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2019

Summary of the June 2019 ITCG meeting

01 Aug 2019

The IASB has published a summary of the IFRS Taxonomy Consultative Group (ITCG) meeting held on 24 June 2019.

The ITCG discussed the following:

  • IFRS Taxonomy supporting materials.
  • Strategy for the IFRS Taxonomy.
  • Interaction between electronic reporting and the Board’s work on primary financial statements.
  • IFRS Taxonomy content — review of common reporting practice.
  • Interaction between electronic reporting and the Board’s work on the review of disclosures.

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

IASB proposes amendments to IAS 1 and the Materiality Practice Statement

01 Aug 2019

The International Accounting Standards Board (IASB) has published an exposure draft 'Disclosure of Accounting Policies (Proposed amendments to IAS 1 and IFRS Practice Statement 2)' with proposed amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements. Comments are requested by 29 November 2019.

 

Background

The feedback on the Board's DP on Principles of Disclosure suggested that guidance is required to assist entities in determining which accounting policies to disclose. It was noted that the application of materiality is key to deciding which accounting policies to disclose, however IAS 1 Presentation of Financial Statements does not refer to materiality but states that ‘[a]n entity shall disclose its significant accounting policies' without the Board providing a definition for the term ‘significant’.

Therefore, the Board decided to develop amendments to paragraphs 117-122 of IAS 1 to require entities to disclose their material accounting policies rather than their significant accounting policies. To support this amendment the Board has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2 Making Materiality Judgements to accounting policy disclosures.

 

Suggested changes

ED/2019/6 Disclosure of Accounting Policies (Proposed amendments to IAS 1 and IFRS Practice Statement 2) proposes to amend paragraphs 117-122 of IAS 1 in the following ways:

  • Paragraph 117 of IAS 1 would be amended to require an entity to disclose its material accounting policies instead of its significant accounting policies;
  • Paragraphs 117A-D of IAS 1 would be added to explain how an entity can identify a material accounting policy (for example an accounting policy has changed during the reporting period, was chosen from alternatives allowed in IFRSs, was developed in accordance with IAS 8 in the absence of an IFRS that specifically applies, relates to an area of significant judgement and assumption, or reflects unique entity-specific application of an IFRS);
  • Paragraph 122, which requires an entity to make disclosures about ‘other judgements’, would be retained but would see a minor amendment to replace the reference to ‘significant accounting policies’ with the reference to ‘material accounting policies’.

The Board has also developed additional guidance to be included in the Materiality Practice Statement for entities to use when applying the four-step materiality process to accounting policy disclosure. This additional guidance is supported by two new examples that highlight the need to focus on information that is useful to users of financial statements and demonstrate how the application of the four-step materiality process can address the issues of: i) boilerplate or generic information being disclosed in accounting policies that are material to the financial statements; and ii) instances in which accounting policy disclosures contain only information that repeats the requirements of IFRSs. 

Comments on the proposed changes are requested by 29 November 2019.

 

Effective date and transition

The exposure draft does not contain a proposed effective date as the IASB intends to decide on this after exposure. The proposed amendments would be applied prospectively and early adoption would be permitted.

 

Dissenting opinion

Board member Martin Edelmann dissented from issuing the exposure draft. Mr Edelmann does not believe that materiality is a concept that should be applied to accounting policies as accounting policies differ from other information in the financial statements. He is also concerned that the application of the concept to accounting policies might lead to a loss of important information.

 

Additional information

Please click for:

 

IASB issues podcast on latest Board developments (July 2019)

31 Jul 2019

The IASB has released a podcast featuring Chair Hans Hoogervorst, Vice-Chair Sue Lloyd, and communications team member Kasia Gilewska to discuss the deliberations at the July 2019 IASB meeting as well as other recent developments.

