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2019

Latest IFRS updates integrated into the ESEF taxonomy

19 Dec 2019

The second version of the European Commission’s delegated Regulation (EU) 2019/2100 on regulatory technical standards for the specification of a single electronic reporting format (ESEF) was published in the Official Journal of the European Union on 16 December 2019.

Until now, the core taxonomy included in ESEF was the 2017 IFRS Taxonomy. The amendment replaces that version with the most recent one published by the IFRS Foundation in March 2019.

The ESEF will be amended on a yearly basis to reflect updates to the IFRS Taxonomy published by the IFRS Foundation.

Please click to access the updated regulation in the Official Journal.

IASB issues podcast on latest Board developments (December 2019)

18 Dec 2019

The IASB has released a podcast, featuring IASB Chair Hans Hoogervorst and Vice-Chair Sue Lloyd, to discuss the deliberations at the December 2019 IASB meeting, the recently-issued general presentation and disclosures ED, and other developments.

The 15-minute podcast features discussions related to financial instruments on the following topics:

  • Proposals outlined in the newly-published ED on general presentation and disclosures.
  • Progress related to amendments to IFRS 17 Insurance Contracts as well as developments in the IBOR reform project and financial instruments with characteristics of equity.
  • Business combinations under common control and what work will be done on this project in 2020.
  • More details on the review of the IFRS for SMEs Standard.
  • Difference between the IFRS for SMEs Standard and a separate research project that deals with subsidiaries that are SMEs.
  • Proposed amendments to IAS 8.
  • Highlights from 2019.

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 at the December IASB meeting.

ESMA issues findings on short-termism in financial markets

18 Dec 2019

Following its consultation in July 2019, the European Securities and Markets Authority (ESMA) has published its findings and recommendations on potential short-term pressures in securities markets.

The final report makes recommendations to the European Commission for action in key areas. Decisive actions are recommended for areas such as the disclosure of Environmental, Social and Governance (ESG) factors. These include:

  • amending the Non-Financial Reporting Directive to establish principles for high quality non-financial information along with a limited set of specific disclosure requirements;
  • promoting a single set of international ESG disclosure standards; and
  • requiring the inclusion of non-financial statements in annual financial reports.

Other areas investigated included the use of fair value measurement in financial statements. ESMA did not identify any need for amending existing requirements in the area of fair value measurement, particularly with respect to the treatment of equity and equity-like instruments in IFRS 9 Financial Instruments, to address concerns with undue short-termism.

Please click for the following additional information:

IFRS Foundation publishes first stakeholder engagement register

18 Dec 2019

The IFRS Foundation has published its first quarterly stakeholder engagement register, which provides a public record of IASB members’ engagement with stakeholders.

The register was created to increase transparency and "continue demonstrating the Board’s independence and accountability and is also in line with stakeholder feedback." The register includes speaking engagements and face-to-face, web-based or phone meetings of more than 30 minutes duration. The register is sorted monthly by IASB member and details for each engagement: the stakeholder name, category of engagement, and location.

For more information, see the press release and stakeholder engagement register on the IASB’s website.

IASB proposes new standard on general presentation and disclosures in financial statements

17 Dec 2019

The International Accounting Standards Board (IASB) has published the exposure draft of a new standard 'General Presentation and Disclosures' that is intended to replace IAS 1 'Presentation of Financial Statements'. The deadline for submitting comments has been extended until 30 September 2020.

 

Background

The Agenda consultation 2015 revealed that respondents wanted the Board to prioritise projects that are important to users of financial statements, including the disclosure initiative and the primary financial statements project. The Board took up discussions in the project in April 2016.

The Board decided to focus on four main areas:

  • Introduction of defined subtotals and categories in the statement of profit or loss
  • Introduction of requirements to improve aggregation and disaggregation
  • Introduction of Management Performance Measures (MPMs) and accompanying disclosures in financial statements
  • Introduction of targeted improvements to the statement of cash flows

In May 2019, the Board also decided that a discussion paper is not required and that as a next project step, the Board will develop an exposure draft for a new standard replacing IAS 1 Presentation of Financial Statements. The related requirements in IAS 1 will be brought forward to the new standard with limited wording changes. Other requirements of IAS 1 will be moved to IAS 8 (which would be renamed to Basis of Preparation, Accounting Policies, Changes in Accounting Estimates and Errors) and IFRS 7.

