A summary of the agenda is set out below:

Agenda papers for the meeting are available on the IFRS Foundation website.

Mr Liikanen opened his speech by introducing the recent work of the IASB and the ISSB and pointing out parallels between what lead to establishing the two Boards. He noted that companies, investors, regulators, auditors and academics all benefited from the global lingua franca of IAS/IFRS and will also do so from a global global baseline of sustainability disclosures for the capital markets.

Mr Liikanen also noted that none of this would have been or will be possible without the deep involvement of the academic community:

We value academic research for its independence and rigour. We continually look for high-quality evidence that can assist in making standard-setting decisions.

Please click to access the full transcript of his speech on the IFRS Foundation website.

Background

The IFRS Interpretations Committee received a submission about supply chain finance arrangements asking:

• How an entity presents liabilities to pay for goods or services received when the related invoices are part of a supply chain finance (or reverse factoring) arrangement; and
• what information about reverse factoring arrangements an entity is required to disclose in its financial statements.

In response to that submission, the Committee published an agenda decision in December 2020. However, feedback and input received — in particular from investors and analysts — suggested the information entities provide about supplier finance arrangements applying existing IFRS requirements does not meet all investor information needs.

In response to that feedback, the Board decided to amend IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that ask entities to provide qualitative and quantitative information about supplier finance arrangements.

Key changes

The amendments in Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7): 

• Do not define supplier finance arrangements. Instead, the amendments describe the characteristics of an arrangement for which an entity is required to provide the information. The amendments note that arrangements that are solely credit enhancements for the entity or instruments used by the entity to settle directly with a supplier the amounts owed are not supplier finance arrangements.
• Add two disclosure objectives. Entities will have to disclose in the notes information that enables users of financial statements
  • to assess how supplier finance arrangements affect an entity’s liabilities and cash flows and
  • to understand the effect of supplier finance arrangements on an entity’s exposure to liquidity risk and how the entity might be affected if the arrangements were no longer available to it.
• Complement current requirements in IFRSs by adding to IAS 7 additional disclosure requirements about:
  • the terms and conditions of the supplier finance arrangements;
  • for the arrangements, as at the beginning and end of the reporting period:
    • a) the carrying amounts of financial liabilities that are part of the arrangement and the associated line item presented;
    • b) the carrying amount of financial liabilities disclosed under a) for which suppliers have already received payment from the finance providers;
    • c) the range of payment due dates (for example, 30 to 40 days after the invoice date) of financial liabilities disclosed under a) and comparable trade payables that are not part of a supplier finance arrangement; and
  • the type and effect of non-cash changes in the carrying amounts of the financial liabilities that are part of the arrangement.
  The IASB decided that, in most cases, aggregated information about an entity’s supplier finance arrangements will satisfy the information needs of users of financial statements.
• Add supplier finance arrangements as an example within the liquidity risk disclosure requirements in IFRS 7.

Effective date and transition

An entity applies the amendments to IAS 7 for annual reporting periods beginning on or after 1 January 2024 (with earlier application permitted) and the amendments to IFRS 7 when it applies the amendments to IAS 7.

There is a certain amount of transition relief provided, including relief regarding comparative information and interim period information.

Additional information

The following additional information is available on the website of the IFRS Foundation and on IAS Plus:

• IASB press release (link to IFRS Foundation website)
• Webcast explaining the amendments (link to IFRS Foundation website)
• Investor Perspectives article (link to IFRS Foundation website)
• Our IAS Plus project page on Supplier finance arrangements

The following topic was discussed:

Maintenance of the SASB Standards: In this meeting, the ISSB ratified consequential amendments to the SASB Standards in connection with the issuance of IFRS S2 Climate-related Disclosures. The ISSB also confirmed it is satisfied that it has complied with the applicable due process requirements to publish the climate-related revisions to the SASB Standards.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

Background

In March 2022, the OECD released technical guidance on its 15% global minimum tax agreed as the second ‘pillar’ of a project to address the tax challenges arising from digitalisation of the economy. This guidance elaborates on the application and operation of the Global Anti-Base Erosion (GloBE) Rules agreed and released in December 2021 which lay out a co-ordinated system to ensure that multinational enterprises with revenues above €750 million pay tax of at least 15% on the income arising in each of the jurisdictions in which they operate.

The IASB decided to respond to stakeholders’ concerns about the potential implications of the imminent implementation of these rules on the accounting for income taxes by jurisdictions. In particular, the IASB noted that the situation is very complicated as:

• jurisdictions may change statutory tax rates to avoid being considered a low-tax environment;
• companies might decide to move their business to jurisdictions with higher statutory tax rates; and
• companies might engage in business that comes with tax incentives that might bring down their statutory tax rate to below 15% although the jurisdiction they are doing business in is not generally considered a low-tax environment.

All of these and further considerations would entail most complicated calculations of deferred tax in a situation that is highly volatile due to the fact that jurisdictions implement the OECD rules at different speed and different points of time. Due to the many unknown variables involved, the IASB has decided to develop a mandatory exemption until the global tax system has settled and reestablished itself and the IASB can thoroughly assess the situation and provide a reliable solution.

