February

IASB posts webcast on IFRS 15

14 Feb 2019

The IASB has posted a webcast, by IASB member Nick Anderson and investor engagement member Sid Kumar, that provides an overview on IFRS 15, ‘Revenue from Contracts with Customers’.

In addition, the webcast discusses performance obligations, value transferred, when to recognise revenue, contract asset and liability, and disclosure requirements.

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

February 2019 IASB meeting notes posted

13 Feb 2019

The IASB met on Thursday 7 and Friday 8 February 2019 to discuss five topics. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

The Board decided to propose amending IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement to provide relief from the effects of uncertainties caused by the reform of IBOR. The Board will consider in March whether the relief should be optional. The Exposure Draft is likely to have a short comment period, enabling any amendments to be finalised and published by December 2019, with an effective date of 1 January 2020.

The Board continued to assess concerns and implementation challenges raised by stakeholders about the requirements in IFRS 17 Insurance Contracts. The Board decided to propose amending that IFRS 17 and IFRS 9 allow an entity to apply either IFRS 17 or IFRS 9 to insurance contracts for which the only insurance in the contract is for the settlement of some, or all, of the obligations created by the contract (with consequential amendments to the disclosure requirements). The Board decided that the transition requirements in IFRS 17 be retained, except for a liability that relates to the settlement of claims incurred before an insurance contract was acquired. The Board decided to propose a change to the modified retrospective approach that would require an entity to classify such liabilities as a liability for incurred claims (to the extent that it does not have reasonable and supportable information to apply a retrospective approach) and to permit an entity applying the fair value approach to choose to classify such liabilities as a liability for incurred claims.

For the Primary Financial Statements project, the Board decided to modify some of its earlier decisions. Within the statement of cash flows, the starting point for the reconciliation of operating cash flows should be the operating profit subtotal, for all entities. Additionally, all entities should classify cash flows from dividends paid as financing cash flows and cash flows from dividends received from equity-accounted associates and joint ventures as investing cash flows. However, the Board also decided on some special requirements, for both the statement of cash flows and the statement(s) of profit or loss and other comprehensive income, for entities that have as their main business activity providing financing to customers or investing in assets that generate a return individually and largely independently of other resources held by the entity. The Board also approved additional proposals related to aggregation and disaggregation of information in the primary financial statements and in the notes, including a requirement to describe items in a way that faithfully represents the items they aggregate.

The Board considered a project plan for a comprehensive review of the IFRS for SMEs Standard that proposes the publication of a Request for Information by about July 2019, an Exposure Draft sometime between January 2020 and February 2021 and amendments between July 2021 and May 2022. The IFRS for SMEs Standard does not reflect the current requirements in IFRS 3, 10, 11, 12, 13, 14, 15, 16 or 17.

The staff also gave an oral update on the projects on Management Commentary project.

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

Summary of the November 2018 GPF meeting

13 Feb 2019

Representatives of the IASB met with the Global Preparers Forum (GPF) in London on 6 November 2018. Notes from the meeting have now been released.

The topics discussed at the meeting included:

  • IASB technical update. An update was given on IASB activities since the last GPF meeting.
  • Primary financial state­ments. The GPF members provided feedback on the IASB’s tentative decisions related to primary financial statements. Specifically, they discussed defined subtotals in the statement of financial performance, management performance measures, and disaggregation.
  • Management commentary. The GPF members discussed developments in the project to update IFRS Practice Statement 1 Management Commentary (Practice Statement), including the objective of management commentary, applying materiality in preparing management commentary, and principles of preparing management commentary.
  • Goodwill and im­pair­ment. The GPF members provided feedback on the disclosure objectives and requirements in development to provide users more information about a business combination and performance.
  • Financial instruments with characteristics of equity. The GPF members were provided with an overview of the key proposals in the Discussion Paper DP/2018/1 Financial Instruments with Characteristics of Equity.

The next GPF meeting will be held on 22 March 2019.

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

Recent sustainability and integrated reporting developments

12 Feb 2019

A summary of recent developments at GRI, IOSCO, WBCSD/CDSB, IIRC, the UK Government, the Carbon Trust, and XBRL International.

The Global Reporting Initiative (GRI) has launched a discussion paper A Closer Look at Water and GHG Emissions Disclosure, which contains key findings on corporate reporting on water and greenhouse gas (GHG) emissions. The publication encourages active dialogue between data producers (report issuers) and data users (investors and data service providers). Please click for more information and access to the discussion paper on the GRI website.

The Growth and Emerging Market Committee (GEMC) of the International Organization of Securities Commissions (IOSCO) has published a consultation report Sustainable finance in emerging markets and the role of securities regulators, which proposes 11 recommendations for emerging market member jurisdictions to consider when issuing regulations or guidance regarding sustainable financial instruments. Among other things, the recommendations propose requirements for disclosure of material Environmental, Social and Governance (ESG) specific risks, aimed at enhancing transparency. Please click to access the report on the IOSCO website.

