February

Agenda and pre-meeting summaries for the March 2019 IFRS Interpretations Committee meeting

22 Feb 2019

The IFRS Interpretations Committee will meet in London on 5 and 6 March 2019 to discuss eleven issues, including three new interpretation requests.

Agenda decisions to finalise

The staff recommend that the Committee finalise eight tentative agenda decisions.

IFRS 11 Joint ArrangementsSale of output by a joint operator. 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, i.e. revenue recognised applying IFRS 15.

IFRS 11 Joint Arrangements—Liabilities in relation to a joint operator's interest in a joint operation. IFRS 11 requires a joint operator to recognise its liabilities, which will include those for which it has primary responsibility.

IAS 38 Intangible Assets—Customer's right to access the supplier's software hosted on the cloud. In a cloud-computing arrangement for which the customer does not receive a software asset, the customer receives a service and the arrangement does not contain a lease.

IFRS 9 Financial Instruments—Physical settlement of contracts to buy or sell a non-financial item. 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. 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—Application of the highly probable requirement in a cash flow hedge relationship. In a cash flow hedge, a forecast transaction can be hedged if, and only if, it is highly probable, which requires consideration of the uncertainty over both the timing and magnitude of the forecast transaction. Furthermore, in the fact pattern analysed, forecast energy sales cannot be specified solely as a percentage of sales during a period.

IFRS 9 Financial Instruments—Credit enhancement in ECL measurement. 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 expected credit losses.

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

Additionally, the staff are recommending that IFRIC Update include a statement along the following lines:

The process for publishing an agenda decision might often result in explanatory material that provides new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained. Because of this, an entity might determine that it needs to change an accounting policy as a result of an agenda decision. It is expected that an entity would be entitled to sufficient time to make that determination and implement any change (for example, an entity may need to obtain new information or adapt its systems to implement a change).

New issues

The Committee will discuss three new issues. In each case the staff are recommending that the Committee not develop an Interpretation or amendment but instead publish a tentative Agenda Decision.

IFRS 15 Revenue from Contracts with Customers—Costs to fulfil a contract.  When revenue is recognised over time (in this case from a property sale, using the output method to measure progress) any costs incurred to fulfil the performance obligation are recognised as an expense when they are incurred.

IFRS 16 Leases—subsurface rights. When a contract between a land owner and another party gives the other party the right to place an oil pipeline in a specified underground space for 20 years, with the land owner retaining the right to use the surface area of the land above the pipeline, that contract contains a lease.

IAS 19 Employee Benefits—Effect of a potential discount on plan classification. The existence of a potential discount on the contribution an entity is obliged to make to a post-employment benefit plan, if the ratio of plan asserts to plan liabilities exceeds a set level, does not preclude the plan from being a defined contribution plan.

Continuing discussions

Holdings of a cryptocurrency. The staff recommend that the Committee publish a tentative Agenda Decision stating that a cryptocurrency does not meet the definitions of cash or a financial asset but does meet the definition of an intangible asset. Accordingly, IAS 38 Intangible Assets applies to holdings of a cryptocurrency, unless it the cryptocurrency is held for sale in the ordinary course of business—in which case IAS 2 Inventories applies.

Future discussions

The staff are working on potential amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates to provide more guidance when a spot exchange rate is not observable.

The agenda for the meeting 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.

IFRS Foundation seeks IASB Board members

22 Feb 2019

The IFRS Foundation Trustees are seeking to appoint three new Board members, one from the Americas, one from Africa, and one from the Asia-Oceania region.

IASB members are appointed for an initial five-year term with the possibility of being reappointed for another three years (in exceptional circumstances for another five years). Nominations for IASB Board membership close on 22 March 2019. For more information, see the press release on the IASB’s website.

IASB posts webcast on international cross-border investment

21 Feb 2019

The IASB has posted a webcast, by IASB member Ann Tarca, which discusses evidence about the impact of adopting IFRS Standards on foreign investment activity.

The webcast reviews "the academic evidence on the effects of countries adopting IFRS Standards on different topics such as financial-statement comparability and foreign direct investment."

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

IFRS Foundation Trustees extend IASB board member’s term

21 Feb 2019

The Trustees of the IFRS Foundation have extended IASB Board member Martin Edelmann’s second term by one year. Mr Edelmann is currently serving his second term with the IASB, which originally was set to end in June 2020 and now will end on 30 June 2021.

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

IASB member discusses disclosures about changes in financing liabilities

21 Feb 2019

IASB member Nick Anderson has issued an article discussing the objectives of the 2016 IAS 7 amendments that require companies to provide disclosures about changes in liabilities arising from financing activities.

In his article, Mr Anderson looks at what is required by the amendments and why this disclosure so important for investor analysis.

Aspects he considers are:

  • Is this different from a ‘net debt reconciliation’?
  • Reconciliation to other areas of the financial statements
  • Sufficient disaggregation
  • Adequate explanation
  • Simple communication

Very helpful are little shaded boxes throughout the article that summarise questions such as "What does good disclosure look like?" or recommendations such as "Companies can help users by...".

Please click to access the article on the IASB website.

EC consults on updating the non-binding guidelines on non-financial reporting

21 Feb 2019

The European Commission (EC) has published a draft supplement to its its non-binding guidelines on non-financial reporting with specific reference to climate-related information.

