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DPOC to hold conference call on 16 December

11 Dec 2019

The Due Process Oversight Committee (DPOC) of the IFRS Foundation has published an agenda and papers for a conference call to be held on 16 December 2019.

The DPOC will discuss:

  • Correspondence received on due process matters; and
  • Due process handbook review — agenda decisions.

The correspondence slot regards two letters received by the DPOC that question whether the full due process was adhered to in an agenda decision of the IFRS Interpretations Committee regarding the lease term and the useful life of leasehold improvements.

Agenda papers for the meeting are available on the IASB's website.

Death of Paul Volcker, inaugural Chairman of the IFRS Foundation Trustees

10 Dec 2019

The staff and the Trustees of the IFRS Foundation and the International Accounting Standards Board have released condolences on the death of Paul Volcker, inaugural Chairman of the IFRS Foundation (formerly IASC Foundation) Trustees, serving from 2000 until 2006.

Mr Volcker led the restructuring of the Foundation, appointed the first Board and garnered widespread international support for its mission of global accounting standards.

Please click for the Statement on the passing of Paul Volcker on the IASB website.

IASB Vice-Chair speaks at annual AICPA conference

10 Dec 2019

At the 2019 AICPA Conference on Current SEC and PCAOB Developments, which is currently being held in Washington, IASB Vice-Chair Sue Llyod spoke about the IASB's primary financial statements project, the linkage between financial and non-financial reporting in the IASB's management commentary project, and consistent application of IFRSs.

On primary financial statements, Ms Lloyd noted that the IASB's work reflects the fact that while the traditional financial statements continue to remain the core of investment analysis, the way in which that information is consumed has evolved. In this environment proper structure and comparability of the financial information provided by companies is especially important.  She explained the Board's thinking on new subtotals that are to be introduced and  on non-GAAP measures, where the IASB's proposals will reflect the growth in the use of these measures in the market and their relevance for investors. The IASB plans to publish its proposals in an exposure draft around the end of this year.

On management commentary, Ms Lloyd pointed out that wider corporate reporting information can be classified broadly into two types: (i) information about how the company affects the world and (ii) information about how the world affects the company. It is the second area where the IASB has decided it can and should play a larger role. The corresponding project is therefore aimed at updating the IASB's practice statement on management commentary so that investors have visibility of factors that may affect a company’s future cash flows but may not yet be reflected in the financial statements. As a next step in this project the IASB intends to publish an exposure draft proposing changes to the practice statement in 2020.

Finally, on supporting consistent application, Ms Lloyd explained the work of the IASB's IFRS Interpretations Committee, which she chairs.

The full text of the speech is available on the IASB website.

The AICPA conference ran from 9 to 11 December and featured speeches by — as well as panel discussions and question-and-answer sessions with — members of the SEC, PCAOB, FASB, and IASB and professionals from various industries. Our US colleagues have prepared a Heads Up newsletter with highlights from all days of the conference.

EFRAG explains how comments on its draft IFRS 17 comment letter were considered in finalising the letter

09 Dec 2019

The European Financial Reporting Advisory Group (EFRAG) published its final comment letter on the IASB exposure draft ED/2019/4 ‘Amendments to IFRS 17' in September 2019. EFRAG has now released a feedback statement summarising comments received on the draft comment letter and explaining how those comments were considered by EFRAG during its technical discussions leading to the publication of the final comment letter.

The press release on the EFRAG website offers a general analysis of the comments received (proposals that were generally supported, proposals that ed to concerns, calls for reconsideration of certain aspects, and effective date) and access to the full feedback statement (29 pages).

Chairman of the IFRS Foundation Trustees speaks about Big Techs and financial stability

06 Dec 2019

In a keynote speech given on 3 December in Paris, Erkki Liikanen, Chairman of the IFRS Foundation Trustees, spoke on the question of whether big tech is a threat to financial stability.

Mr Liikanen explained that today, a major push for innovation in global finance is coming from ‘big techs’, companies that are dominant platform providers that offer ubiquitous digital services. He summarised the impact of these big techs neutrally:

  1. The entry of big techs into financial services holds the promise of efficiency gains and can enhance financial inclusion.
  2. Regulators need to ensure a level playing field between big techs and banks, taking into account big techs’ wide customer base, access to information and business models.
  3. Big techs' entry presents new and complex trade-offs between financial stability, competition and data protection.

