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2019

October 2019 IASB meeting notes posted

25 Oct 2019

The IASB met on Tuesday 22 and Wednesday 23 October 2019. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

Implementation matters:

  • Onerous Contracts: For the planned amendments to IAS 37 the Board decided to replace the examples proposed in the ED with a clarification that the costs that relate directly to the contract consist of both the incremental costs of fulfilling that contract and an allocation of costs that relate directly to fulfilling that and other contracts.
  • PPE—Proceeds before intended use: The Board decided that the forthcoming amendments to IAS 16 will be effective for periods beginning on or after date 1 January 2022 and require retrospective application, but only for PPE made available for use on or after the beginning of the earliest period presented in the financial statements in which an entity applies the amendments. The amendments will prohibit the deduction of the proceeds from testing PPE, before it is capable of operating in the manner intended by management, from its cost.
  • Sale of a single asset entity containing real estate: The Interpretations Committee referred an issue involving the sale of an entity that has only one asset (real estate) and whether it should be in the scope of IFRS 10 or IFRS 15. The Board asked the staff to provide more analysis so that the Board can assess whether it should make a narrow scope amendment to IFRS 10 or IFRS 15.  

Business Combinations under Common Control: The Board decided that, when applying a predecessor approach for a business combination under common control: the acquirer should recognise and measure assets and liabilities at the carrying amounts included in the financial statements of the transferred entity (rather than at the amounts included in the consolidated financial statements of the common controller); and that the acquisition would be accounted for prospectively—i.e. the comparative information of the acquirer would not be adjusted.

Management Commentary: The Board decided that the revised Practice Statement state that the enhancing qualitative characteristics of comparability, verifiability, and understandability are relevant to management commentary along with guidance on how to apply those characteristics, but decided not to include timeliness as a qualitative characteristic. The Board also began its discussions of the business model. 

Accounting Policies and Estimates (amendments to IAS 8): The Board decided to finalise the proposed amendments to the definition of accounting estimates but not amend the definition of accounting policies.

SME Standard Review and Update: The Board decided that the RFI ask whether the IFRS for SMEs Standard should be updated to align the definitions of Section 15 with IFRS 11 by aligning the definitions of ‘control’ and ‘joint control’ (but not the recognition and measurement requirements) and retain three categories (i.e. jointly controlled operations, jointly controlled assets, jointly controlled entities).

Financial Instruments with Characteristics of Equity: The Board has decided to develop amendments to IAS 32 to address practice issues, clarify the underlying principles in IAS 32 and develop additional application guidance. The Board discussed the overall objectives of the project and the project timetable, which could lead to an Exposure Draft in 2021.

Dynamic Risk Management: The Board discussed the outreach plan, which focuses on assessing the viability and operability of the DRM model and whether it will reflect an entity’s risk management strategy. The outreach will focus exclusively on financial institutions and aim to provide feedback to the Board by June 2020.

Subsidiaries that are SMEs: The Board decided that when it tailors the disclosure requirements for subsidiaries that are SMEs if there is no recognition and measurement difference between full IFRS and IFRS for SMEs they will use the disclosures in IFRS for SMEs. If there is a recognition and measurement difference, they will consider the principles in BC157 of the IFRS for SMEs Standard and adapt the disclosures if supported by one of the principles.  

IBOR Reform and the Effects on Financial Reporting: The Board decided to amend IFRS 9 to clarify that an entity should apply the IBOR practical expedient first, by updating the effective interest rate based on the alternative benchmark rate, and then apply IFRS 9 current requirements (but not with an illustrative example). In the context of the IBOR reform, the Board concluded that the current requirements in IFRS 9 provide an adequate basis to determine if any other modifications to that financial instrument are substantial, and propose no other amendments to IFRS 9.

Amendments to IFRS 17 Insurance Contracts: The Board discussed an update on feedback from outreach.  

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

Accountancy Europe recommends revising the EU Non-Financial Reporting Directive

23 Oct 2019

Accountancy Europe has released a call to action recommending five steps to revise the Non-Financial Reporting Directive and strengthen non-financial reporting requirements in Europe.

Accountancy Europe recommends:

  • Expanding the scope of the Non-Financial Reporting Directive beyond large public listed entities;
  • Indicating a minimum set of mandatory reporting criteria;
  • Requiring companies to disclose their non-financial information in the annual management report;
  • Introducing minimum reporting criteria for forward-looking disclosures; and
  • Ensuring the reliability of reported information.

Please click to access the call to action on the Accountancy Europe website.

