2019

EFRAG extends comment period for NETs discussion paper

03 May 2019

The European Financial Reporting Advisory Group (EFRAG) has extended the comment letter deadline for its discussion paper 'Non-exchange Transfers ('NETs'): A role for societal benefit?' The revised deadline for comments is Tuesday, 14 May 2019 (formerly 30 April 2019).

For more information, please see our November 2018 story on the EFRAG's DP as well as the press release discussing the comment extension on the EFRAG website.

IASB publishes proposed amendments to IAS 39 and IFRS 9 in the context of the IBOR reform

03 May 2019

The International Accounting Standards Board (IASB) has published an exposure draft 'Interest Rate Benchmark Reform (Proposed amendments to IFRS 9 and IAS 39)' that constitutes a first reaction to the potential effects the IBOR reform could have on financial reporting. Comments are requested by 17 June 2019.

 

Background

Interbank offered rates (IBORs) are interest reference rates, such as LIBOR, EURIBOR and TIBOR, that represent the cost of obtaining unsecured funding, in a particular combination of currency and maturity and in a particular interbank term lending market.

Recent market developments have brought into question the long-term viability of those benchmarks. The Board is monitoring further developments in this regard in order to determine whether there are any implications for the existing accounting requirements. The focus of the project is currently on financial instruments although an IBOR reform would later definitely also have impact on any standard dealing with discounting.

The amendments proposed today deal with issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative interest rate and consider the implications for specific hedge accounting requirements in IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, which require forward-looking analysis. 

 

Suggested changes

The changes proposed in ED/2019/1 Interest Rate Benchmark Reform (Proposed amendments to IFRS 9 and IAS 39)

  • modify specific hedge accounting requirements so that entities would apply those hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform;
  • require specific disclosures about the extent to which the entities' hedging relationships are affected by the proposed amendments; and
  • note that the amendments would be mandatory.

The proposed amendments also note that the Boards proposes to amend the hedge accounting requirements only as specified in the exposure draft and that the proposals are not intended to provide relief from any other consequences arising from interest rate benchmark reform. Moreover, the exposure draft notes that if a hedging relationship no longer meets the requirements for hedge accounting for reasons other than those specified in the exposure draft, then discontinuation of hedge accounting is still required.

Comments on the proposed changes are requested by 17 June 2019.

 

Effective date

The exposure draft proposes that the amendments would be effective for annual periods beginning on or after 1 January 2020 and would be applied retrospectively. Early application would be permitted.

 

Additional information

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FASB Chairman reflects on collaboration with IASB

02 May 2019

At a financial reporting conference at Baruch College in New York City, FASB Chairman Russell Golden discussed the challenges of ‘bilateral convergence’ between IFRS and US GAAP, what the Boards have accomplished together, and how the Boards will work together in the future.

Mr Golden began his speech by acknowledging that comparable global accounting standards help reduce complexity and costs in financial reporting. He stated, however, that “by 2013, [the FASB had] come to realize that the ideal of single set high-quality global accounting standards was just that—an ideal. Different starting points, different cultures, and different legal systems made bilateral convergence impossible to achieve.”

After he highlighted the success of the joint FASB-IASB projects on business combinations, noncontrolling interests, fair value measurements, borrowing costs, segment reporting, stock compensation, and nonmonetary exchanges, Mr Golden reflected on the diverging strategies for the Boards’ projects on revenue recognition, leases, credit losses, and insurance. He closely examined the reasons for divergence, which were usually due to cost and complexity for US stakeholders.

Mr Golden discussed how the FASB is working to “[forge] a new model for how we support the goal of more comparable, high-quality accounting standards worldwide,” which includes:

  • Development of high-quality GAAP — Mr Golden noted that considering opportunities to align with IFRS when possible is ‘embedded’ in the FASB’s process. He said the FASB is in ‘constant contact’ with the IASB about the IASB’s projects and that the Boards share research activities to “continue progress toward improved, aligned solutions.”
  • Active participation in the Accounting Standards Advisory Forum (ASAF) — Mr Golden described the FASB’s commitment to the ASAF, which advises the IASB as it develops IFRS. He called the FASB’s involvement “an important opportunity to represent U.S. interests in the IASB’s standard-setting process” and noted that the ASAF provides a “valuable opportunity to work together with other standard setters on issues of common interest.”
  • Enhancing relationships with other national standard setters — Mr Golden mentioned that the FASB meets individually with standard setters from many countries to “exchange ideas on improving our respective standards. This process also helped promote the broader flow of information and ideas that mutually inform our thinking. And to contribute to an environment that will foster greater alignment of standards across the globe.”

He made clear in his speech that the FASB will continue to work closely with the IASB to improve accounting standards worldwide. He also briefly provided his own opinion on sustainability reporting:

I think we should follow the IASB’s lead and remain focused on improving the financial statement. And leave sustainability reporting and other performance metrics—however important they may be—to other experts.

The full text of Mr Golden’s speech is available on the FASB's website.   

AASB updates research paper on climate-related risks disclosure

02 May 2019

The Australian Accounting Standards Board (AASB) has released the latest version of 'Climate-related and other emerging risks disclosures: assessing financial statement materiality using AASB Practice Statement 2'.

The research paper, originally published in December 2018, contains several updates and guides directors, preparers and auditors when preparing and auditing financial statements. Even though the guidance is not mandatory, it represents the IASB’s best practice interpretation of materiality.

Please click to access the updated research paper on the AASB website.

