New Issues

There are five new issues. The Committee received submissions asking whether:

• IFRS 15 Revenue from Contracts with Customers: whether fees for admitting an entity to a stock exchange and fees for an ongoing listing service are distinct or relate to only one service
• IFRS 11 Joint Arrangements: how the operators in a joint operation should report a lease liability on a contract signed by the joint operation or signed only by a lead operator
• IAS 38 Intangible Assets: whether, some, cloud computing arrangements create an intangible asset
• IAS 27 Separate Financial Statements: when an entity loses control of a subsidiary as a result of disposing some of its interest, can the entity elect to measure the retained interest at FVOCI and can any gain or loss on initial disposal be presented in profit or loss
• IAS 27 Separate Financial Statements: whether the cost of a subsidiary acquired in stages is the fair value of the tranches (as deemed cost) or the sum of the consideration actually paid

The staff are recommending that the Committee not take any of these new matters onto its agenda, and that it should issue tentative decisions to that effect.

Agenda Decisions to finalise

The Committee will consider the feedback on four tentative Agenda Decisions:

• IAS 23 Borrowing Costs — Expenditure on a qualifying asset
• IAS 23 Borrowing Costs — Borrowing costs on land
• IAS 21 The Effects of Changes in Foreign Currency Exchange Rates — Determination of the exchange rate when there is a long term lack of exchangeability
• IFRS 9 Financial Instruments — Classification of a particular type of dual currency bond

The staff are recommending that the Committee finalise all of the tentative Agenda Decisions.

Items for continuing consideration

Two matters have been carried forward from earlier meetings.

• IAS 37 Provisions, Contingent Liabilities and Contingent Assets — Payments relating to taxes other than income tax. The staff are recommending that the Committee not take this matter onto its agenda, and that it should issue a tentative Agenda Decisions to that effect.
• IFRS 9 Financial Instruments — Hedge accounting with load following swaps. A tentative Agenda Decision was issued in March 2018. In light of the comments received the staff are recommending that the Committee issue a revised tentative Agenda Decision (i.e. to provide an opportunity for additional feedback).

Advice from the Committee for the IASB

The Committee will discuss two topics for which the IASB has asked for feedback: Cryptocurrencies (including holdings of cryptocurrencies and initial coin offerings); and feedback on the proposed amendments to the definitions of accounting policies and estimates in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Other work in progress

Possible revisions to IAS 21 The Effects of Changes in Foreign Exchange Rates to clarify the accounting when the spot rate is not observable is not being discussed at this meeting. Three additional requests have been received, and are being analysed. They relate to IFRS 9 Financial Instruments and the physical settlement of a contract to buy or sell a non-financial item; IFRS 11 Joint Arrangements when there is a difference between a joint operator's entitlement to output and the amount they have actually received; and IAS 23 Borrowing Costs and the capitalisation of borrowing costs on assets being developed for sale for which revenue is recognised over time.

The full agenda for the meeting and our pre-meeting summaries can be found here. We will update this page for any changes to the agenda and our Deloitte observer notes from the meeting as they become available.

The topics covered during the meeting were the following (numbers in brackets are references to the corresponding paragraphs of the summary):

• Financial instruments with characteristics of equity (1–6): The IASB staff provided an education session for ASAF members on the Discussion Paper Financial Instruments with Characteristics of Equity issued in June 2018.
• Business combinations under common control (7–25): ASAF members discussed (1) discuss the results of a joint investor survey conducted by the HKICPA and OIC as well as (2) measurement approaches developed by the staff for transactions within the scope of the Board’s BCUCC project.
• Better communication (26–41): ASAF members gave feedback (1) on moving the primary financial statements project from the research agenda to the standard-setting agenda and (2) on the AcSB’s draft framework for reporting performance measures.
• Property, Plant and Equipment – Proceeds before intended use (42–48): ASAF members were asked for advice on the possible ways forward regarding ED and the project in general.
• Goodwill and impairment (49–68): ASAF members (1) offered their views about disclosures that the Board tentatively decided to consider and additional possible disclosures the staff are considering to improve disclosure requirements for business combinations, goodwill and impairment and (2) were asked whether they have any suggestions or ideas for other possible disclosures that can provide better and timely information without imposing costs that exceed the benefits.
• Better communication (continued) (69–77): The ASAF members provided advice on (1) the Board's process for developing and drafting guidance for the Board regarding disclosure objectives and requirements and (2) which standards the Board should select for review.
• Accounting for pensions (78–91): ASAF members discussed a proposal that the IASB consider hybrid pension plans either as another dimension of the research pipeline project or a project in itself.
• Project updates and agenda planning (92–95): ASAF members discussed the proposed agenda for the October 2018 ASAF meeting.

A full summary of the meeting is available on the IASB's website.

EFRAG is currently in the process of preparing draft endorsement advice on IFRS 17 and in this context notes a number of concerns of its constituents. EFRAG has not yet determined the impact of these issues on the draft endorsement advice that is under preparation. However, as EFRAG also notes that the IASB is showing willingness to consider issues associated with the implementation of IFRS 17 and has already tentatively agreed small changes to the standard (to be dealt with as part of its annual improvements project), the EFRAG Board decided to bring the concerns of European constituents to the IASB's attention.