Changes

The amendments in International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12) are:

• An exception to the requirements in IAS 12 that an entity does not recognise and does not disclose information about deferred tax assets and liabilities related to the OECD pillar two income taxes. An entity has to disclose that it has applied the exception.
• A disclosure requirement that an entity has to disclose separately its current tax expense (income) related to pillar two income taxes.
• A disclosure requirement that state that in periods in which pillar two legislation is enacted or substantively enacted, but not yet in effect, an entity discloses known or reasonably estimable information that helps users of financial statements understand the entity’s exposure to pillar two income taxes arising from that legislation.
• The requirement that an entity applies the exception and the requirement to disclose that it has applied the exception immediately upon issuance of the amendments and retrospectively in accordance with IAS 8. The remaining disclosure requirements are required for annual reporting periods beginning on or after 1 January 2023.

The IASB will continue to monitor developments related to the implementation of the pillar two model rules. It plans to undertake further work to determine whether to remove the temporary exception — or to make it permanent — after there is sufficient clarity about how jurisdictions implemented the rules and the related effects on entities.

The IASB has also decided that the pillar two model rules (and the amendments to IAS 12) are relevant to entities applying the IFRS for SMEs. The IASB has added to its work plan a narrow-scope standard-setting project to amend Section 29 Income Tax of the IFRS for SMEs. An exposure draft is expected in June 2023.

Dissenting opinion

The final amendments contain a dissenting opinion as one Board member is concerned that these amendments will result in an entity disclosing less useful information to help users of financial statements assess the entity’s future cash flows.

Additional information

Please click for:

• IASB press release (link to IASB website)
• iGAAP in Focus newsletter explaining the amendments
• Our IAS Plus project page on IAS 12 — OECD pillar two model rules

In particular, research papers are welcomed on the following research areas of interest:

• Intangible assets
• Statement of cash flows and related items
• Impact of IFRS 17 Insurance Contracts
• Disclosure in financial reports, including
  • guidance for developing and drafting disclosure requirements in IFRS Accounting Standards;
  • segment reporting;
  • climate-related risks in the financial statements;
  • connectivity between the financial statements and sustainability-related financial disclosures; and
  • management commentary and integrated reporting
• Any other topics on the IASB’s work plan

Research papers are requested by 31 March 2024.

For more information, see the press release and call for papers on the IFRS Foundation website.

The declaration mentions the work and progress of the International Sustainability Standards Board (ISSB) and highlights the need of sustainability disclosures for mobilising private sector finance to support the transition to a sustainable economy. It notes:

We underline our commitment to consistent, comparable and reliable disclosure of information on sustainability including climate. We support the International Sustainability Standards Board (ISSB) finalizing the standards for general reporting on sustainability and for climate-related disclosures and working toward achieving globally interoperable sustainability disclosure frameworks. We also look forward to the ISSB’s future work on disclosure on biodiversity and human capital, in line with its work plan consultation.

Please click to access the full statement on the website of the Ministry of Foreign Affairs of Japan.

High­lights of the podcast include dis­cus­sions on:

• Ratification of consequential amendments to the SASB Standards;
• Consultation on the ISSB’s agenda priorities and international applicability of the SASB Standards;
• Stakeholder engagements;
• Upcoming publication of S1 and S2 in June 2023.

The podcast can be accessed through the press release on the IFRS Foun­da­tion’s website.

The following topics are on the agenda:

Business Combinations—Disclosures, Goodwill and Impairment: The staff recommend that the IASB not proceed with its preliminary view to remove the requirement to perform a quantitative impairment test each year and should retain the requirement for an entity to perform an annual impairment test. The staff also recommend that the IASB maintain its preliminary view that it is infeasible to design a different impairment test that is significantly more effective at a reasonable cost.

IASB work plan update: The staff will provide an update on the IASB’s work plan since its last update in March 2023.

Post-implementation review (PIR) of IFRS 15: The IASB will be asked to approve the publication of a Request for Information (RFI) for the PIR of IFRS 15 and whether it agrees with a comment period of 120 days. The publication of the RFI is expected for the end of June 2023.

Maintenance and consistent application: The IASB will discuss further potential annual improvements as well as their effective date and whether early application should be permitted. The staff are asking for approval to begin the balloting process for the upcoming Exposure Draft.

Primary Financial Statements: The IASB will discuss staff recommendations about investments in associates and joint ventures accounted for using the equity method. The IASB will also discuss issues related to management performance measures and IFRS 8.

Subsidiaries without Public Accountability: The IASB will make decisions on whether to retain the disclosure requirements proposed in the draft Standard, after making some targeted changes. The IASB will also discuss the paragraph in the draft Standard that addresses materiality of disclosure requirements as well as disclosure requirements about transition in other IFRS Accounting Standards. Furthermore, the staff will ask the IASB whether disclosure requirements in IFRS Accounting Standards that have been issued since the draft Standard was developed should apply to eligible subsidiaries applying the new Standard.

Management Commentary: The staff will hold an educational session on the comparison between the Management Commentary Exposure Draft and the Integrated Reporting Framework.

Dynamic Risk Management (DRM): The IASB will discuss potential illustrative examples of the application of the current DRM model to support stakeholders in their analysis of the model requirements.

Financial Instruments with Characteristics of Equity (FICE): The staff recommend consequential amendments resulting from the forthcoming FICE Exposure Draft (ED) to the forthcoming Subsidiaries without Public Accountability Standard. The staff will also ask for permission to begin the balloting process for the ED.

Rate-regulated Activities: The IASB will discuss the staff analysis and recommendations on the proposals relating to initial recognition of regulatory assets and liabilities in the Exposure Draft Regulatory Assets and Regulatory Liabilities.

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

More in­for­ma­tion about the issues is set out below:

Click to access all our comment letters to the IASB, IFRS Foun­da­tion, and IFRS In­ter­pre­ta­tions Committee.