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News

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Call to action in response to climate change

25 Feb 2020

14 accounting bodies have signed a call to action in response to climate change. The bodies, who are all members of A4S’s Accounting Bodies Network, represent over 2.5 million accountants and students globally.

The statement includes eight actions which accountants are called upon to take in response to the climate emergency. It also includes commitments from the bodies themselves in support of their members. The call to action highlights that climate change represents an economic, social and business risk – a risk that accountants from across the world must take action on.

Please click to access the call to action on the A4S website.

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

EFRAG draft comment letter on the proposed new standard on general presentation and disclosures

24 Feb 2020

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB exposure draft ED/2019/7 'General Presentation and Disclosures'.

The proposed new standard is intended to replace IAS 1 Presentation of Financial Statements.

In its draft comment letter, EFRAG

  • supports the IASB's proposals to present an operating, investing and financing category in the statement of profit or loss to improve comparability and reduce diversity in practice, but has reservations over some of the proposals in the ED;
  • expresses the view that separate presentation of integral and non-integral associates and joint ventures will result in relevant information for users of financial statements and enhance comparability, but will involve significant judgement and needs to be tested in practice;
  • welcomes the IASB's efforts to provide guidance on management performance measures but highlights a number of challenges in regard to the ED proposals and also mentions the possibility of an alternative narrower scope; and
  • welcomes the IASB's efforts to define unusual income and expenses and to require entities to disclose such items in the notes, but notes that the definition of unusual items seems to be rather narrow.

Comments on EFRAG's draft comment letter are requested by 19 June 2020. For more information, see the press release and the draft comment letter on the EFRAG's website.

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IFRS Foundation seeks new SMEIG members

24 Feb 2020

The IFRS Foundation Trustees are currently seeking nominations for membership of the SME Implementation Group (SMEIG), which supports the international adoption of the 'International Financial Reporting Standards for Small and Medium-sized Entities' (IFRS for SMEs) and monitors its implementation.

The Trustees are seeking new SMEIG members from all geographical regions and are particularly interested in candidates who use the financial statements of small and medium-sized entities (investors and providers of finance). They will be appointed from 1 July 2020 and would serve three-year terms. Nominations for membership of the SMEIG close on 20 March 2020. Please click for the IASB press release (link to IASB website).

IPSASB (International Public Sector Accounting Standards Board) (mid gray) Image

IPSASB publishes three exposure drafts

24 Feb 2020

The International Public Sector Accounting Standards Board (IPSASB) has released three interconnected exposure drafts: ED 70 'Revenue with Performance Obligations', ED 71 'Revenue without Performance Obligations', and ED 72 'Transfer Expenses'.

The three exposure drafts are published together to highlight the linkages between the accounting for revenue and transfer expenses.

  • ED 70 is aligned with IFRS 15 Revenue from Contracts with Customers, while extending the income recognition approach in IFRS 15 to address common public sector transactions which include performance obligations, including those where the ultimate beneficiary is a third party.
  • ED 71 is an update of IPSAS 23 Revenue from Non-Exchange Transactions (Taxes and Transfers) that addresses some of the issues encountered in its application. ED 71 also provides public sector-specific guidance on capital transfers for the first time.
  • ED 72 proposes guidance for transfer expenses, where a transfer provider provides resources to another entity without receiving anything directly in return.

Comments on all EDs are requested by 15 September 2020.

Please click to access the following additional information on the IPSASB website:

 

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March 2020 IFRS Interpretations Committee meeting agenda posted

21 Feb 2020

The IFRS Interpretations Committee has posted the agenda for its next meeting, which will be held in London on 3 March 2020.

The Committee will discuss the following:

  • Administrative matters
  • IFRS 16 — Sale and leaseback with variable payments
  • IAS 12 — Deferred tax related to a subsidiary's undistributed profits
  • IAS 12/IAS 29 — Translation of hyperinflationary foreign operation
  • IFRS 15 — Training costs to fulfil a contract
  • Work in progress

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries as well as observer notes from the meeting on this page as they become available.

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Agenda for the March 2020 GPF meeting

21 Feb 2020

Representatives from the International Accounting Standards Board (IASB) will meet with the Global Preparers Forum (GPF) in London on 5 March 2020. The agenda for the meeting has been released.

The full agenda for the meeting is summarised below:

Thursday, 5 March 2020 (10:10-16:20)

  • Primary financial statements — Overview over the ED and preliminary views of the members
  • IASB update
  • Goodwill and impairment — Overview of the Board’s preliminary views that will be included in the discussion paper and GPF members’ views on the feedback process for the project and areas of focus during the comment and outreach period
  • Disclosure initiative: Targeted standards-level review of disclosures in IAS 19 and IFRS 13 — next steps in the project

Agenda papers for this meeting are available on the IASB's website.