FRC Lab report discussing reporting on climate-related issues

22 Oct 2019

A new report from the Financial Reporting Lab of the UK Financial Reporting Council (FRC) reveals that companies are falling short of investors’ expectations for clearer reporting on climate-related issues. It notes that while reporting on climate change is an evolving practice, investor expectations are changing rapidly.

The report highlights the gap between current reporting and investor expectations as economies increasingly transition towards low carbon and climate resilient futures and calls on companies to bridge this gap. It provides practical guidance about where companies can improve their reporting. The report also outlines what investors want to understand, questions companies should ask themselves, recommended disclosures, and a range of examples of the developing practice of climate-related reporting.

Please click to download the new report Climate-related corporate reporting – Where to next? from the FRC website.

ESMA announces enforcement priorities for 2019 financial statements

22 Oct 2019

The European Securities and Markets Authority (ESMA) has announced the priority issues that the assessment of listed companies' 2019 financial statements will focus on.

The common enforcement priorities related to 2019 IFRS financial statements include:

  • specific issues related to the application of IFRS 16 Leases;
  • follow-up of specific issues related to the application of IFRS 9 Financial Instruments for credit institutions and IFRS 15 Revenue from Contracts with Customers for corporate issuers; and
  • specific issues related to application of IAS 12 Income Taxes (including application of IFRIC 23 Uncertainty over Income Tax Treatments).

ESMA also highlights potentially significant implications of transition from one interest rate benchmark rate to another on financial reporting and the importance of timely disclosure of its consequences.

In addition, this year’s priorities highlight the requirements to disclose non-financial information, with a focus on environmental matters, and specific aspects of ESMA’s Guidelines on Alternative Performance Measures. ESMA also highlights the importance of disclosures analysing the possible impacts of the decision of the United Kingdom to leave the European Union.

Additionally, the harmonised electronic format for issuers’ annual financial reporting (the European Single Electronic Format, ESEF) will apply to annual financial reports containing financial statements for financial years beginning on or after 1 January 2020. ESMA expects issuers to undertake all the necessary steps to ensure compliance with the new requirements on a timely basis.

ESMA and European national enforcers will monitor and supervise the application of the IFRS requirements outlined in the priorities, with national authorities incorporating them into their reviews and taking corrective actions where appropriate. ESMA will collect data on how European listed entities have applied the priorities and will publish its findings in a separate report.

Please click for the following documents on the ESMA website:

Future of corporate reporting survey

21 Oct 2019

The UK Financial Reporting Council (FRC) has launched an online survey asking respondents about what information they need. The survey is part of the FRC's major project to inspire the future of corporate reporting.

The aim of the project is to make recommendations for improvements to current regulation and practice and develop ‘blue sky’ thinking on corporate reporting. A key aim of the project is to challenge the FRC to think more broadly about how to promote greater ‘brevity, comprehensibility and usefulness in corporate reporting’ moving forward.

The survey is open until 15 November. Summary results will be published alongside the future of corporate reporting thought leadership paper in 2020.

Please click to access the survey through the press release on the FRC website. It will take no more than 15 minutes to complete.

IFRS Foundation issues compilation of 2019 IFRS Interpretations Committee agenda decisions

18 Oct 2019

The IFRS Foundation has issued, “Compilation of Agenda Decisions — Volume 1” which contains all the agenda decisions made by the IFRS Interpretations Committee from January to September 2019.

The IFRS Foundation plans on issuing this new compilation series biannually in April and October. For more information, see the press release and compilation on the IASB’s Web site.

Pre-meeting summaries for the October 2019 IASB meeting

17 Oct 2019

The IASB will meet in London on 22–23 October 2019 to discuss 10 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.

Implementation matters:

  • Onerous Contracts: The staff recommend that for the planned amendments to IAS 37 the Board replace the examples proposed in the ED with a clarification that the costs that relate directly to the contract consist of both the incremental costs of fulfilling that contract and an allocation of costs that relate directly to fulfilling that and other contracts.
  • PPE—Proceeds before intended use: The staff recommend that the forthcoming amendments to IAS 16 have an effective date of 1 January 2022 and require retrospective application, but only for PPE made available for use on or after the beginning of the earliest period presented in the financial statements in which an entity applies the amendments. The amendments will prohibit the deduction of the proceeds from testing PPE, before it is capable of operating in the manner intended by management, from its cost.
  • Sale of a single asset entity containing real estate: The Board will discuss a matter referred to it by the IFRS Interpretations Committee, involving whether the sale of an entity that has only one asset (real estate) should be in the scope of IFRS 10 or IFRS 15. The staff recommend that the Board consider single-asset entities broadly, as part of the PIR of IFRS 10, rather than addressing this specific and narrow issue.  