The World Business Council for Sustainable Development (WBCSD) and the Climate Disclosure Standards Board (CDSB) released a report on the corporate sustainability reporting landscape in Japan. The report highlights that there’s growing market demand for more information on ESG issues and considerations. Please click for more information and access to the report on the CDSB website.

The International Integrated Reporting Council (IIRC) has published new report Integrated Reporting in Turkey. The report aims to reveal perspectives of the Turkish business world through the lens of integrated reporting, the current corporate reporting practices, and the future expectations and orientations of the companies. Please click for more information and access to the report on the IIRC website.

The UK Goverment has issued updated Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance. The guidelines include two new chapters - 1: Steps in reporting your environmental impacts and 2: Guidance on streamlined energy and carbon reporting. It also outlines additional voluntary information that is likely to be useful to organisations and a wide range of stakeholders. Please click to access the updated guidance on the UK government website.

The Carbon Trust has published a summary of its findings on climate risk disclosure, in which it reveals that two-thirds (67%) of UK corporates plan to disclose climate-related risks and opportunities in their 2019 annual reports. Please click for more information and access to an infographic on the Carbon Trust website.

XBRL International has provided a comment letter on the EU’s draft report on climate-related disclosures, urging the EU to help work to make this kind of reporting comparable, digital, discoverable and accessible. XBRL International supports streamlining climate disclosure, believing that comparable and usable disclosures are vital to help investors navigate this complicated field. Please click for more information and access to the comment letter on the XBRL International website.

Updated IASB work plan — Analysis

11 Feb 2019

Following the IASB's February 2019 meeting, we have analysed the IASB work plan to see what changes have resulted from the meeting and other developments since the work plan was last revised in January.

Below is an analysis of all changes that were made to the work plan since our last analysis on 25 January 2019.

Stan­dard-set­ting projects

  • No changes.

Main­te­nance projects

  • 2019 Comprehensive Review of the IFRS for SMEs Standard — This project has been added to the work plan. A request for information is expected in H2 2019.

Research projects

  • No changes.

Other projects

  • Due Process Handbook Review — This project has been added to the work plan. An exposure draft is expected in the second quarter of 2019.

The above is a faithful com­par­i­son of the IASB work plan at 25 January 2019 and at 11 February 2019. For access to the current IASB work plan at any time, please click here.

AcSB updates research on extractive industries

11 Feb 2019

In 2018, the IASB started gathering evidence to help it decide whether to start a project to develop proposals to replace IFRS 6 'Exploration for and Evaluation of Mineral Resources'. Before deciding the scope and direction of a research project, the IASB asked the national standard-setters who contributed to the 2010 discussion paper on extractive activities to make the IASB aware of any new developments.

The Canadian Accounting Standards Board (AcSB) staff has now prepared a research update to identify accounting challenges faced and any developments since 2010 in the extractive sector as well as how those changes affect the research findings in the discussion paper.

Key research findings include:

  • A weak commodity price environment and pipeline capacity constraints are placing additional pressures on the extractive sector.
  • The decline in commodity prices reduces the profitability prospects and attractiveness of the sector.
  • These pressures have caused a decrease in the number of publicly traded entities as a result of mergers, acquisitions and bankruptcies.
  • Other than that, there have been no significant changes or developments in the Canadian extractive sector since 2010.
  • Many preparers, practitioners and regulators say that there are areas of accounting complexity both within and outside of the scope of IFRS 6.
  • However, non-authoritative guidance on many of these challenges are available, e.g. by CPA Canada Mining and the CPA Canada Oil and Gas Task Forces.

Please click to read the AcSB press release offering access to a short In Brief overview of the research update.

Applicants invited for IFRS Interpretations Committee membership

08 Feb 2019

The Trustees of the IFRS Foundation have invited applications for candidates to fill four vacancies on the International IFRS Interpretations Committee for terms that will expire on 30 June 2019.

Members are expected to attend approximately six two-day meetings each year held in London. Terms of membership will begin on 1 July 2019 and will expire on 30 June 2022. Membership is unpaid, but the IFRS Foundation meets members' expenses of travel on IFRS IC business.

Applications are accepted until 8 March 2019.

Please click for more information on the IASB's website.

IASB member discusses returns, reinvestment opportunities and dividend distribution

08 Feb 2019

IASB member Nick Anderson has issued an article discussing corporate performance and how investors seek to understand the quality of the profit number, not just the amount of earnings.

Mr Anderson notes that investors will consider questions such as

  • How much capital has the business deployed to generate its level of profit?
  • How persistent are earnings likely to be into the future?
  • Does net profit include gains or expenses that are unlikely to reoccur?
  • Is the pattern of future profits likely to exhibit volatility or cyclicality?
  • To what extent are profits supported by cash flow generation?
  • What are the long-term risks faced by the business, including material environmental and social factors?

when assessing the sustainability of future profits of an entity. And while they draw on the financial statements, management commentary and multiple other information sources, "no number in isolation can adequately capture corporate performance".

