Please see the press release on the IVSC website for membership of the new Board.

The Climate Disclosure Standards Board (CDSB) and the Carbon Disclosure Project (CDP) have jointly conducted a review of corporate disclosure of climate change and environmental information across Europe. Their report First Steps: Corporate climate & environmental disclosure under the EU Non-Financial Reporting Directive provides evidence of reporting practices of 80 companies, indicates what information companies are currently disclosing and whether companies are implementing the recommendations of the G20 Task Force on Climate-related Financial Disclosures (TCFD). The press release on the CDSB website offers a short summary and access to the full report.

CDP has published a call by European investors urging EU policymakers to upgrade corporate reporting rules. The signatory investors call on EU policymakers to: (i) align corporate reporting with the recommendations of the TCFD to mitigate financial risk; (ii) create a level playing field across the EU by implementing consistent corporate reporting requirements like those of financial reporting; (iii) standardise sector-specific reporting metrics that increase comparability and consistency and enable tracking progress against public policy targets and clearly defined time horizons; and (iv) address the shortcomings of the European corporate reporting legislative framework by stressing policy coherence between investor duties and corporate reporting. Please click to access the statement here.

Principles for Responsible Investing (PRI) and the International Corporate Governance Network (ICGN) have launched a discussion paper on corporate ESG reporting arguing that despite growing consensus that the integration of relevant ESG factors into company value creation models and corporate reporting is important, listed companies and organisations providing reporting standards have yet to coalesce on an approach to the treatment and inclusion of ESG factors in company disclosure and reporting. The press release on the PRI website offers a short summary and access to the full discussion paper.

The United Nations Environment Programme Finance Initiative (UNEP FI) has announced a partnership with 16 of the world’s largest insurers to develop a new generation of risk assessment tools designed to enable the insurance industry to better understand the impacts of climate change on their business. The pilot group will develop analytical tools that they will use to pioneer insurance industry climate risk disclosures that are in line with the recommendations of the TCFD. Please click for more information on the UNEP FI website.

The Global Reporting Initiative (GRI) announces that its free digital reporting tool has been upgraded to make navigation easier and keeping progress more visual. Please click for more information on the GRI website.

GRI also announces that the GRI Standards are now also available in Arabic. More information can be found here.

The Saïd Business School, University of Oxford, offers a debate on "Should FASB and IASB be responsible for setting standards for nonfinancial information?" at the Oxford Union on 11 December 2018. A Green Paper focussing on the arguments for and against the FASB and the IASB setting standards for nonfinancial information has been released in preparation for the debate and can be downloaded here.

The KASB argues that financial statements currently consist of an overly simplified body and an extensive volume of notes that disclose a list of disorderly information necessary in decision-making. As the KASB believes that this inevitably leads to the on-going criticism that users of the financial statements cannot effectively utilise the information which are useful in making decisions, the KASB sought to find ways to better understand the current status of note disclosure preparation in entities and analyse usefulness of disclosed information in the notes through in-depth interviews with financial statement users. The research report The Usefulness of Note Disclosures: Examination and Suggestions for Improvement was issued in the hope of sharing the outcome of the research conducted with a wider range of stakeholders in Korea and overseas.

The research report can be accessed throuh the press release on the KASB website.

Of the list with 25 potential issues around IFRS 17 that were first discussed in October 2018, the staff has grouped 13 into six agenda papers for the meeting. The papers are (all links to the IASB website):

• AP2A: Presentation of insurance contracts on the statement of financial position
• AP2B: Discount rates, risk adjustment and OCI option
• AP2C: Variable fee approach
• AP2D: Business combinations
• AP2E: Future cash flows in the measurement of reinsurance contracts held
• AP2F: The treatment of accounting estimates in interim financial statements

The Staff recommends to amend the requirements in IFRS 17 for the presentation of insurance contracts on the statement of financial position as discussed in AP2A, but not to amend the requirements in IFRS 17 for the other topics discussed in AP2A–2F. 

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.

Continuing discussions

The Committee continued its discussions from September on whether, some, cloud computing arrangements create an intangible asset. The Committee decided not to take the matter onto its Agenda and issue a tentative Agenda Decision to that effect.

In September, the Committee finalised an Agenda Decision IAS 21 The Effects of Changes in Foreign Exchange Rates—foreign exchange restrictions. At this meeting the Committee provided feedback on a proposal by the staff to amend IAS 21 to provide additional guidance on estimating an exchange rate.

New issues

IFRS 11 Joint Arrangements—Output received by a joint operator. The Committee decided that when the output a joint operator receives in a reporting period is different from the output to which it is entitled, the joint operator recognises revenue that depicts the transfer of output to its customers in each reporting period, ie revenue recognised applying IFRS 15.

IFRS 9 Financial Instruments—Physical settlement of contracts to buy or sell a non-financial item. The Committee decided that when an entity contracts to buy or sell a non-financial item in the future at a fixed price, it is not appropriate at the time of physical settlement for an entity to (a) reverse the accumulated gain or loss previously recognised in profit or loss on the derivative, and (b) recognise a corresponding adjustment to either revenue (in the case of a sale contract) or inventory (in the case of a purchase contract).

IAS 23 Borrowing Costs—Revenue recognised over time. The Committee decided that borrowing costs would not be capitalised when the borrowings relate to the construction of a residential multi-unit real estate development for which revenue is recognised over time.

IFRS 9 Financial Instruments—Credit enhancement in ECL measurement. The Committee decided that if a credit enhancement is required to be recognised separately by IFRS Standards, an entity cannot include the cash flows expected from it in the measurement of ECL.