The consultation marks another step in the implementation of the EC's action plan on sustainable finance published in March 2018, which last saw the publication of a report on companies' disclosure of climate-related information by the Technical Expert Group on Sustainable Finance set up by the EC. The report contained recommendations intended to allow the EC to update its non-binding guidelines on non-financial reporting with specific reference to climate-related information, in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board.

Stakeholders are invited to comment on the draft supplement by the end of Wednesday 20 March 2019, through the online facility created for this purpose.

Please click to access the EC consultation page offering access to the draft supplement and the online questionnaire.

IASB announces sixth research forum

20 Feb 2019

The International Accounting Standards Board (IASB) will host its sixth Research Forum on 28-29 October 2019 in Short Hills, New Jersey.

The Forum will be held in conjunction with the Journal of International Accounting Research (JIAR). The call for papers inviting submissions that can provide evidence to inform the standard-setting activities of the IASB notes the following areas of particular interest:

  • Convergence between the IASB and the FASB;
  • Evidence relevant to the forthcoming post-implementation reviews of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities and IFRS 5 Non-current Assets Held for Sale and Discontinued Operations;
  • The challenges of conducting effective post-implementation reviews;
  • World-wide use of IFRS and the IFRS for SMEs;
  • Intangible assets;
  • Liabilities vs. equity;
  • Performance reporting/primary financial statements;
  • Rule- vs. principles-based accounting standards; and
  • Projects on any other topics on the IASB research agenda or in the research pipeline.

Please click for more information on the IASB website.

IASB issues podcast on latest Board developments

20 Feb 2019

The IASB has released a podcast featuring Vice-Chair Sue Lloyd, Board member Darrel Scott, and education director Matt Tilling to discuss the deliberations at the February 2019 IASB meeting.

The 14-minute podcast features discussions of the following topics in more detail:

  • IFRS 17 Insurance Contracts
  • IBOR reform
  • IFRS for SMEs review
  • Management commentary
  • Primary financial statements

The podcast is available on YouTube. More information on the topics discussed is available through our comprehensive notes taken by Deloitte observers at the February IASB meeting.

Membership for European Lab Project Task Force on climate-related reporting, programme for the EFRAG conference on innovation in corporate reporting

15 Feb 2019

The European Financial Reporting Advisory Group (EFRAG) has announced that the European Lab Steering Group has appointed the members of the Project Task Force on climate-related reporting. The European Lab's activities will beginn with a conference on 'Fostering Innovation in Corporate Reporting' on 5 March 2019. The full programme for this conference is now available.

The group’s mem­ber­ship includes:

  • Cristina Bage-Friborg, company, Sweden
  • Michel Bande, civil society organization, Belgium
  • Piotr Biernacki, user, Poland
  • Jean-Francois Coppenolle, financial institution, UK
  • Eric Dugelay, accountancy profession, France
  • Aurelie Faure Schuyer, user, France
  • Elena Flor, financial institution, Italy
  • Antonio Fuertes Zurita, company, Spain
  • Andrea Gasperini, user, Italy
  • Giulia Genuardi, company, Italy
  • Andreas Horn, company, Germany
  • Andre Jakobs, financial institution, The Netherlands
  • Bertrand Janus, company, France
  • Kristina Jeromin, user, Germany
  • Michele Lacroix, user, France
  • Anna Lindberg, financial institution, Sweden
  • Alexandra Middleton, academic, Finland
  • Miroslav Petkov, user, Bulgaria
  • Alice Peyrard, company, France
  • Nicole Röttmer, accountancy profession, Germany
  • Matthias Schmidt, accountancy profession, Germany
  • Jane Thostrup Jagd, consultant, Denmark
  • Michael Zimonyi, civil society organization, Hungary

For more in­for­ma­tion, see the press release on the EFRAG website.

To mark the launch of the European Lab and its first project on climate-related reporting, a high-level conference entitled Fostering Innovation in Corporate Reporting will take place on the afternoon of 5 March 2019 in Brussels. European Commission Vice-President Valdis Dombrovskis will deliver the keynote speech and Richard Howitt, IIRC CEO and former MEP, will set the scene for the conference panel discussions. For access to the full programme of the conference and registration, see the press release on the EFRAG website.

Report on intangibles and the R&D capitalisation debate

15 Feb 2019

Many have noted the increasing gap between the values of companies based on their share price and the tangible asset values in their financial statements. One of the major components of this gap are the ‘intangibles’ that are recognised as valuable by the market but are not recognised as assets by financial reporting.

These intangibles may include the value of the workforce, knowhow, customer relationships, brands and a pipeline of new products. IFRSs only allow for a restricted recognition of these assets, hence the gap. Many intangibles will be assets if purchased directly or as part of an acquisition. Of internal spend, the development costs of new products or processes meeting six criteria (about the likelihood that the project will achieve commercial returns) specified in IAS 38 Intangible Assets must be recognised as assets. Whether those criteria are met can be a matter of judgement giving management considerable scope to decide whether they prefer to expense these costs as incurred or to capitalise them.

A new report The capitalisation debate: R&D expenditure, disclosure content and quantity and stakeholder views provides comprehensive evidence of the current state of accounting for research and developments (R&D) by IFRS reporters and some of the factors that may lie behind it. Please click to read the full report.

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