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News

IVSC (International Valuation Standards Council) (lt green) Image

IVSC concludes article series on goodwill amortisation

02 Jun 2020

The International Valuation Standards Council (IVSC) has published the third article in a series looking into whether principles underlying business valuations are compatible with the concept of goodwill amortisation. The series aims at encouraging public discussion by exploring certain fundamental questions in this area to inform financial statement preparers, reviewers, and users, and aid the capital market.

The third article Opportunities for Enhancing the Goodwill Impairment Framework can be accessed on the IVSC website.

The second article What is the Information Value of the Current Impairment Framework? was published in December 2019.

The first article Is Goodwill a Wasting Asset? was published in September 2019.

ASBJ (Accounting Standards Board of Japan) Image
FASB (US Financial Accounting Standards Board) (lt blue) Image

FASB and ASBJ hold biannual meeting

02 Jun 2020

On 1 June, the FASB and the Accounting Standards Board of Japan (ASBJ) held a joint virtual meeting. The meeting was the 27th in a series of biannual meetings between the two standard-setters.

The two boards informed each other about the effects of the COVID-19 pandemic on their respective accounting standards and exchanged views on technical topics in which they both have an interest, including accounting for goodwill and intangibles and financial performance reporting and disclosures.

The next meeting between the FASB and ASBJ is expected to be held in the second half of 2020. For more information about the latest meeting, see the press release on the ASBJ website.

IOSCO (International Organization of Securities Commissions) (dark gray) Image

IOSCO statement on importance of disclosure about COVID-19

02 Jun 2020

The International Organization of Securities Commissions (IOSCO) has issued a public statement on the importance of disclosure about COVID-19 aspects to highlight financial reporting issues that should be considered by issuers in order to provide investors with relevant and reliable information in their financial reports and related disclosure documents.

The statement discusses:

  • the importance of disclosures about the impact on amounts recognised, measured and presented in the financial statements;
  • the importance of transparent and complete disclosures that should be entity-specific and especially highlight significant judgments and estimates;
  • non-GAAP measures that should be reliable and informative;
  • interim reports that should provide robust disclosures of material information and management’s response to the changing circumstances;
  • implications for the annual audit; and
  • the balance between the flexibility provided by regulators by extending the period to file financial information and the responsibility to provide timely and comprehensive financial information that includes reasonable and supportable judgments.

A corresponding press release and the public statement are available on the IOSCO website.

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

EFRAG draft comment letter on the IASB's discussion paper on goodwill and impairment

30 May 2020

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB discussion paper DP/2020/1 'Business Combinations — Disclosures, Goodwill and Impairment'.

The IASB's project on goodwill and impairment aims at improving the information companies provide to investors, at a reasonable cost, about the businesses those companies buy and would help to hold management to account for its decisions to acquire those businesses.

In its draft comment letter on the discussion paper published in March 2020, EFRAG

  • supports the objective to explore whether companies can, at a reasonable cost, provide investors with more useful information about the acquisitions companies make;
  • notes some practical issues to consider in relation to disclosures about the strategic rationale, management’s objectives for an acquisition, and synergies; asks whether this information should be provided in the management commentary rather than the financial statements; and questions whether the benefits of some of the disclosures would outweigh the costs;
  • suggests that the guidance on goodwill allocation to cash generating units is possibly amended to improve how the impairment test for cash-generating units containing goodwill is applied in practice;
  • does not offer a view yet on whether amortisation of goodwill should not be reintroduced;
  • appreciates the attempts to simplify the impairment test, but has reservations about introducing an indicator-only approach;
  • supports the proposal to remove the restriction that prohibits companies from including cash flows arising from a future uncommitted restructuring or from enhancing the asset’s performance as well as to remove the requirement to use pre-tax inputs and pre-tax discount rates to calculate value in use;
  • does not assess that there would be any benefits of presenting the amount of total equity excluding goodwill in the statement of the financial position; and
  • would recommend that the issue on whether some intangible assets could be included in goodwill should be considered in a second phase of the project.

Comments on EFRAG's draft comment letter are requested by 30 November 2020. For more information, see the press release and the draft comment letter on the EFRAG's website.

IASB podcast (blue) Image

IASB issues podcast on latest Board developments (May 2020)

29 May 2020

The IASB has released a podcast featuring IASB Chair, Hans Hoogervorst and Vice-Chair, Sue Lloyd discussing deliberations at (1) the May IASB meeting and (2) the Board's supplementary meeting on IFRS 16 covid-19-related rent concessions.

The podcast features discussions related to amendment to IFRS 16 Leases to help companies with covid-19-related rent concessions. The podcast also discusses:

  • Amendments to IFRS 17 Insurance Contracts;
  • IBOR reform and the effects on financial reporting — Phase 2;
  • Management commentary;
  • Disclosure initiative — Accounting policies; and
  • Maintenance and consistent application.

