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May

IASB issues podcast on latest Board developments

31 May 2018

The IASB has released a podcast featuring Chair Hans Hoogervorst, Vice-Chair Sue Lloyd, and education director Matt Tilling to discuss the deliberations at the May 2018 IASB meeting.

The 13-minute podcast features dis­cus­sions of the following topics:

  • Primary financial statements.
  • Disclosure initiative.
  • Business combinations under common control.
  • Rate-regulated activities.
  • Goodwill and impairment.

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 of the May 2018 meeting.

Report on the spring 2018 IFASS meeting

30 May 2018

A report has been issued summarising the discussions at the meeting of the International Forum of Accounting Standard Setters (IFASS) held in Mumbai on on 12 and 13 April 2018.

The report covers:

  • Continuation of the internal discussions
  • Proposals on the goodwill and impairment project of the IASB
  • The IASB’s work on implementation
  • Jurisdictional/standard-setters’ updates
    • Relevance of parent and/or subsidiary financial statements if consolidated financial statements are available
    • Q&A on IASB's work plan including research project pipeline
    • Recent developments in the work of the not-for-profit working group
  • Facilitating the adoption of new IFRSs
    • IFRS 15: Enforceable right to payment: Off-plan apartment complex construction contracts
    • IFRS 16: Exchange of lessons learned
  • Facilitating the adoption of new IFRSs: IFRS 17 - Exchange of lessons learned
  • Other optional sessions in brief:
    • Consolidation of not-for-profit entities under IFRS 10
    • Taxonomy update
    • NFRS implementation in Nepal – progress and challenges
  • Equity instruments: Impairment and Recycling
  • Intangibles: First Thoughts
  • BCUCC – Follow-up from London 2017
  • Primary financial statements: Some issues arising in IASB’s current projects

IFASS will meet next time in London on 2 and 3 October 2018 following the IFRS Foundation’s World Standard Setters meeting. The subsequent IFASS meeting is scheduled to be held in Argentina in late March 2019, the exact location and date are not determined yet.

Please click for the full report from the meeting.

IASB posts webcast on proposed amendments to IAS 8

29 May 2018

The IASB has posted a webcast by IASB member Mary Tokar and staff member Jawaid Dossani that provided an overview on why the IASB proposed amendments to IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors,’ and discussed the proposed amendments.

In addition, the webcast answered certain questions presented to the Board during the exposure draft period as well as next steps in the project.

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

EC follows up on action plan on sustainable finance with first legislative proposals

28 May 2018

In January 2018, the High-Level Expert Group (HLEG) on Sustainable Finance, established by the European Commission (EC), published its final report setting out strategic recommendations for a financial system that supports sustainable investments. The EC reacted to the recommendations by publishing an action plan on sustainable finance in March. They have now followed up by publishing legislative proposals that aim at identifying which investments are sustainable.

The key features of the proposed measures aim at:

  1. a unified EU classification system setting harmonised criteria to determine whether an economic activity is environmentally sustainable;
  2. consistency and clarity on how institutional investors should integrate environmental, social and governance (ESG) factors in their investment decision-making process;
  3. benchmarks reflecting companies' carbon footprint and give investors greater information on an investment portfolio's carbon footprint; and
  4. better to advice to clients on sustainability.

As such, the proposals do not affect financial reporting yet, however, they aim at establishing a framework that can be used for judging whether the public reporting obligations including financial and non-financial reporting requirements for EU companies are meeting their objectives, which is the aim of the EU 'Fitness Check on the EU Framework for Public Reporting by Companies' (still open for comment until 21 July 2018).

The following information is available on the EC website:

May 2018 IASB meeting notes posted

25 May 2018

The IASB met at its offices in London on 22 and 23 May 2018. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

The Board discussed the primary financial statements project, focusing on aggregation and disaggregation of line items in the financial statements, criteria to help entities determine whether to analyse expenses by function or by nature and some remaining issues in relation to management performance measures (MPMs) and earnings per share (adjusted EPS) from the April 2018 Board meeting.

The Board had an initial discussion of establishing guidance for it to use when developing and drafting disclosure objectives and requirements.

The Board considered the staff analysis of Business Combinations under Common Control and what they describe as the Full Fair Value and Ceiling approaches.