 

Key proposals

On the four above mentioned areas, ED/2019/7 General Presentation and Disclosures proposes the following:

  • The introduction of defined subtotals and categories in the statement of profit or loss aims at additional relevant information and a P&L structure that is more comparable between entities. The proposals include:
    • Require all entities to present an operating profit or loss subtotal in the statement of profit or loss, which is defined as profit from continuing operations before tax and before investing (defined as returns from investments that are generated individually and largely independently of other resources held by an entity), financing (defined as income and expenses from assets and liabilities related to an entity’s financing), and the share of profit of integral associates and joint ventures; whether an item is ‘unusual’ does not affect whether it is included in operating profit; there is a separate proposed approach to operating profit for financial entities.
    • Require entities to present separately ‘integral’ and ‘non-integral’ associates and joint ventures in statements of financial performance and cash flows, where a significant interdependency between an entity and an associate or joint venture would indicate that the associate or joint venture is integral to the main business activities of the entity (the definition would be supplemented with indicators for determining whether a joint venture or associate is ‘integral’ or ‘non-integral’).
    • Not to define EBITDA, but to use ‘operating profit or loss before depreciation and amortisation’, which would provide similar information to many of the EBITDA measures that are currently being used and is clearly understood.
  • The introduction of requirements to improve aggregation and disaggregation aims at additional relevant information and insuring that material information not being obscured. The proposals include:
    • Remove the free choice whether the analysis of operating expenses is by nature or by function; instead the Board proposes to provide a set of factors for entities to consider when making this assessment; remove the option to present an analysis of expenses in the notes only; if the statement of profit or loss presents an analysis by function, there is no requirement to analyse each functional line item by nature in the notes (analysis would be of total operating expenses).
    • Require the entities to identify assets, liabilities, equity, income and expenses that arise from individual transactions or other events and classify them into groups based on shared characteristics, resulting in line items in the primary financial statements that share at least one characteristic, then separate them based on further characteristics, resulting in the separate disclosure of material items in the notes; there may be a need to aggregate immaterial items with dissimilar characteristics to avoid obscuring relevant information; companies should use a descriptive label or, if that is not possible, provide information in the notes about the composition of such aggregated items.
    • Define unusual income and expenses as income and expenses with limited predictive value when it is reasonable to expect that income or expenses that are similar in type and amount will not arise for several future annual reporting periods; income and expenses from the recurring remeasurement of items measured at a current value would not be expected to be classified as unusual; unusual income and expenses would be disaggregated by line items presented in statement of profit or loss and line items disclosed in the analysis of operating expenses by nature, if the entity analyses expenses by function in the statement of profit or loss.
  • The introduction of Management Performance Measures (MPMs) and accompanying disclosures in the financial statements aims at transparency and discipline in the use of such measures and disclosures in a single location. The proposals include:
    • Require disclosure in the notes of subtotals of income and expenses that are used in public communications with users of financial statements, outside financial statements, complement totals or subtotals included in IFRSs, and communicate management’s view of an aspect of an entity’s financial performance; they would be accompanied by disclosures in a single note to enhance transparency.
    • MPMs would be accompanied by disclosures in the notes offering a description of why the MPM provides management’s view of performance, how the MPM has been calculated, how the measure provides useful information about an entity’s financial performance, a reconciliation of the MPM to the most directly comparable subtotal or total specified by IFRSs, a statement that the MPM provides management’s view of an aspect of the entity’s financial performance, the effect of tax and non-controlling interests separately for each of the differences between the MPM and the most directly comparable subtotal or total specified by IFRSs; if there is a change in how the MPM is calculated, an explanation would be provided to help users understand the reasons for and effect of the change.
    • Specify that as regards adjusted earnings per share, the numerator of adjusted EPS can only be either a subtotal specified by IFRSs or a management performance measure.
  • The introduction of targeted improvements to the statement of cash flows aims at improved comparability between entities. The proposals include:
    • Require entities to use operating profit as the single starting point for the indirect reconciliation.
    • Remove the classification options for interest and dividends.

The deadline for submitting comments has been extended until 30 September 2020.