IFRS 9 Financial Instruments—Presentation of contractual interest. The Committee decided that the reversal of the unwinding of discount is presented as a reversal of credit impairment when the asset is cured.

The Committee decided not to take any of these issues onto its agenda and tentative Agenda Decisions to that effect will be published shortly (each with a 60-day comment period).

Other work in progress

The staff are analysing a request in relation to subsurface rights.

More information

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

The meeting saw the presentation of six academic papers, responses by academics and standard-setters as well as panel discussions. We have already posted our short summaries of the discussions in November. Please click to access the IASB's audio recordings here (the panel discussions were obviously not recorded).

Mr Liikanen began by reviewing the history of how the EU decided to adopt IFRS instead of adapting them into EU GAAP. He noted the importance of that decision and how most of the world has followed suit. He then stated:

All things considered, the IFRS project has been a success at an international level. Is it also viewed as a success at an EU level? The answer to that is provided by the EU Fitness Check.

He went on to praise the EU fitness check, mentioning high participation within — and outside of — the EU. He explained that the number of external comments could be attributed to (1) many non-EU domiciled companies and investors having interests in the EU and being impacted by EU policies; and (2) the EU's approach to corporate reporting — particularly IFRS Standards — is "highly influential in shaping the policies of other jurisdictions".

Mr Liikanen described the financial reporting perspective of the EU fitness check, mentioning that "the report shows that things are working well". He acknowledged that not everything is perfect, but highlighted that there is not much support for substantive change:

Most respondents felt that IFRS Standards are effective, helping to reduce the cost of capital and increase investments within the EU. Few believed that the Standards have led to procyclicality and short-termism, while most believed that the EU’s policy on IFRS Standards has promoted more integrated capital markets in the EU and internationally. This is encouraging feedback and shows the importance of our Standards to the EU’s Capital Markets Union project and the wellbeing of the global economy more broadly.

He also discussed the fitness check results related to the 'carve-in' mechanism proposed to modify IFRS Standards in the EU. Mr Liikanen reported that three quarters of all respondents supported the status quo of a restricted endorsement process and argued against carve-ins. He did acknowledge that a minority of respondents argued for the carve-in mechanisms; he provided their perspective that it would help the EU exert greater influence on the IASB's standard-setting process. He explained:

This topic of influence is an important one and should not be dismissed. Every major jurisdiction sets out to influence the international agenda, and this is naturally relevant also for the EU. The EU signed up to IFRS Standards from the very beginning, has been a strong and vocal supporter of IFRS Standards as the global standard, and the EU has endorsed pretty much every standard the IASB has ever issued. So, I completely understand the desire to be highly influential in a process to create standards that are mandated for use across the EU.

The question is how best to exert that influence. To collect views, to analyse concerns, to present them well and to win the argument through logic and reason. The EU has a great deal of experience in this area, because that is how its own internal decision-making works.

Mr Liikanen said that many people see carve-ins as an 'opt-out' clause from international IFRS system, of which the EU is a major player. He emphasised that he sees the fitness check as an endorsement that the system is working well as-is. He opined that "the best way for the EU to influence the IASB is through the quality of its work and the persuasiveness of its arguments".

The full text of Mr Liikanen's speech is available on the IASB's website. For more information, see our March 2018 story on the release of the fitness test consultation document as well as our November 2018 story providing a summary of fitness test responses.

In the annual report, the FSB especially notes expected loan loss provisioning (IFRS 9 and the FASB's current expected credit loss model). The FSB has asked the standard-setters to monitor the consistent implementation of their standards. The annual report also notes IFRS 17 as setting out a single, consistent approach to accounting for insurance contracts.

In his letter to G20 Leaders, the FSB Chair especially comments on mitigating the financial stability risks from climate change through the Taskforce on Climate-related Financial Disclosures (TCFD). He notes "encouraging progress" and that a many companies are already reporting against some of the recommendations. The letter states: "Adoption can be expected to widen and improve as the private sector refines emerging good practice in efficient, decision-useful material climate-related financial disclosure."

Please click for the two documents on the FSB website:

• Annual report
• Letter to G20 Leaders

In the first phase of the project, the European Commission asked EFRAG to collect quantitative data on the current holdings of equity instruments and their accounting treatment and investigate if entities expect that the new accounting requirements will affect their decisions in relation to investment in equity instruments. EFRAG reported its findings from this first phase in January 2018.

In the second phase of the project, EFRAG investigated whether and how the requirements in IFRS 9 on accounting for holdings of equity instruments could be improved. EFRAG published a discussion paper to gather constituents' views on recycling and impairment of equity instruments designated at fair value through other comprehensive income on 1 March 2018 and made available the results of a literature view on IFRS 9 and long-term investment on 28 March 2018. EFRAG has now published its final response to the second phase of the EC request. The response addresses the interaction between an impairment model and the reintroduction of recycling, and what characteristics an impairment model for equity instruments could have. The letter notes:

The majority of respondents that expressed a view were in fact more supportive of an impairments model similar to IAS 39. [...] However, there is no consensus on how to reach an approprioate balance between relevance and comparability. [...] EFRAG maintains that a degree of rigour in the use of the election or the impairment model would be essential to ensure comparability.

Please click to access the full response on the EFRAG website.

EFRAG also notes that it is currently working on a second request for technical advice on possible alternative accounting treatments for equity and equity-type instruments. The European Commission asked for EFRAG's technical advice on this aspect of IFRS 9 by the second quarter of 2019.