Business Combinations under Common Control: The staff recommend that, when applying a predecessor approach for a business combination under common control, the acquirer should recognise and measure assets and liabilities at the carrying amounts included in the financial statements of the transferred entity (rather than at the amounts included in the consolidated financial statements of the common controller). The acquisition would be accounted for prospectively—i.e. the comparative information of the acquirer would not be adjusted.

Management Commentary: The staff recommend that the revised Practice Statement state that the enhancing qualitative characteristics of comparability, verifiability, timeliness and understandability are relevant to management commentary along with guidance on how to apply those characteristics. The Board will also begin its discussions of the business model. 

Accounting Policies and Estimates (amendments to IAS 8): The staff recommend that the Board finalise the proposed amendments to the definition of accounting estimates but not amend the definition of accounting policies.

SME Standard review and update: The staff recommend that the RFI ask whether the IFRS for SMEs Standard should be updated to align the definitions of Section 15 with IFRS 11 and introduce requirements on how an operator accounts for a joint operation and whether to retain the accounting policy election in Section 15 (i.e. cost model, equity method or fair value model). The staff will also ask the Board whether it wants to seek views in the RFI on aligning the definition of ‘control’ but not the definition of ‘joint control’ or if it wants to wait until the completion of the PIR of IFRS 10, 11 and 12 before considering aligning Section 15.

Financial Instruments with Characteristics of Equity: The Board has decided to develop amendments to IAS 32 to address practice issues, clarify the underlying principles in IAS 32 and develop additional application guidance. The Board will discuss the overall objectives of the project and the project timetable, which could lead to an Exposure Draft in 2021.

Dynamic Risk Management: The staff have set out their outreach plan, which will focus on assessing the viability and operability of the DRM model and whether it will reflect an entity’s risk management strategy. The outreach will focus exclusively on financial institution and aim to provide feedback to the Board by June 2020.

Subsidiaries that are SMEs: The staff ask the Board to indicate how it wants to tailor the disclosure requirements of the IFRS for SMEs Standard. 

IBOR Reform and the Effects on Financial Reporting: The staff recommend that the Board amend IFRS 9 to clarify that an entity should apply the IBOR practical expedient first, by updating the effective interest rate based on the alternative benchmark rate, and then apply IFRS 9 current requirements (with an example in IFRS 9 to illustrate this). In the context of the IBOR reform, the staff conclude that the current requirements in IFRS 9 provide an adequate basis to determine if any other modifications to that financial instrument are substantial, and propose no other amendments to IFRS 9.

Amendments to IFRS 17 Insurance Contracts: The Board will be given an update on feedback from outreach. 

More information

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

IFAC survey shows adoption of international standards to be on the increase

15 Oct 2019

The International Federation of Accountants (IFAC) has published the results of a survey among its members as 'International Standards: 2019 Global Status Report'. The report includes research results on the adoption of IFRSs.

The report includes data from more than 170 IFAC member organisations. The data shows that more than 90% of the jurisdictions examined have adopted or partially adopted IFRSs. Most jurisdictions adopt IFRSs by directly referring to the standards or working to eliminate differences to better align national standards with the international ones. Only 9% do not use international standards as a reference.

The report notes that IFAC has more than 120 member organisations that operate in jurisdictions where English is not an official or a business language. In these jurisdictions, access to local language standards translations is one of the main challenges to successful adoption and implementation of the international standards.

Please click to access the full report on the IFAC website.

IFRS Foundation publishes proposed IFRS Taxonomy update

14 Oct 2019

The IFRS Foundation has published 'IFRS Taxonomy 2019 — Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)'.

The proposed update includes elements to reflect the new disclosure requirements introduced by the amendments to IFRS 9, IAS 39 and IFRS 7, issued by the Board on 26 September 2019.

For more information, see the press release and proposed update on the IASB’s website. Comments are requested by 13 December 2019.

October 2019 IASB meeting agenda posted

11 Oct 2019

The IASB has posted the agenda for its next meeting, which will be held at its offices in London on 22–23 October 2019. There are 10 topics on the agenda.

The Board will discuss the following:

  • Implementation matters — Property, plant and equipment, onerous contracts, sale of a single asset entity containing real estate, September 2019 IFRIC update
  • Business com­bi­na­tion under common control
  • Management commentary
  • Amendments to IFRS 17 Insurance Contracts
  • IBOR reform and the effects on financial reporting
  • Financial instruments with characteristics of equity
  • Dynamic risk management
  • SME standard review and update
  • Accounting policies and accounting estimates
  • Im­ple­men­ta­tion matters — Property, plant and equipment: Proceeds before intended use (amend­ments to IAS 16)

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.

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