 

Effective date and transition

The ED does not contain a proposed effective date as the IASB will decide on the effective date only upon completion of its redeliberations. The expectation is currently that the standard will become effective approximately 18-24 months after being published in its finalised form.

The standard would be applied retrospectively and early adoption would be permitted.

 

Additional information

Please click for:

 

December 2019 IASB meeting notes posted

17 Dec 2019

The IASB met on 11–12 December 2019 to discuss 9 topics. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

Amendments to IFRS 17 Insurance Contracts: The Board continued its discussions about ED/2019/4 Amendments to IFRS 17. The Board unanimously supported all of the staff recommendations (about the amendments identified in November as not requiring significant redeliberation and about insurance acquisition cash flows and reinsurance contracts held).

IBOR reform and the effects on financial reporting: The Board decided that IFRS 9 and IAS 39 be amended to allow entities to continue a hedging relationship (i.e. no derecognition) when modifications to the interest rate benchmark on which a financial instrument’s contractual cash flows are based are a direct consequence of IBOR reform and are done on an economically equivalent basis.

Accounting policies and accounting estimates (Amendments to IAS 8): The Board gave the Staff permission to prepare the final amendments to IAS 8. They will apply to annual periods beginning on or after 1 January 2022 and are expected to be published in the first half of 2020.

Implementation matters:

Onerous contracts: The Board gave staff permission to prepare the final amendments to IAS 37. They will apply to annual periods beginning on or after 1 January 2022 and are expected to be published in the first half of 2020.

Annual improvements: The Board gave staff permission to prepare the final amendments for annual improvements to IFRS 1 (subsidiary as a first-time adopter), IFRS 9 (fees included in the ‘10 per cent’ test for derecognition of financial liabilities) and IAS 41 (taxation in fair value measurements). The amendments will apply to annual periods beginning on or after 1 January 2022. The amendment to the illustrative example accompanying IFRS 16 takes effect when it is published. Staff do not expect to publish the package of amendments until the second quarter of 2020.

IFRS 3 reference to the Conceptual Framework: The Board decided to confirm the proposal to add, within the section headed ‘Exception to the recognition principle’, an exception to the recognition principle for liabilities and contingent liabilities within the scope of IAS 37 or IFRIC 21. It also decided to clarify that updating the reference to the Conceptual Framework does not change IFRS 3 requirements for recognition of assets and liabilities whose fair values are subject to measurement uncertainty.

Subsidiaries that are SMEs: The Chair of the Australian Accounting Standards Board gave a presentation on their proposal for a simplified disclosure standard, similar to the one the IASB is looking to develop. (It was an information-only session).

Business combinations under common control: The Board decided that the acquisition method, as set out in IFRS 3, be required for transactions that affect non-controlling shareholders of the receiving entity. However, the receiving entity should recognise any excess of the fair value of the acquired identifiable net assets over the consideration transferred as an increase in the receiving entity’s equity (contribution), not as a gain on a bargain purchase in profit or loss.

SME Standard review and update: The Board gave staff permission to prepare the Request for Information, with a comment period of 180 days. 

Financial instruments with characteristics of equity: The Board began its discussion about classifying financial instruments that will, or may, be settled in the issuer’s own equity instruments (both derivative and non-derivative instruments), focusing on what clarifications could be made to the underlying principle of the fixed-for-fixed condition.

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

DPOC decides on agenda decisions

16 Dec 2019

The Due Process Oversight Committee (DPOC) of the IFRS Foundation held a conference call today to discuss staff recommendations for finalising the proposed amendments to the Due Process Handbook relating to agenda decisions.

In light of the feedback received on the proposed amendments, the staff recommended that the DPOC:

  • amend the description of agenda decisions by removing the statement that "explanatory material should be seen as helpful, informative and persuasive";
  • amend the description of agenda decisions by replacing "new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained" with "additional insights that might change an entity’s understanding of the principles and requirements in IFRS Standards";
  • amend the due process relating to agenda decisions by asking Board members whether they object to the publication of an agenda decision with explanatory material so that an agenda decision will only be published if no more than three Board members (of a Board of 14 members) object to publishing the finalised agenda decision at the Board meeting immediately following the finalisation of decision;
  • not to provide the Board with a due process tool equivalent to an agenda decision.

