comment period of 90 days and that the staff can begin the balloting process. The question for dissent was not asked but no IASB member intervened.