The Board supported the staff recommendation to measure rate-regulated assets on a basis that reflects estimates of the future cash flows arising from the assets, updated if necessary, and discounted if there is a significant financing component.

The Board was asked to decide the form of consultation document that should be issued as the next step in the project on goodwill and Impairment. The Board had asked the staff to provide it with some additional analysis when it considered this in April. However, the Board deferred that decision again and asked the staff to bring back the alternative solutions and a strategy.

The Board decided to propose an amendment (in the next Annual Improvements cycle) to an illustrative example in relation to lease incentives that is included in the material accompanying IFRS 16 Leases.

The Board was given a summary of the Insurance Contracts Transition Resource Group meeting held on 2 May and a report on implementation challenges.

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

Updated IASB work plan — Analysis

25 May 2018

Following the IASB's May 2018 meeting, we have analysed the IASB work plan to see what changes have resulted from the meeting and other developments in May. Changes are minor.

Below is an analysis of all changes made to the work plan since our last analysis on 30 April 2018.

Maintenance project

  • Lease incentives (amendments to IFRS 16 Illustrative Examples) — Added project to work plan; no milestone or expected date listed.

Research project

  • Goodwill and impairment — The IASB removed the expected date for a DP or ED; the previous work plan had listed H1 2018.

The above is a faithful comparison of the IASB work plan at 30 April 2018 and at 25 May 2018. For access to the current IASB work plan at any time, please click here.

Recent sustainability reporting developments

23 May 2018

A summary of recent developments at the WBCSD, TCFD/CDSB, CDSB, ICAEW, UNEP FI, and GRI.

The World Business Council for Sustainable Development (WBCSD) has launched the Social and Human Capital Coalition, designed to help companies recognise, measure and value the importance of people and communities. As part of the launch, the Coalition is also opening the Social and Human Capital Protocol for public consultation until 16 June 2018. Please click for more information on the WBCSD website.

The Task Force on Climate-related Financial Disclosures (TCFD) and the Climate Disclosure Standards Board (CDSB) have launched the TCFD Knowledge Hub – a platform with relevant insights, tools and resources to help organisations implement the TCFD recommendations. The TCFD Knowledge Hub is the first online platform to provide useful information on quality climate-related disclosures in line with the recommendations of the Task Force. Please click to access the hub here.

The CDSB has also published an introduction to scenario analysis, tips, pitfalls and insights as scenario analysis presents one of the biggest challenges organisations are facing when reporting climate information following the TCFD recommendations. Please click to access the introduction to scenario analysis on the CDSB website.

The Institute of Chartered Accountants in England and Wales (ICAEW) has produced a practical guide Reporting on climate risks and opportunities. The guide is designed to help organisations considering how best to implement the TCFD recommendations which focus on communicating the financial impact of climate change on reporting organisations. The guide is available on the ICAEW website.

The United Nations Environment Programme Finance Initiative (UNEP FI) has published Connecting Finance and Natural Capital: A Supplement to the Natural Capital Protocol. The supplement is a tool for financial institutions to assess how their business is impacted by, and depends upon the natural world. Please click to access the supplement on the UNEP FI website.

The Global Reporting Initiative (GRI) has published an article sharing the process that the organisation underwent when writing its own sustainability report, the problems that came up along the way, and the solutions that were found. The article is available on the GRI website.

IASB to explore how technological disruption may influence the outcome of its projects

22 May 2018

As it has become clear that massive changes in relation to technology will have an impact upon accounting and corporate reporting, the IASB is looking for a 'Technology Principal' who will be responsible for "a group of projects related to the effect of technology on financial reporting and standard-setting".

There have been repeated calls in the past for the IASB to consider how technological developments can be used to overcome problems or find solutions for issues with projects on its agenda. The principles of disclosure project and the perceived "disclosure overload" immediately spring to mind, as does the primary financial statements project. The more general field of wider corporate reporting, which the IASB is aiming to address through updating the Management Commentary Practice Statement, would also offer itself.

It seems that the IASB is set to actively explore opportunities arising from technological disruption as the job description includes research into the possible effects of new and emerging technology on the delivery and consumption of financial information including likely impact on standard-setting as well as the education of the Board on relevant new technologies. Threats the IASB might be facing from changes in technology are also included among the responsibilities.

The full job description is available on the IASB website.

