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IASB (International Accounting Standards Board) (blue) Image

IASB to extend comment period for its proposed amendments to IFRS 13 and IAS 19 and draft guidance for developing and drafting disclosures

21 Jul 2021

During its 21 July 2021 meeting, the IASB Board members have decided to extend the comment period for its Exposure Draft (ED), ‘Disclosure Requirements in IFRS Standards — A Pilot Approach’ to 12 January 2022.

The ED contains proposed guidance for when the IASB is developing and drafting disclosure requirements for future IFRS Standards as well as proposed amendments to IFRS 13 'Fair Value Measurement' and IAS 19 'Employee Benefits' that result from applying the proposed guidance to those standards.

For more information, see the press release on the IASB’s website.

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IFRS Foundation Trustees hold additional meeting

19 Jul 2021

The IFRS Foundation Trustees met by video conference on 13 July 2021.

The Trustees discussed progress and next steps on  to establish a new board focused on sustainability-related disclosure standards. They were also updated about a recent meeting of some of the Trustees with the Monitoring Board that allowed the Trustees to provide a detailed update on progress and next steps in their work to establish the proposed International Sustainability Standards Board. The Chair of the Trustees reported on his participation in a policy panel on regulations, disclosures, financial risk and private financing for the green economy. The Trustees also noted the G20 support for the IFRS Foundation’s work to establish a new board.

Please click to access the full meeting summary on the IASB website.

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IFRS 17 endorsement in the EU takes next hurdle

19 Jul 2021

On 16 July 2021, the Accounting Regulatory Committee (ARC) voted in favour of endorsing IFRS 17 'Insurance Contracts' (including the amendments to IFRS 17 issued in June 2020) for use in the European Union. Final en¬dorse¬ment is currently expected in the fourth quarter of 2021.

In its final endorsement advice on IFRS 17, the European Financial Reporting Advisory Group (EFRAG) noted that it could not reach consensus on one aspect of the standard: the requirement to apply annual cohorts to intergenerationally-mutualised and cash-flow matched contracts. Seven EFRAG Board members believed that the annual cohorts requirement meets the EU endorsement criteria, whereas seven EFRAG Board members believed it does not, and two EFRAG Board members abstained.

While the final meeting document is not yet available in the EU Comitology register and the positive vote is only reflected in the updated EFRAG status report, it was expected that the ARC would include in the final vote an optional exemption from applying the annual cohort requirement (while disclosing the fact when doing so). Such an exemption had been suggested by some EFRAG stakeholders. Companies wishing to apply IFRS 17 as issued by the IASB would still be able to do so.

ESMA (European Securities and Markets Authority) (dark gray) Image
European Union Image

ESMA publishes 25th enforcement decisions report

16 Jul 2021

The European Securities and Markets Authority (ESMA) has published further extracts from its confidential database of enforcement decisions taken by European national enforcers. This batch deals with decisions in relation to IFRS 9 (three decisions), IFRS 16 (two decisions), IFRS 9/IFRS 7, IAS 1, IAS 1/IAS 34, IAS 1/IFRS 7 and IAS 7.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from November 2019 to July 2020, include:

Standard Topic
IFRS 9 Financial Instruments
Measurement of expected credit losses
IFRS 9Financial Instruments
Measurement of purchased credit impaired assets (POCI)
IFRS 9 Financial Instruments
Disclosure of the effects of changes in the credit risk related to financial liabilities designated as at fair value through profit and loss
IFRS 9 Financial Instruments
IFRS 7 — Financial Instruments: Disclosure
Impairment of finance lease receivables
IFRS 16Leases Recognition of lease on the first application of IFRS 16
IFRS 16Leases Depreciation of leased assets and dismantling costs
IAS 1 — Presentation of Financial Statements Presentation of expenses related to COVID-19
IAS 1 — Presentation of Financial Statements
IAS 34 — Interim Financial Reporting
Presentation current/ non-current liabilities in the balance sheet
IAS 1 — Presentation of Financial Statements
IFRS 7 — Financial Instruments: Disclosure
Disclosures of financial risk
IAS 7 — Statement of Cash Flows Reconciliation of net-debt

Click for access to the full report (link to ESMA website). The ESMA has also published an updated overview of all enforcement decisions ever published.

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Pre-meeting summaries for the July 2021 IASB meeting

16 Jul 2021

The IASB meets on Tuesday 20 and Wednesday 21 July 2021 and has a joint education session with the FASB on Friday 23 July, all by video conference. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. We summarised the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

This is the first meeting chaired by the new IASB Chair Andreas Barckow.