Based on this, Mr Liikanen offered three observations. Firstly, policymakers need to decide how much to encourage big tech to enter finance — should policies promote big techs’ entry or restrict it? Secondly, big tech tests the regulatory perimeters of data protection, competition policy and now financial regulation. As such, regulation that is fit-for-purpose will require enhanced cooperation among multiple regulatory bodies. And thirdly, we need to recognise the cross-border nature of the big techs and fintechs challenge and respond appropriately. Mr Liikanen also noted that among the initiatives in the field is the work by the IFRS Foundation to consider the accounting for crypto assets under IFRSs.

Mr Liikanen closed his speech by noting: "Innovation is here to stay, and it will bring benefits and it will bring challenges. We need a balanced approach, where we reap the benefits of financial inclusion and efficiency and ensure a level playing field between big techs and banks."

Please click to access the full text of Mr Liikanen's speech on the IASB website.

Pre-meeting summaries for the December IASB meeting

06 Dec 2019

The IASB will meet in London on 11–12 December 2019 to discuss nine topics. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. For each topic to be discussed, we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

Amendments to IFRS 17 Insurance Contracts: The Board is continuing its discussions about ED/2019/4 Amendments to IFRS 17. At this meeting the staff are recommending that the Board make decisions about the amendments that the staff identified in November did not require significant redeliberation. The staff have also made recommendations about insurance acquisition cash flows and reinsurance contracts held.

IBOR Reform and the Effects on Financial Reporting: The staff recommend 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 staff are requesting 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 Staff are requesting 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 Staff are requesting 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 staff recommend that the Board 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. They also recommend that the Board 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 will give a presentation on their proposal for a simplified disclosure standard, similar to the one the IASB is looking to develop. (It is an information-only session).

Business Combinations under Common Control: The staff recommend 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 staff are seeking approval to prepare the Request for Information, with a comment period of 180 days. 

Financial Instruments with Characteristics of Equity: The Board will begin 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). In particular, the staff will explore what clarifications could be made to the underlying principle of the fixed-for-fixed condition.

More information

Our pre-meeting summaries are available on our December meeting notes page and will be supplemented with our popular meeting notes after the meeting.

CAQ issues publication on company-prepared information

04 Dec 2019

The Center for Audit Quality (CAQ) of the American Institute of Certified Public Accountants (AICPA) has released a publication 'The Role of Auditors in Company-Prepared Information: Present and Future'.

The report provides a foundational understanding of the current role of auditors in various types of company-prepared and publicly disclosed information and is intended to help investors and audit committees understand how auditors are positioned to help fill existing gaps in enhancing the reliability of decision-useful information. It argues that while today the role of auditors is largely limited to the audit of financial statements, changing business models and investor demand lead to companies increasingly providing information outside the financial statements. The report argues that auditors are poised to meet stakeholders’ needs in enhancing confidence in these other types of company-prepared information, which include non-GAAP financial measures, environmental, social, and governance information, cybersecurity reporting, and other communications about value-creation outside of financial statements.

For more information, see the press release and publication on the CAQ website.

December 2019 IASB meeting agenda posted

03 Dec 2019

The IASB has posted the agenda for its next meeting, which will be held at its offices in London on 11–12 December 2019. There are nine topics on the agenda.

The Board will discuss the following:

  • Implementation matters
  • Accounting policies and accounting estimates
  • Financial instruments with characteristics of equity
  • Amendments to IFRS 17 Insurance Contracts
  • IFRS 3 reference to the Conceptual Framework
  • IFRS for SMEs review and update
  • IBOR reform and the effects on financial reporting
  • Subsidiaries that are SMEs
  • Business combinations under common control

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.

Agenda and slides for the upcoming MCCG meeting

03 Dec 2019

The IASB's Management Commentary Consultative Group will be meeting on 13 December 2019 in London. An agenda for the meeting is now available.

The meeting will focus on topics for further input, an overview of the staff’s current proposals, and supporting the adoption of the Practice Statement.

The agenda and slides for the meeting are available on the IASB's website.

We comment on the IASB's proposed amendments to IAS 1 and the Materiality Practice Statement

29 Nov 2019

We have responded to the IASB’s exposure draft ED/2019/6 'Disclosure of Accounting Policies (Proposed amendments to IAS 1 and IFRS Practice Statement 2)'.

Whilst we agree with the IASB's view that it is useful to replace “significant” by “material”, we are concerned that without further guidance, the assessment of whether an accounting policy is material may be driven primarily by quantitative considerations. This is why we suggest that additional guidance is added to IAS 1 to highlight that the assessment of materiality should be based on whether the transaction, other event or condition to which the accounting policy relates is material in size or nature or a combination of both.

Please download the full comment letter here.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.