Pre-meeting summaries for the May IASB meeting

17 May 2018

The IASB will meet for a two-day meeting on 22-23 May 2018. 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.

There are seven topics on the agenda.

Tuesday 22 May

the Board will discuss the Primary Financial Statements project, focusing on aggregation and disaggregation of line items in the financial statements, criteria to help entities determine whether to analyse expenses by function or by nature and some remaining issues in relation to management performance measures (MPMs) and earnings per share (adjusted EPS) from the April 2018 Board meeting.

Wednesday 23 May

The Board will discuss disclosure initiative and an initial discussion of the development of guidance for the Board to use when developing and drafting disclosure objectives and requirements.

The staff will continue its analysis of Business Combinations under Common Control and what they describe as the Full Fair Value and Ceiling approaches.

For the project on Rate-regulated Activities the discussion moves on to consider how regulatory assets that are recognised in the model should be measured.

The Board will be asked to decide the form of consultation document that should be issued as the next step in the project on Goodwill and Impairment. The Board had asked the staff to provide it with some additional analysis when it considered this in April.

The Board will consider whether it needs to amend an illustrative example in relation to lease incentives that is included in the material accompanying IFRS 16 Leases.

For Insurance Contracts the Board will be given a summary of the Transition Resource Group held on 2 May and a report on implementation challenges.

More in­for­ma­tion

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

ECON exchange of views with EFRAG dominated by IFRS 17 issues

17 May 2018

The Committee on Economic and Monetary Affairs (ECON) of the European Parliament welcomed representatives of the European Financial Reporting Advisory Group (EFRAG) today for a hearing, which took place while EFRAG is working on its draft endorsement advice on IFRS 17 'Insurance Contracts' and ECON is working on a draft motion for a resolution.

After a short introduction by EFRAG President Jean-Paul Gauzès who highlighted EFRAG's current efforts in connection with developing the draft endorsement advice (expected in September 2018, with a final endorsement advice expected in December 2018) and mentioned case studies, structured interviews, independent research, and briefing papers, the Parliamentarians raised a number of questions.

  • Content of the standard. The standard itself was generally agreed to bring significant improvements to the accounting for insurance contracts; questions on the content were more related to detailed aspects. One question was for example on the level of aggregation and whether a high level of aggregation would lead to a loss of information, another one whether bank insurers have a problem with the compatibility of IFRS 9 and IFRS 17. The level of aggregation was acknowledged to be an issue where a trade-off has to be achieved; bank insurers were reported to be satisfied with deferring the application of IFRS 9 until 2021.
  • Complexity and costs. There was also general agreement that the standard is complex (one Parliamentarian claimed that IFRS 17 is more complex for insurers than IFRS 9 was for banks) and that the costs for implementing it will be significant. In that context the question came up whether implementing the standard by 2021 was feasible. As regards the complexity and resulting costs, the EFRAG representatives shared the concern and stated that they would look in depth into the issue and the balance between the costs (mostly to the insurers) and the benefits (mostly to the investors). They warned that this might lead to having to compare quantitative information with qualitative information. The 2021 implementation date was acknowledged to become a topic of increasing discussion even though 3.5 years was considered to be generous and even though many insurers are signaling that they will be ready in time.
  • Impact. It was asked whether the introduction of IFRS 17 would lead to changes in insurance products and prices. It was also noted that the United States do not apply IFRSs and would therefore not adopt IFRS 17 - would this pose a problem? The EFRAG representatives replied that insurers had so far signaled that products and prices would not change as a result of the application of IFRS 17. They also noted that while the United States are not on IFRSs they are working on an insurance project that "points in the same direction" regarding some important aspects. EFRAG would look closely into competition consequences.
  • General. The EFRAG representatives were asked how many insurers had chosen to defer the application of IFRS 9 until 2021. The EFRAG President noted that he did not have any numbers yet but was expecting more information "in the coming weeks". It was also asked which jurisdictions saw the most resistance against IFRS 17. Again, the EFRAG President did not give a direct answer but treated the Parliamentarians to some private thoughts on national characteristics making out three groups of countries: those who are happy with general rules, those who are "word obsessed", and those who grumble first but then simply apply what has been decided.

A recording of the meeting is available on the ECON website. Please note that the recording covers the whole morning, which also saw the discussion of other topics. The exchange of views with EFRAG begins 1 hour and 50 minutes into the recording.

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