He goes on to discuss cash flows, dividend regulations, and accounting requirements, noting that while accounting is an important piece of information it is just ’one piece of the jigsaw’. Dividend policy reflects many other factors such as reinvestment opportunities, financing needs, the risks faced by the company, legal constraints and incentive arrangements - and all of these factors differ by company, by jurisdiction and over time. Therefore, Mr Anderson notes, responsibility to determine whether dividend payments are appropriate is beyond the remit of the IASB. But he concludes:

However, there is no impediment to complementing high quality financial statements prepared in accordance with IFRS Standards by providing additional disclosures about dividend policies and dividend payments, including any disclosures needed to meet jurisdiction requirements.

Please click to access the full text of Mr Anderson's contribution on the IASB website.

FASB and ASBJ hold biannual meeting

08 Feb 2019

On 7 and 8 February, the FASB and the Accounting Standards Board of Japan (ASBJ) met in Tokyo. The meeting was the 25th in a series of biannual meetings between the two standard-setters.

In addition to giving updates on their respective standard-setting activities at the meeting, the two boards exchanged views on technical topics in which they both have an interest, including business combinations and goodwill, performance reporting and disclosures, leases, and the distinction between liabilities and equity.

The next meeting between the FASB and ASBJ is expected to be held in the Second half of 2019 in Norwalk. For more information about the latest meeting, see the press release on the ASBJ website.

IASB decides on further potential amendments to IFRS 17

07 Feb 2019

At its meeting currently held in London, the IASB discussed IFRS 17 'Insurance Contracts' and 4 of the 25 concerns regarding the standard that were identified in October 2018 as candidates for potential amendments.

Applying the criteria for evaluating proposed amendments agreed on in October 2018, the Board came to the following conclusions:

Issue identified at the October IASB meeting

Agenda paper with detailed description (link to IASB website)

Staff recommendation

Board decision

1 — Loans that transfer significant insurance risk

Agenda paper 2A

  1. To amend the scope of IFRS 17 and IFRS 9 for insurance contracts for which the only insurance in the contract is for the settlement of some or all of the obligation created by the contract to enable an entity to apply either IFRS 17 or IFRS 9 to such contracts

13/14 support staff recommendation (on portfolio basis)

23 — Transition: Optionality and comparative information

Agenda paper 2B

  1. To retain the IFRS 17 transition requirements without amendment that would reduce the optionality
  2. To retain the IFRS 17 requirement to present restated comparative information

14/14 support both staff recommendations

25 (and some aspects of 8) — Transition: Risk mitigation option and amounts accumulated in other comprehensive income on transition

Agenda paper 2C

  1. To retain the requirements in IFRS 17 relating to the prohibition of retrospective application of the risk mitigation option
  2. To retain the requirements in IFRS 17 with respect to the cumulative amounts included in other comprehensive income

13/14 support staff recommendation 1 (the staff will do further research and bring back the issue at a future meeting); 14/14 support staff recommendation 2

24 — Transition: Modified retrospective approach

Agenda paper 2D

  1. To retain the requirements in IFRS 17 that an entity:
    • (a) cannot use a specified modification in the modified retrospective approach to the extent that the entity has reasonable and supportable information to apply the related IFRS 17 requirement retrospectively
    • (b) can only use a specified modification in the modified retrospective approach when the entity has reasonable and supportable information to apply that modification
  2. To
    • (a) not amend IFRS 17 to permit an entity to develop its own modifications
    • (b) amend the transition requirements in IFRS 17 for a liability that relates to the settlement of claims incurred before an insurance contract was acquired as follows:
      • (i) to add a specified modification to the modified retrospective approach to require an entity to classify such liabilities as a liability for incurred claims
      • (ii) to permit an entity applying the fair value approach to choose to classify such liabilities as a liability for incurred claims
    • (c) not amend the specified modification in the modified retrospective approach related to the use of cash flows that are known to have occurred
    • (d) not amend IFRS 17 to permit an entity to apply the specified modifications related to groups of insurance contracts without direct participation features to determine the contractual service margin for groups of contracts with direct participating features

14/14 support both staff recommendations (additional guidance to be included)

Please click to access our full meeting notes from the session.

The staff notes that the only outstanding topics are now the level of aggregation of insurance contracts and a question about a risk mitigation option for general model contracts related to the December 2018 Board discussion on risk mitigation. The staff intend to present papers on the remaining topics and on possible sweep issues at the March 2019 Board meeting.

In addition, the IASB has issued a podcast, featuring IASB member Darrel Scott and Technical Staff Laura Kennedy, on the IFRS 17 discussion at the February IASB meeting.

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