After comprehensive discussion, the DPOC agreed with all staff recommendations. Detailed descriptions of the staff recommendations can be found in the corresponding agenda paper for the meeting. There is also an audio recording of the call (discussion of the paper in question begins at about 27 minutes into the recording) and a summary report of the meeting on the IASB's website.

Updated IASB work plan — Analysis (December 2019)

14 Dec 2019

Following the IASB's December 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 November.

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

Standard-setting projects

No changes.

Maintenance projects

  • 2019 comprehensive review of the IFRS for SMEs Standard — A request for information is now expected in January 2020 (formerly Q1 2020).
  • Amendments to IFRS 17 'Insurance Contracts' — A final amendment is now expected in H1 2020 (formerly Q2 2020).
  • Annual improvements (2018-2020 cycle) — All projects that are part of this cycle have now been aligned to say that final amendments are now expected in Q2 2020 (formerly some said Q2 2020 and some H1 2020); projects that belong to the annual improvement cycle are:
    • Fees in the ‘10 per cent’ test for derecognition of financial liabilities (Amendments to IFRS 9);
    • Lease incentives (amendments to illustrative example 13 accompanying IFRS 16);
    • Subsidiary as a first-time adopter (amendments to IFRS 1);
    • Taxation in fair value measurements (amendments to IAS 41).
  • Disclosure initiative - Accounting policies — Comments on the Exposure Draft (ED) were due 29 November 2019; feedback on the ED is now expected in February 2020.
  • IBOR reform and its effects on financial reporting: phase 2 — An exposure draft is now expected in Q2 2020 (formerly H1 2020).
  • Onerous contracts - Cost of fulfilling a contract — A final amendment is now expected in H1 2020 (formerly H2 2020).
  • Updating a reference to the Conceptual Framework (amendments to IFRS 3) — A final amendment is now expected in Q2 2020 (previously no date given).

Research projects

  • Goodwill and impairment — A discussion paper is now expected in February 2020 (formerly Q1 2020).
  • Post-implementation review of IFRS 10, IFRS 11 and IFRS 12 — A review of the research is now expected in February 2020 (previously no date given).

Other projects

  • IFRS Taxonomy update: interest rate benchmark reform (amendments to IFRS 9, IAS 39 and IFRS 7) — Comments on the proposed update were due 13 December 2019; there are no further dates given.

The above is a faithful comparison of the IASB work plan at 25 November and at 14 December 2019. For access to the current IASB work plan at any time, please click here.

IASB releases podcast on IFRS 17

14 Dec 2019

The IASB has released a podcast featuring IASB member Darrel Scott and technical staff member Vitalina Kobernik as they discuss the developments at the December 2019 Board meeting related to the amendments to IFRS 17 'Insurance Contracts'.

The podcast discusses the amendments tentatively finalised during the meeting and focuses on the expected recovery of insurance acquisition cash flows and the accounting for reinsurance contracts held.

The podcast can be accessed through the press release on the IASB website. Our summary of the meeting and the results of the IASB's votes is available here.

UK taskforce publishes second report on IFRS 9 expected credit loss disclosures

13 Dec 2019

In November 2017, The UK Financial Conduct Authority (FCA), Financial Reporting Council (FRC) and the Prudential Regulatory Authority (PRA) set up the Taskforce on Disclosures about Expected Credit Losses (‘the DECL Taskforce’). The idea being that the Taskforce would be a partnership between preparers and users, coming together to engage constructively on expected credit loss (ECL) disclosure. The model for this was the Enhanced Disclosure Task Force (EDTF).

The DECL Taskforce’s first report consisted of recommendations to describe what a comprehensive set of good ECL disclosures might look like, drawing from and building on existing disclosure recommendations and requirements. The second report now adds guidance and illustrative examples that show how the recommendations in the first report can be presented in a way that enhances comparability between banks.

The second report particularly focuses on disclosures that help users to understand the types and extent of credit risk exposure a bank has and how that risk has evolved; the forward-looking information about macro-economic conditions used in estimating ECL; and the sensitivity of ECL provisions to different macro-economic conditions.  

The guidance is aimed primarily at the biggest UK-headquartered banks and building societies, but is likely to be relevant to a much wider group of preparers.

Please click to download the report from the FRC website.

Please click to download the report from the FRC website.

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