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EC publishes consultation on the revision of the NFRD

20 Feb 2020

Following the launch of the initiative 'Revision of the Non-Financial Reporting Directive', the European Commission (EC) has now opened the consultation itself for public comment.

As reported earlier, Executive Vice President Valdis Dombrovskis of the EC announced in January 2020 that later this year he would present a renewed sustainable finance strategy, which would include a revision of the Non-Financial Reporting Directive (NFRD). The initiative to update the NFRD was launched earlier this month. Today, the EC launched the consultation itself by publishing a consultation document. 

In the introduction to the consultation, the EC makes the following statement:

  1. There is inadequate publicly available information on non-financial issues as:
    • a) reported non-financial information is not sufficiently comparable or reliable;
    • b) companies do not report all non-financial information that users think is necessary, and many companies report information that users do not think is relevant;
    • c) some companies do not report such information; and
    • d) it is hard to find non-financial information even when it is reported.
  2. Companies incur unnecessary and avoidable costs related to reporting non-financial information.

The consultation document itself contains 45 questions in eight categories:

    1. Quality and scope of non-financial information to be disclosed
    2. Standardisation
    3. Application of the principle of materiality
    4. Assurance
    5. Digitisation
    6. Structure and location of non-financial information
    7. Personal scope (which companies should disclose)
    8. Simplification and reduction of administrative burdens for companies

"Standardisation" contains questions about whether there should be common standards for EU companies, what the relation between financial information and non-financial information should be and which bodies/groups should be involved in setting these standards (if that should be the case).

The consultation document is available on the EC website (login required). Feedback is requested by 14 May 2020.

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IIRC calls for feedback in the context of the planned revision of its Framework

20 Feb 2020

The International Integrated Reporting Council (IIRC) has launched a revision of the International <IR> Framework and is calling for market feedback on specific themes that will inform the nature and direction of the revision.

The IIRC has identified key themes around which it invites feedback, outlined in three topic papers on a) business model considerations, b) responsibility for an integrated report, and c) charting a path forward. The first two topic papers relate to the current <IR> Framework revision process. The third topic paper forges ahead with themes shaping the future of corporate reporting, including extended assurance and the role of technology. Feedback on this paper will inform the IIRC’s longer-term strategy.

Each topic paper separately invites market feedback via an online survey. Responses are requested by 20 March 2020. Please see the following additional information on the IIRC website:

Proposed amendments to the Framework will receive 90-day public exposure via a consultation draft, launching in May 2020. The revised Framework is due for release at the end of 2020.

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IFRS Foundation Trustees' stakeholder event with focus on non-financial reporting

19 Feb 2020

At the joint stakeholder event hosted by the IFRS Foundation and the European Financial Reporting Advisory Group (EFRAG) during the meeting of the Trustees in Brussels on 18 February, participants discussed 'Financial reporting: remaining relevant in a changing environment'.

The keynote address was delivered by Executive Vice President of the European Commission Valdis Dombrovskis. He noted that the European Commission (EC), at the beginning of a new five-year mandate, hat two major tasks to focus on - the fight against climate change and digital transformation. In his speech on non-financial reporting, Mr Dombrovskis connected both topics. He explained that today a much broader range of information is needed from companies and that in order for corporate reporting to remain relevant in this changing world, it needs to evolve. Mr Dombrovskis referred to the recently launched initiative to review the Non-Financial Reporting Directive and mentioned that the EC will ask EFRAG to begin work on non-financial reporting standards soon. However, he stressed, that while the EU is taking the lead on this, it "cannot go alone". Rather, Mr Dombrovskis explained, the EU initiative will be a platform that will allow and need others to contribute to developing these standards - he referred expressly to the IASB and other standard-setters and organisations "from around the world". Turning to digitalisation, Mr Dombrovskis commented that common standards are not only needed to achieve comparability in non-financial reporting, they would also provide a good basis for harnessing digital developments to help make fragmented and scattered information accessible and machine readable. His thoughts included broadening the new European Single Electronic Format (ESEF) to non-financial reporting and he noted that the digital financial strategy the EC is currently developing would extend to both financial and non-financial reporting.