Post-implementation Review of IFRS 9: The Board will discuss the feedback from outreach and the staff analysis and recommendations on the matters to examine further in phase 2, i.e. which questions should be asked in the Request for Information (RFI). Most stakeholders said that generally the classification and measurement requirements are working well in practice. However, some users of financial statements and academics said that IFRS 9 is complex and thus difficult to understand.

The staff recommend the Board examine the business model assessment for financial assets, contractual cash flow characteristics assessment for financial assets, the option for equity instruments to present fair value changes in other comprehensive income, financial liabilities designated as fair value through profit or loss, modifications to contractual cash flows and transition to IFRS 9. The staff expect the RFI will be publish around the end of September 2021.

Post-implementation Review of IFRS 10-12: In December 2020, the Board published an RFI as part of its post-implementation review (PIR) of IFRS 10-12 which was open for comment until 10 May 2021. The Board will consider the feedback received within the comment letters and from an updated academic literature review. Many stakeholders agree with the use of control as the single basis for consolidation in IFRS 10 and the need to take a holistic and qualitative assessment of all legal, contractual and other facts and circumstances and stressed the importance of application guidance and illustrative examples. Some respondents noted difficulties in some situations applying the definition of an investment entity and expressed concerns about the loss of information when an investment entity measures at fair value a subsidiary that is itself an investment entity. Respondents highlighted the usefulness of the IFRIC agenda decisions in applying IFRS 11 and some asked for these to be incorporated into the Standard. Feedback from respondents noted that IFRS 12 had resulted in significant improvements to financial reporting, however there were some requests for additional information. The Board will not be asked to make any decisions during this meeting and will present its findings in a feedback statement after completing its deliberations.

Taxonomy: The Board published the Proposed IFRS Taxonomy Update PTU/2021/1 Disclosure of Accounting Policies and Definition of Accounting Estimates on 21 April 2021. The Board received five comment letters. The staff plan to issue the final IFRS Taxonomy Update along with the final taxonomy files in Q4 of 2021. No decisions will be asked of the Board.

Disclosure Initiative—Targeted Standards-level Review of Disclosures: The staff recommend that the Board extend the deadline for comments for the Exposure Draft Disclosure Requirements in IFRS Standards—A Pilot Approach from 21 October 2021 to 12 January 2022.

Goodwill and Impairment: The Board will continue its discussion of feedback on particular aspects of the DP—focusing this month on the location of the information resulting from, and practical challenges related to, the Board’s preliminary views on improving disclosures; improving the effectiveness of the impairment test; and the subsequent accounting for goodwill, including whether to reintroduce amortisation of goodwill. The Board will not be asked to make any decisions at the meeting.

Primary Financial Statements: The Board will continue to discuss the approach for classifying items of income and expenses in the financing category of the statement of profit or loss.

The staff recommend that the income and expenses from hybrid contracts with host liabilities and embedded derivatives be classified: for separated host liabilities in the same way as for other liabilities; for separated embedded derivatives in the same way as for stand-alone derivatives; and for contracts that are not separated to be classified in the same way as income and expenses on other liabilities.

For gains or losses on financial instruments designated as hedging instruments the staff recommend that they be classified in the category affected by the risk the entity manages, except when it would involve grossing up gains or losses in which case they would be classified as operating. They recommend the Board apply the same requirements to derivatives used for risk management even if they are not designated as hedging instruments. However, if this creates undue cost or effort the gains or losses would be classified as operating.  

Gains or loses on derivatives not used for risk management would be classified as operating. However, if the derivative relates to financing activities and is not used in the course of the entity’s main business activities it would be classified as financing. FX differences would be classified in the same way as the item that gave rise to the differences, unless there is undue cost or effort, in which case the FX differences would be classified as operating.  

Maintenance and Consistent Application:

Classification of Debt with Covenants as Current or Non-Current—Transition, Early Application and Due Process: At its meeting in June 2021, Board tentatively decided to propose narrow-scope amendments to IAS 1 to modify the requirements introduced by Classification of Liabilities as Current or Non-current (the 2020 amendments) on how an entity classifies debt and other financial liabilities as current or non-current in particular circumstances. The proposed amendments would also defer the effective date of the 2020 amendments to no earlier than 1 January 2024. The staff recommend that the Board require entities to apply the proposed amendments retrospectively in accordance with IAS 8, not provide a transition exemption for first-time adopters, permit an entity to apply the amendments earlier than their effective date and set a comment period of no less than 120 days for the Exposure Draft.

Supplier Finance Arrangements—Transition, Early Application and Due Process At its meeting in June 2021, the Board decided to add a narrow-scope, disclosure-only standard-setting project to its workplan related to supplier finance arrangements (for example, reverse factoring or similar arrangements). The project involves the Board proposing amendments to IAS 7 and IFRS 7. The staff recommend that the Board require entities to apply the proposed amendments retrospectively in accordance with IAS 8 and not provide an exemption for first-time adopters. Early application would be permitted and the proposals would have a comment period of no less than 120 days.

