The main activities of EFRAG in this context are the EFRAG draft comment letter and field-testing on the exposure draft. Please click for more information in the press release on the EFRAG website.

Below is an analysis of all changes made to the work plan since our last analysis on 18 April 2020.

Standard-setting projects

• Disclosure initiative — Subsidiaries that are SMEs — The Board will decide whether to publish a discussion paper or an exposure draft as next step in this project in the fourth quarter of 2020 (previously no date given)
  

Maintenance projects

• Accounting policy changes — The Board will decide on the future project direction in June 2020 (previously May 2020)
• Classification of liabilities — Effective date — A project newly added to the work plan to defer the effective date effective date of the January 2020 amendments to IAS 1 to 2023; an exposure draft is expected in May 2020
• Deferred tax related to assets and liabilities arising from a single transaction — The Board was expecting to discuss exposure draft feedback in June 2020; the entry has now been changed to a decision of the future project direction (no date given)
• IBOR reform and its effects on financial reporting — Phase 2 — Discussion of the feedback on the April 2020 exposure draft is now expected to occur in June 2020 (previously third quarter of 2020)
• IFRS 16 and COVID-19 — Feedback on the exposure draft published earlier today is expected to be discussed in May 2020
• Lease liability in a sale and leaseback — A project newly added to the work plan; an exposure draft is expected in the third quarter of 2020

Research projects

• Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — the entry has been changed from research review  to request for information; the date remains unchanged as fourth quarter of 2020

Other projects

• Due Process Handbook review — The revised handbook is now expected in June 2020 (previously April 2020)

The above is a faithful comparison of the IASB work plan at 18 April 2020 and at 24 April 2020. For access to the current IASB work plan at any time, please click here.

Background

The COVID-19 pandemic has led to some lessors providing relief to lessees by deferring or relieving them of amounts that would otherwise be payable.  In some cases this is through negotiation between the parties, but can be as a consequence of a government encouraging or requiring that the relief be provided. Such relief is taking place in many jurisdictions in which entities that apply IFRSs operate.

When there is a change in lease payments, the accounting consequences will depend on whether that change meets the definition of a lease modification, which IFRS 16 Leases defines as “a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term)”.

The proposed amendment published today are intended to provide practical relief to lessees in accounting for rent concessions arising as a result of the COVID-19 pandemic.

Suggested changes

The changes proposed in ED/2020/2 Covid-19-Related Rent Concessions (Proposed amendment to IFRS 16) would amend IFRS 16 to

1. provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification;
2. require lessees that apply the exemption to account for COVID-19-related rent concessions as if they were not lease modifications;
3. require lessees that apply the exemption to disclose that fact; and
4. require lessees to apply the exemption retrospectively in accordance with IAS 8, but not require them to restate prior period figures (a lessee would recognise any difference arising on initial application of the amendment in opening retained earnings (or other component of equity, as appropriate) in the annual reporting period that includes the date of initial application).

The proposed amendment would not supersede the educational material recently published on the same topic, but rather the two complement each other.

The IASB is not proposing any additional relief for lessors as the current situation is not as equally challenging for lessors, as most have operating leases and even if they have lease modifications, the required accounting is not as complicated.

Comment period

The IFRS Foundation's Due Process Handbook sets out that 75% of the Trustees must approve comment periods shorter than 30 days. In a phone meeting on 17 April 2020, the Trustees approved a 14-day comment period. Therefore, comments on the proposed changes are requested by 8 May 2020.

Effective date

The Board expects to finalise the amendment to IFRS 16 by the end of May 2020 and proposes an effective date of 1 June 2020 for the final amendment (earlier application permitted, including in financial statements not yet authorised for issue at the date the amendment is issued).

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• Related IFRS in Focus newsletter
• Deloitte's comment letter on ED/2020/2
• Our IAS Plus project page on IFRS 16 and COVID-19

Comments on Tentative Agenda Decision

IAS 12 Income Taxes—Multiple Tax Consequences of Recovering an Asset (Agenda Paper 2): The staff recommend finalising the agenda decision which confirms that an entity should reflect the distinct tax consequences of recovering the asset's carrying amount under the income tax and capital gain tax regimes.