The podcast can be accessed through the press release on the IASB website. More information on the topics discussed is available through our comprehensive notes taken by Deloitte observers at the May IASB meeting as well as the Board's supplementary COVID-19 meeting.

IASB document (blue) Image

IASB finalises amendment to IFRS 16 regarding COVID-19-related rent concessions

28 May 2020

The International Accounting Standards Board (IASB) has published 'Covid-19-Related Rent Concessions (Amendment to IFRS 16)' amending the standard to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. Concurrently, the IASB also published a proposed Taxonomy Update to reflect this amendment.

 

Background

The COVID-19 pandemic has led to some lessors providing relief to lessees by deferring or relieving them of amounts that would otherwise be payable.  In some cases, this is through negotiation between the parties, but can be as a consequence of a government encouraging or requiring that the relief be provided. Such relief is taking place in many jurisdictions in which entities that apply IFRSs operate.

When there is a change in lease payments, the accounting consequences will depend on whether that change meets the definition of a lease modification, which IFRS 16 Leases defines as “a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term)”.

On 24 April 2020, the Board published an exposure draft with a proposed amendment intended to provide practical relief to lessees in accounting for rent concessions arising as a result of the COVID-19 pandemic. Given the urgency of the matter, the exposure draft was published with a 14-day comment period. On 15 May 2020, the Board considered the feedback received and decided to finalise the amendment with some changes.

 

Changes

The changes in Covid-19-Related Rent Concessions (Amendment to IFRS 16) amend IFRS 16 to

  1. provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification;
  2. require lessees that apply the exemption to account for COVID-19-related rent concessions as if they were not lease modifications;
  3. require lessees that apply the exemption to disclose that fact; and
  4. require lessees to apply the exemption retrospectively in accordance with IAS 8, but not require them to restate prior period figures.

The main change from the proposal in the exposure draft is that the IASB had proposed that the practical expedient should only be available for lease payments originally due in 2020. However, after having considered the feedback to the exposure draft, the IASB decided to extend this period to June 2021 to also capture rent concessions granted now and lasting for 12 months.

The IASB considered but decided not to provide any additional relief for lessors as the current situation is not as equally challenging for them and the required accounting is not as complicated.

 

Effective date

The amendment is effective for annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted, including in financial statements not yet authorised for issue at 28 May 2020. The amendment is also available for interim reports.

 

Proposed Taxonomy Update

The IASB has also published a proposed Taxonomy Update to reflect the amendment to IFRS 16. Comments on the proposed Taxonomy update are requested by 29 June 2020.

 

Additional information

Please click for:

 

European Union Image

EC review of the NFRD postponed by three months

27 May 2020

In February 2020, the European Commission (EC) launched an initiative to review the European Non-Financial Reporting Directive (NFRD). The COVID-19 pandemic has now led to changes in the timetable.

The review was originally scheduled to be completed in the fourth quarter of 2020. An updated work programme released today shows that this date has been moved to the first quarter of 2021.

Please see this communication on the EC website (entry number four under item 2).

IASB podcast (blue) Image

IASB releases podcast on IFRS 17 (May 2020)

26 May 2020

The IASB has released a podcast featuring IASB member Darrel Scott and technical staff member Vitalina Kobernik as they discuss the developments at the May 2020 Board meeting related to the amendments to IFRS 17 'Insurance Contracts'.

The amendments to IFRS 17 are being finalised by the staff. During this process the staff identified five (sweep) issues for which the Board decided to make additional changes to the standard, along with two other matters that were identified after the staff paper had been distributed.

The podcast can be accessed through the press release on the IASB website.

Our comprehensive meeting notes from the session are available here.

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

Updated IPSAS-IFRS alignment dashboard

26 May 2020

The International Public Sector Accounting Standards Board (IPSASB), which develops the International Public Sector Accounting Standards (IPSAS) for financial reporting by governments and other public sector entities, has released an updated IPSAS-IFRS alignment dashboard showing how far individual IPSAS are aligned with corresponding IFRSs.

Please click to access the updated alignment dashboard prepared for the June 2020 IPSASB meeting on the IPSASB website.

In this context, please also so our 2020 edition of IPSAS in your pocket published in January.

Deloitte document (mid gray) Image

We comment on the IASB's proposed amendments as a result of the second phase of its project on the IBOR reform

25 May 2020

We have commented on IASB exposure draft ED/2020/1 'Interest Rate Benchmark Reform — Phase 2 (Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)', which was published by the IASB on 9 April 2020.

The ED contains proposed amendments that would address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates.

We are largely supportive of the amendments. In particular, we support the key changes that ensure that entities that apply hedge accounting will continue to do so as they transition to new benchmark interest rates and that the accounting for the modification of hedged items, when those modifications arise directly from the reforms, are reflected on a prospective basis via the application of IFRS 9:B5.4.5. We consider these as being the two most important elements of the proposals.

Please click to download our full comment letter.

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