The 18-minute podcast features discussions of the following topics in more detail:

  • the IASB's recent meeting with the Accounting Standards Advisory Forum (ASAF);
  • IASB projects on goodwill and impairment, primary financial statements and rate-regulated activities;
  • deliberations on stakeholders’ feedback on the Exposure Draft on interest rate benchmark reform (IBOR);
  • the dynamic risk management model;
  • progress on Management Commentary, the review of The IFRS for SMEs Standard, and the Disclosure Initiative.

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 July IASB meeting.

IASB issues 'Investor Update' newsletter

31 Jul 2019

The IASB has issued the nineteenth edition of its newsletter 'Investor Update', which provides investors with quick access to information about current accounting and financial reporting topics.

This issue features:

  • Spotlight — Intangible resources and financial reporting—an evolving debate
  • In profile—Jacques De Greling, Scope Ratings
  • We need your views
  • Stay up to date
  • Resources for investors

The Investor Update newsletter is available on the IASB’s website.

Three new ICAI publications

30 Jul 2019

The Institute of Chartered Accountants of India (ICAI) has published an IFRS 9 study, a quick reference to accounting standards, and a compendium of Indian accounting standards.

Updated IASB work plan — Analysis (July 2019)

29 Jul 2019

Following the IASB's July 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 June.

Below is an analysis of all changes that were made to the work plan since our last analysis on 24 June 2019.

Stan­dard-set­ting projects

  • Management commentary — The expected timing of an exposure draft has been moved to the second half of 2020 (previously first half of 2020).
  • Primary financial statements — The expected date of an exposure draft has been narrowed down to the fourth quarter of 2019 (previously second half of 2019).

Main­te­nance projects

  • 2019 Comprehensive review of the IFRS for SMEs Standard — The expected date for the request for information has been narrowed down to the fourth quarter of 2019 (previously second half of 2019).
  • Accounting policies and accounting estimates (amendments to IAS 8) — A decision on this project’s direction will occur in the fourth quarter of 2019.
  • Amendments to IFRS 17 — Discussions on feedback received on the exposure draft is expected to occur in the fourth quarter of 2019.
  • Classification of liabilities as current or non-current (amendments to IAS 1) — The expected date for the IFRS amendments has been narrowed down to the fourth quarter of 2019 (previously second half of 2019).
  • Deferred tax related to assets and liabilities arising from a single transaction (amendments to IAS 12) — This project is now in the exposure draft comment letter phase. Comments are requested by 14 November 2019.
  • Disclosure initiative — Accounting policies — The work plan still notes that an exposure draft is expected in September 2019, however, the IASB has separately communicated that it expects to publish the ED on 1 August 2019
  • Fees in the ’10 per cent’ test for derecognition of financial liabilities (amendments to IFRS 9) — Discussions on feedback received on the exposure draft is expected to occur in the fourth quarter of 2019.
  • IBOR reform and its effects on financial reporting (Phase 1) — Discussions on feedback received on the exposure draft has been narrowed down to occur in September 2019 (previously third quarter of 2019).
  • Lease incentives (amendments to illustrative example 13 accompanying IFRS 16) — Discussion on feedback received on the exposure draft are expected to occur in the fourth quarter of 2019.
  • Onerous contracts — cost of fulfilling a contract (amendments to IAS 37) — A decision on this project’s direction will occur in September 2019.
  • Property, plant and equipment: Proceeds before intended use (amendments to IAS 16) — IFRS amendments are expected in the first quarter of 2020.
  • Subsidiary as a first-time adopter (amendments to IFRS 1) — Discussion on feedback received on the exposure draft are expected to occur in the fourth quarter of 2019.
  • Taxation in fair value measurements (amendments to IAS 41) — Discussion on feedback received on the exposure draft are expected to occur in the fourth quarter of 2019.