The letter agreed on yesterday can be downloaded here from the EFRAG website.

The new issues relate to:

• IFRS 15 — Assessment of promised goods or services
• IFRS 11 — Joint operations
• IAS 38 — Cloud computing arrangements
• IAS 27 — Investments in a subsidiary accounted for at cost
• IAS 37 — Payments relating to taxes other than income tax

The full agenda for the meeting can be found here. We will update this page for any changes to the agenda and our Deloitte pre-meeting summaries for the meeting as they become available.

The agenda is summarised below:

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

On 28 June 2018, the IASB issued DP/2018/1 which defines the principles for the classification of financial liabilities and equity instruments without, however, fundamentally changing the existing classification outcomes of IAS 32. The IASB's proposed preferred approach is based on two features, timing and amount, and is accompanied by the provision of additional information through a separate presentation of expenses and income from certain financial liabilities in other comprehensive income and additional disclosures.

For more information on the outreach event, see the press release on the EFRAG’s website.

Mr Hoogervorst began by discussing progress towards global accounting standards and reflected on Japan's 'very interesting economic experiment' of letting the market decide whether to adopt IFRS. He noted:

[A]round 200 mostly big, multinational Japanese companies have chosen to adopt full IFRS Standards, representing more than 30% of the total market capitalisation of the Tokyo Stock Exchange. . . . The number of Japanese companies using US GAAP has been steadily shrinking and is expected to be less than 10 soon.

He highlighted the results of Japan's experiment, emphasising that (1) given a choice, companies are prepared to voluntarily incur the cost of transition to IFRS; (2) 100% of the companies transitioning have chosen full IFRS rather than a version modified to meet local preferences; and (3) Japan has created a 'third way' for jurisdictions to move forward with IFRS, joining the 'adopt' and 'converge' models.

Mr Hoogervorst went on to discuss the reason the IASB changed its mind and decided to possibly reintroduce amortisation of goodwill in an upcoming discussion paper. (The IASB has not listed an expected date for this DP in its work plan.) He noted that the post-implementation review of IFRS 3 identified 'a couple of problems' with the impairment-only approach to goodwill:

[T]he annual impairment test is both costly and subjective. Often, the projections of future cash flows from cash generating units tend to be on the rosy side. Impairment losses therefore tend to be identified too late. And when an impairment loss is finally booked, the resulting information has only weak confirmatory value for investors.

After the discussion of goodwill, Mr Hoogervorst described the IASB's better communication project, promising to "improve what we have, rather than create big, new Standards." He underscored that upcoming projects will improve financial reporting at 'much less cost' because the focus will be on presenting better information that is already being collected. He then detailed aspects of the 'strands of work' that fall under the umbrella of better communications, including primary financial statements and management commentary. 

The full version of Mr Hoogervorst's speech is available on the IASB's website.

EFRAG published its DP in March 2018 to gather constituents' views in relation to questions raised by the European Commission related to the accounting for equity instruments which are carried at FVOCI.

The summary of responses describe the main messages and key themes identified from the 53 comment letters received on the DP, and include:

• The desire to wait for the IASB's post-implementation review of IFRS 9 before suggesting changes and/or that changes should be agreed with the IASB and not introduced at the European level.
• The reintroduction of recycling would improve the depiction of financial performance of long-term investors.
• Recycling should be accompanied by an impairment model.
• The preferred impairment model would be similar to IAS 39.

A press release and the summary of responses are available on the EFRAG website.

FASB releases

Specifically, the FASB released the following:

• ASU 2018-13, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement — Removes, modifies, and adds certain disclosure requirements in ASC 820 on the basis of the concepts in the FASB Concepts Statement Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements. The ASU is effective for all organizations for fiscal years — and interim periods within those fiscal years — beginning after 15 December 2019. Early adoption is permitted.
• ASU 2018-14, Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans — Modifies ASC 715-20 to improve disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU is effective for fiscal years ending after 15 December 2020, for public companies and for fiscal years ending after 15 December 2021, for all other organizations. Early adoption is permitted.
• Chapter 8 of the conceptual framework, “Notes to Financial Statements” — “[E]xplains what information the Board should consider including in notes to financial statements by describing the purpose of notes, the nature of appropriate content, and general limitations. It also addresses the Board’s considerations specific to interim reporting disclosure requirements.”
• Amendments to chapter 3 of the conceptual framework, “Qualitative Characteristics of Useful Financial Information” — Updates the FASB’s definition of materiality to be consistent with the definition used by the SEC, PCAOB, AICPA, and U.S. judicial system.

For more information, see the press release and FASB in Focus newsletter on the FASB’s website.

Comparison with IFRS

The IASB is still deliberating its Discussion Paper Principles of Disclosures that was published in March 2017. In July 2018, the IASB selected IAS 19 Employee Benefits and IFRS 13 Fair Value Measurement for the targeted standards-level review of disclosures. The FASB had already published its proposed Statement on Notes/Disclosures in 2014 and had also picked employee benefits and fair value measurement to test the concepts of the proposed Concepts Statement. This has now resulted in corresponding changes in Subtopic 715-20 and Topic 820. In selecting IAS 19 and IFRS 13, the IASB is therefore following the same path as the FASB.