IFRS Interpretations Committee The Board will be given the opportunity to ask questions about the most recent meeting of the IFRS Interpretations Committee.

Education session with the FASB

The purpose of the meeting is for the boards to share views on projects related to largely converged Standards, common projects and their agenda consultations. The boards will discuss their reviews of the accounting for goodwill and impairment. They will also discuss the work undertaken to date, and recent tentative decisions made, on their respective projects on supplier finance. No decisions will be made.

Our pre-meet­ing summaries is available on our July meeting notes page and will be sup­ple­mented with our popular meeting notes after the meeting.

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Panel discussion with Chair of the IFRS Foundation Trustees

16 Jul 2021

On 11 July 2021, the Chair of the IFRS Foundation Trustees, Erkki Liikanen, took part in a panel discussion that was part of a conference was organised by the Italian Ministry of Economy and Finance and the Bank of Italy to coincide with the G20 Finance Ministers and Central Bank Governors’ meeting in Venice.

The topic of the panel discussion was "Regulations, disclosures, financial risk and private financing for the green economy". A recording of the one-hour debate is available on YouTube.

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We comment on the proposed CSRD

16 Jul 2021

The Deloitte firms in the European Union on behalf of Deloitte Global have provided feedback on the proposed EU Corporate Sustainability Reporting Directive (CSRD).

We support many of the proposals of the CSRD, including the development of EU Sustainability Reporting standards (ESRS) allowing for both international consistency and catering for EU needs and its legislative landscape. However, we note that issues at stake are global, investors and other stakeholders are often global, and many companies operate and source through global value chains. Therefore, similar to the G7 ministers of finance and central bank governors, we support a baseline global reporting standard for sustainability to be developed by the IFRS Foundation, which jurisdictions can further supplement.

Please click to download the full comment letter here.

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A4S publishes introduction to sustainability-related reporting

15 Jul 2021

The Prince of Wales' Accounting for Sustainability Project (A4S) has published 'Navigating the Reporting Landscape'.

The guide offers a brief introduction to the changing corporate reporting landscape. It summarises recent key developments in sustainability reporting including EU developments and the sustainability initiative of the IFRS Foundation Trustees. It shows how sustainability reporting is impacting the role of the accountant and shaping the future of corporate reporting. It also highlights how this area is likely to evolve going forward, offering signposting to further sources of information.

Please click to access the guide on the A4S website.

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Value Accounting Network founded

15 Jul 2021

A group of nine initiatives has founded the Value Accounting Network. They share the ambition that the value provided by and experienced by people and nature must be included in all decision-making.

The network defines value accounting as: "The collection, calibration, and use of information about the relative value that an organization creates, preserves, or erodes for its stakeholders, using common units. This information is used when making decisions for a variety of purposes."

The group has published agreed statements of commonality:

  1. We firmly believe it is vital for businesses, finance, and governments to base decisions on value accounting.
  2. We aim to modernize accounting to transform governance practices, decision making, and reporting.
  3. We believe that we need generally accepted principles to account for value.
  4. We believe that integrated thinking, and a holistic systems-based approach is essential.
  5. We embrace and support the concept of ‘capital’ reflecting stocks that can change over time and that underpin increasing or decreasing flows of benefits to people, communities, the environment, and the economy.
  6. We recognize the importance of accounting for holistic value creation, the value of impacts and dependencies on different capitals.
  7. We recognize that the value to society (inside-out) and value to the entity (outside-in) are both essential to assess and report value.
  8. We believe that the trade-offs between capitals and between stakeholders must be specified and addressed in decision making.
  9. We recognize the importance of existing efforts, and we are building on the standards, frameworks and definitions that have already been agreed.

The Value Balancing Alliance, one of the founding members of the Value Accounting Network, makes the following information available on its website:

EFRAG (European Financial Reporting Advisory Group) (dk green) Image

Summary report and video of European Lab @EFRAG webinar on sustainability

13 Jul 2021

On 25 May 2021, the European Financial Reporting Advisory Group (EFRAG) project task force on reporting of non-financial risks and opportunities and linkage to the business model held a webinar where it introduced key findings in its draft report. EFRAG has now published a summary report and a video from the event.

The draft report has been developed after conducting fieldwork that involved an assessment of the following:

  • reporting practices on sustainability-related risks, opportunities, and linkage to the business model;
  • user needs and expectations, the extent to which these are addressed by current reporting practices and challenges faced by companies in providing such information; and
  • innovative reporting data and technology use cases.

For more information, see the press release, summary report, and video (YouTube) of the webinar on the EFRAG’s website.

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