Research projects

  • Dynamic risk management — The expected date for the core model has been narrowed down to the fourth quarter of 2019 (previously second half of 2019).
  • Extractive activities — The expected date to review the research has been narrowed down to the fourth quarter of 2019 (previously second half of 2019).
  • Financial instruments with characteristics of equity — A decision on this project’s direction has been narrowed down to the fourth quarter of 2019 (previously second half of 2019).
  • Goodwill and impairment — The expected date of the discussion paper has been narrowed down to the fourth quarter of 2019 (previously second half of 2019).
  • Pension benefits that depend on asset returns — The expected date to review the research has been narrowed down to the fourth quarter of 2019 (previously second half of 2019).
  • Provisions — The expected date to review the research has be narrowed down to the fourth quarter of 2019 (previously second half of 2019).
  • Subsidiaries that are SMEs — The expected date to review the research has be narrowed down to the fourth quarter of 2019 (previously second half of 2019).

The above is a faithful com­par­i­son of the IASB work plan at 24 June 2019 and at 29 July 2019. For access to the current IASB work plan at any time, please click here.

AcSB panel discussion on IFRS 17 - recording and slides

28 Jul 2019

On 18 July 2019, the Canadian standard-setter Accounting Standards Board (AcSB) hosted a panel discussion on IFRS 17 and the proposed amendments to the standard. Among the panelists was IASB member Darrel Scott.

The 2.5 hour event first saw an introduction to the Canadian endorsement process and key messages on IFRS 17 by AcSB Chair Linda Mezon and an introduction of the proposed changes to IFRS 17 by Darrel Scott.

The panel discussion (starting after about 30 minutes) then discussed the following topics:

  • Deferral date and endorsement status
  • Insights into the IASB's proposals
  • Transition matters
  • Questions from the audience

A recording of the event and the slides presented are  available on the AcSB website:

The Bruce Column — Making the future more realistic than rosy

25 Jul 2019

The Chairman of the International Accounting Standards Board, Hans Hoogervorst, is half way through his second, and final, term as Chairman.

In a video interview with Robert Bruce, he reflects on recent achievements, work still to be finalised, how non-GAAP measures lead to what he terms a ‘rosy’ view in accounts, and work ahead on many issues, including ensuring climate change is reflected in the figures.

The difficulties that have faced the IASB and its Chairman, Hans Hoogervorst, in recent years have all been ones that by their very nature are hard to pin down. Everyone knows that the risks surrounding climate change and market dislocation reflect real financial risks. But often the systems available make it harder for the financial reporting standards, (IFRS), to deal with them.

Hoogervorst looks to future IASB projects to provide at least some of the answers. He talks of the upcoming revision of the Board’s Management Commentary Practice Statement as part of the solution. ‘It would’, he says, ‘be a good vehicle for focusing on financial risks not yet captured in financial statements’. And he also sees it as a solution to issues surrounding the recommendations as to how to deal with climate-related financial disclosure.

While he insists it is not the place of the IASB to get involved with sustainability reporting he said that Management Commentary would be ‘an excellent vehicle’ to convey the disclosures. He said that such disclosures ‘fit perfectly in the annual report’ and that the IASB will write new guidance to cover it. And he is also keen that the IASB project on the nature of Primary Financial Statements should provide the guidance needed to ensure that there is more rigour surrounding the financial information that currently escapes financial statements.

These are the non-GAAP numbers that he suggests are generally more ‘rosy’ than the numbers reported under IFRS. ‘This is one of the most important pieces of work that we are currently working on’, he says. ‘The income statement’, he says, ‘ is the most important piece of information that is used by investors for future cash-flow projections and evaluations’, yet ‘what is currently the case in IFRS is that in the income statement we define revenue and we define profit or loss but in between we define not all that much’. Investors and companies, he suggests, like to look at subtotals like operating profit, or EBIT, or EBITDA, to better understand their own results or to explain it to investors. ‘But’, as Hoogervorst points out, ‘we don’t define any of that’. And into that gap has grown the mass of non-GAAP.