Following the keynote address, the Chairman of the IFRS Foundation Trustees Erkki Liikanen moderated a panel discussion with MEPs Sven Giegold and Sirpa Pietikäinen, both members of the Committee on Economic and Monetary Affairs (ECON) of the European Parliament. Again, non-financial reporting was at the heart of the discussion. Ms Pietikäinen pointed to the 200 plus frameworks and sets of standards for sustainability reporting that currently exist. She asked the audience to imagine such a situation for financial reporting and stressed that non-financial reporting must be harmonised and must be made mandatory to achieve comparability. Ms Pietikäinen expressed the belief that this must be done globally. She suggested that there is no better place to have such a global standard-setter than under the auspices of the IFRS Foundation. Asked what the IFRS Foundation and the IASB should think or worry about regarding climate change and financial reporting, Mr Giegold explained that the climate crisis is a similar crisis to the financial crisis. Before the financial crisis, financial statements did not give a true and fair view of the risks companies were exposed to. Similarly, financial statements now would not faithfully portray the risks companies are exposed to as regards the climate change. He pointed out that ESG risks have a huge economic impact. He acknowledged the IASB's efforts around the management commentary, however, he called it the "blah blah" and asked the IASB to become active and develop rules that would allow to reflect ESG risks and their economic impact in the financial statements themselves.

A transcript of Mr Dombrovskis speech is available on the EC website.

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Pre-meeting summaries for the February IASB meeting

18 Feb 2020

The IASB will meet in London on 25–27 February 2020 to discuss six topics. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. For each topic to be discussed, we summarise 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.

Amendments to IFRS 17 Insurance Contracts:The Board will continue its discussion of topics for which it had decided to consider the feedback from respondents further, specifically:

  • Contractual service margin attributable to investment services (finalise the amendments proposed, with some changes)
  • Level of aggregation—annual cohorts for insurance contracts with intergenerational sharing of risks between policyholders (recommend retaining the requirement in IFRS 17).
  • Applicability of the risk mitigation option—non-derivative financial instruments at fair value through profit or loss (recommend the that the risk mitigation option be extended for insurance contracts with direct participation features in IFRS 17:B115)
  • Minor editorial and consequential amendments (recommend the Board finalise them with minor changes).
  • Additional specific transition modifications and reliefs (recommend extending, amending and adding modifications to the modified retrospective approach).
  • For other topics raised by respondents to the Exposure Draft Amendments to IFRS 17 the staff recommend an amendment only to resolve an inconsistency between IFRS 17:B65(m) and IFRS 17:B66(f) and not for any of the other matters raised.

IBOR Reform and the Effects on Financial Reporting: The Board will complete its discussions of proposed amendments that respond to IBOR reform. The staff are recommending that the ED:

  • Limit the scope of the amendment to clarify that a change in the basis on which the contractual cash flows are determined that alters what was originally anticipated constitutes a modification of a financial instrument in accordance with IFRS 9 to changes made in the context of IBOR reform;
  • Propose temporary relief for hedging relationships that are amended to reflect modifications directly required by the reform;
  • Set out how the amendments are apply when transition to an alternative benchmark rate occurs for classification and measurement of financial instruments; hedge accounting; lease accounting; and disclosures. The separately identifiable requirement for risk components should cease applying 12 months after the date that the alternative benchmark rate was designated as a risk component for hedge accounting purposes. These amendments should be mandatory and not voluntary.
  • Have an effective date of annual periods beginning on or after 1 January 2021 with earlier application permitted, and be applied retrospectively.

The ED is expected to be published in April, with a comment period of 45 days.

Disclosure Initiative—Targeted Standards-level Review of Disclosures: The Board will continue its discussions of potential revisions to the disclosure requirements in IFRS 13 and recommend that the disclosure requirements in IFRS 13 be amended to:

  • refer to significant drivers of change in the objective;
  • require an entity to disclose a reconciliation from opening to closing balances of recurring fair value measurements categorised within Level 3 of the fair value hierarchy;
  • state that an explanation by an entity of significant drivers of change in fair value measurements other than those classified in Level 3 of the fair value hierarchy might be necessary for it to meet the disclosure objective.

Disclosure Initiative—Accounting Policies: The staff will present a summary of the feedback received on the proposal to amend IAS 1 (or its proposed replacement, see https://www.iasplus.com/en/projects/major/pfs) to require the disclosure of ‘material’ rather than ‘significant’ accounting policies and to add guidance on how to whether an accounting policy is material.

Business Combinations under Common Control: The staff set out the disclosures requirements that they recommend should accompany the acquisition and predecessor approaches for a BCUCC. The staff also recommend that the Board publish a DP as the next step.

The staff will give an updates on recent activities of the IFRS Interpretations Committee and recommend that the Board not finalise the proposed amendments to IFRIC 14 related to Availability of a Refund. 

More information

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

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