IFRS Foundation consults on IFRS IC and IASB agenda decisions

30 Apr 2019

The Trustees of the IFRS Foundation have issued an updated IFRS Foundation Due Process Handbook for public comment. Clarifications regarding the role and status of agenda decisions published by the Interpretations Committee (IFRS IC) and amendments to make agenda decisions a tool for the Board are the most prominent proposed amendments.

On IFRS IC agenda decisions, the Handbook continues to note that agenda decisions do not have the status of IFRSs and cannot add or change requirements in the standards, however, it now also states that in many cases an agenda decision includes explanatory material that explains how principles and requirements in IFRSs apply to the transaction or fact pattern described in the agenda decision. As these explanations provide "new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained", the Handbook states that entities might determine that they need to change an accounting policy as a result of an agenda decision.

The newly proposed Board agenda decisions are intended to support the consistent application of IFRSs by also providing explanatory material. The Board would publish agenda decisions when it has decided not to add a project to the standard-setting agenda but still concludes that consistency of application of the standards would be improved by providing material that explains how the applicable principles and requirements in the standards apply to a particular transaction or fact pattern. Again, the Handbook notes that agenda decisions do not have the same status as IFRSs, but that entities might nonetheless feel the need to change an accounting policy as a result of a Board agenda decision.

In addition to the proposed amendments on agenda decisions, the Trustees also propose to update Handbook regarding the procedures relating to the use of effects analysis to ensure that they are consistent with current activities.

Less prominent proposed updates regard the categories of education material produced by the IFRS Foundation, the consultation requirements for adding major projects to the Board’s work plan, the role of the IFRS Advisory Council, and the processes for approving amendments to the IFRS Taxonomy and the DPOC’s role in overseeing the IFRS Taxonomy due process.

Comments on the proposed updates are due by 29 July 2019. Please see the IASB website for the press release and the consultation document. The IFRS Foundation has also released a YouTube video with a short introduction of the consultation.

EFRAG publishes feedback statement on proposed amendments to IAS 37

25 Apr 2019

The European Financial Reporting Advisory Group (EFRAG) has published a feedback statement following the publication of its final comment letter on the IASB's Exposure Draft ED/2018/2 'Costs Considered in Assessing Whether a Contract is Onerous (Amendments to IAS 37)'.

The feedback statement describes the thirteen comments received by EFRAG in response to its draft comment letter on the IASB's December 2018 ED, and how these comments were considered by EFRAG in finalising its comment letter to the IASB.

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

EFRAG issues annual review for 2018

25 Apr 2019

The European Financial Reporting Advisory Group (EFRAG) has published its 2018 annual review.

This publication includes reports from the EFRAG President Jean-Paul Gauzès and the outgoing TEG Chairman and CEO Andrew Watchman. It also features EFRAG's continued work on IFRS 17 Insurance Contracts including case studies and user outreach culminating in the IASB’s re-deliberations of IFRS 17; EFRAG’s work on the EC requests relating to the potential effect on long-term investment of IFRS 9’s requirements on accounting for equity instruments; and EFRAG’s position on the IASB project Financial Instruments with Characteristics of Equity with inputs resulting from a wide outreach programme as well as an early stage analysis.

The annual review is available on the EFRAG website.

Summary of the March 2019 CMAC meeting

24 Apr 2019

The IASB has released a summary of the Capital Markets Advisory Committee (CMAC) meeting, which was held in London on 21 March 2019.

The topics discussed at the meeting included:

  • Extractive activities:
    • Proposed scope of the research project
    • Additional disclosures: (1) minerals and resources and (2) other disclosures.
  • Financial instruments with characteristics of equity:
    • Presentation of equity instruments
    • Presentation of financial liabilities — presentation of income and expenses arising from particular financial liabilities in other comprehensive income
  • Targeted standards-level review of disclosures:
    • IAS 19 Employee Benefits
    • IFRS 13 Fair Value Measurement
  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets:
    • Aligning liability definition and guidance with the Conceptual Framework
    • Clarifying which costs to include in the measure of a provision
    • Specifying whether discount rate includes own credit risk
  • Management commentary practice statement:
    • Challenges in current practice of reporting performance and position in management commentary
    • The interaction between management commentary and other reports
    • Overview of performance and position
    • Forecasts and targets in management commentary
    • Information about tax in management commentary
  • Business combinations under common control

The next CMAC meeting will take place on 13–14 June 2019.

For more information, see the meeting page and the meeting summary on the IASB's website.

DPOC greenlights shortened comment period for IFRS 17 amendments

23 Apr 2019

In a conference call held today, the Due Process Oversight Committee (DPOC) discussed the comment letter period for proposed targeted amendments to IFRS 17 'Insurance Contracts'. The staff sought the approval of the DPOC for a shortened comment period of 90 days for the forthcoming exposure draft.

During the four minute conference call, DPOC members asked no questions, just gave the go ahead for a shortened comment period.

Please click to listen to the recording of the call on the IASB website.

Summary of the March 2019 GPF meeting

18 Apr 2019

Representatives of the IASB met with the Global Preparers Forum (GPF) in London on 22 March 2019. Notes from the meeting have now been released.

The topics discussed at the meeting included

  • IASB update
  • SMEs that are subsidiaries — Application advice in individual jurisdictions
  • Onerous contracts — Costs of fulfilling a contract (proposed amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets)
  • Provisions
  • Management commentary
  • Disclosure initiative — Targeted Standards-level review and user outreach summary

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

The next GPF meeting will be held jointly with the Capital Markets Advisory Committee (CMAC) in London on 13–14 June 2019.

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