‘Non-GAAP is basically created by companies themselves’, he said, ‘but without the discipline of proper accounting standards. So it is no surprise’, he said, ‘that much of this information tends to be on the optimistic side. 70 to 80% of non-GAAP is more rosy than the IFRS numbers’. Hence the Primary Financial Statements project. ‘We have decided to make a definition for operating income. We have decided to define an EBIT-like subtotal which makes it possible for investors to better compare the performance of companies irrespective of the way that they are financed; by leverage or more by equity. By doing so’, says Hoogervorst, ‘we will provide more anchors in the financial statements for comparison across the board. It is extremely important’, he says. ‘We will also provide guidance and discipline around the use of the common practice of taking unusual items out of the income statement, which is one of the sources of rosiness’. And we will make it very clear that you have to do that symmetrically – if you take out expenses you probably have to take out some unusual sources of income that might not recur every year’.

All of this, and a variety of other measures will, says Hoogervorst ‘provide a lot more structure and order in the income statement’. All this, as ever, will take time, probably a couple of years, as it goes through the IASB process. The same has been true of IFRS 17 on insurance. ‘It has been clear that a lot of investors avoid investing in insurance companies because they cannot understand the accounting’, he says. ‘The existence of the new standard might draw more investors to the business of insurance’. At present he says that ‘it is a bit of a mess’. ‘Quite frankly’, he said, ‘investors rely more on prudential information than on accounting, and on a lot of non-GAAP, and we all know the problems with non-GAAP’. n Nevertheless he forsees an effective date of 2022 for the finalized standard. And looking at the IFRS landscape generally he is optimistic. ‘Accounting cannot prevent crises’, he says, ‘but we should be able to give better transparency about the risks that are building up in the financial system or within a company’.

Across the economy from banks to insurance companies he believes the useful and reliable information will be there. ‘I believe the introduction of IFRS 9, with the introduction of the expected loss model, should give investors a much quicker and better insight into the risks building up on the balance sheet of a bank’. The insurance reforms are also, he says, extremely important for the whole financial system. The update of management commentary will, he says, give investors a better insight into the future risks of a company related to, for example, sustainability issues, but also related to its business model or the technology it is working with. ‘All of these improvements will’, he says, ‘serve investors better in a future period of crisis’.

EBA publishes IFRS 9 roadmap, launches IFRS 9 benchmarking exercise

24 Jul 2019

The European Banking Authority (EBA) has published a IFRS 9 roadmap providing a comprehensive overview of planned monitoring activities on IFRS 9 implementation. The EBA has also launched an IFRS 9 benchmarking exercise on a sample of institutions aimed at analysing the different modelling practices followed by institutions and how IFRS 9 implementation impacts the amount of expected credit losses in terms of own funds and regulatory ratios.

In the roadmap, the EBA clarifies its intention to continue monitoring and promoting a consistent application of IFRS 9 as well as working on the interaction with prudential requirements. The roadmap includes the different phases of this work from qualitative and quantitative perspectives which will take place in the coming months and years.

The IFRS 9 benchmarking exercise represents an important step in the context of the on-going quantitative monitoring activities. The focus of this exercise is to assess whether the use of different modelling techniques and inputs can lead to significant inconsistencies in terms of expected credit losses amount that directly impacts own funds and regulatory ratios.

Please click for more information on the EBA website.

Summary of the June 2019 joint CMAC-GPF meeting

23 Jul 2019

Representatives from the International Accounting Standards Board (IASB) met with both the Capital Markets Advisory Council (CMAC) and Global Preparers Forum (GPF) in London on 13 and 14 June 2019. Notes from the joint meeting have now been released.

The topics discussed at the meeting included:

  • Disclosure of sensitive information
  • Goodwill and impairment
  • Primary financial statements
  • Business combinations under common control
  • Management commentary
  • Targeted standards-level review

The next GPF meeting will be held on 8 October 2019; the next CMAC meeting will take place on 10 October 2019.

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

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