Research Summary

Supply Chain Financing—Reverse Factoring (Agenda Paper 3): The research summary provides a summary of the prevalence of supply chain financing arrangements, the key terms of reverse factoring arrangements and the accounting for reverse factoring arrangements.

Work in progress (Agenda Paper 4)

There are no new matters that have not yet been presented to the Committee.

The full agenda and pre-meeting summaries for the meeting can be found here. We will update this page for any changes to the agenda and our Deloitte meeting notes as they become available. 

In the draft comment lettert, EFRAG welcomes the tentative decisions taken by the IASB during its deliberations on the second phase of its project on the IBOR reform. In particular, EFRAG supports providing a practical expedient allowing an entity to apply paragraph B.5.4.5 of IFRS 9 Financial Instruments to account for modifications related to IBOR reform; supports the tentative decisions taken on hedge accounting; and observes that the proposed disclosures will assist users of financial statements in understanding the effects of IBOR reform on an entity.

​EFRAG notes the IASB proposal to clarify that a change in the basis on which the contractual cash flows are determined after initial recognition of financial instrument constitutes a modification even if the​ contractual terms of that financial instrument are not amended. As an assessment of the impact of this clarification is not possible within the limited timeframe available for this urgent project, EFRAG agrees with this proposal provided that this new definition is limited to the changes directly related to the IBOR reform.

Comments on EFRAG's draft comment letter are requested by 15 May 2020. For more information, see the press release and the draft comment letter on the EFRAG's website.

As a response to the additional challenges facing stakeholders as a result of the COVID-19 pandemic, the IPSASB has decided to provide them with additional time to undertake outreach and prepare their responses. A press release on the IPSASB website announces that the new comment letter deadline for the three exposure drafts is now 1 November 2020.

The RFI seeks comments on strategic and general questions, specific sections of the IFRS for SMEs, as well as new topics and other matters related to the IFRS for SMEs.

Stakeholders will be able to submit feedback by:

• Comment letter process — For stakeholders that currently have this process in place.
• Optional response document — For stakeholders without an existing comment letter process, but with the time and resources to provide one.
• Online survey — For stakeholders with limited time and resources.

Comments on the RFI are due by 27 October 2020. For more information, see the press release on the IASB’s website.

To inform its work, the SFN drew on a survey of the initiatives planned or undertaken by securities regulators and market participants to address the opportunities and challenges posed by sustainable finance. The report reflects the expectations from regulators and market participants that IOSCO should take an active role in facilitating global coordination and addressing transparency. The report notes:

[T]he SFN work to date points to a need to improve the comparability of sustainability-related disclosures. The lack of consistency and comparability across third party frameworks could create an obstacle to cross border financial activities and raise investor protection concerns.

The SFN has identified several actions that could contribute to enhanced comparability of sustainability related disclosure:

• Alignment of frameworks and requirements
• Identification of relevant components of disclosure
• Increased public accountability and assurance standards
• Increased engagement with asset managers on the integration of ESG factors in investment decision processes

Building on these, the report sets out the role that IOSCO can play and a proposal for next steps:

In response to these demands, IOSCO is looking to play an important role in addressing the challenges identified by the SFN while avoiding duplicating work done or being carried out by other standard-setting bodies or similar organizations. In particular, facilitating the provision of disclosure, both qualitative and quantitative, that is decision useful for both investors and companies is an area where IOSCO should be able to contribute meaningfully.

Therefore, IOSCO has decided to establish a Sustainability Task Force (STF). With a view to improve sustainability–related disclosures made by issuers and asset managers, the STF will identify and develop categories of disclosure which are material for investors and which are capable of falling within the supervisory and regulatory competence of securities regulators. The STF will then examine the categories of disclosure to assess whether industry specific or more broad metrics would provide decision useful information and comparability between different issuers. For this work, the STF will engage with the industry, voluntary third-party disclosure standard-setters and other relevant organisations.

Please click for the press release and the final report on the IOSCO website.

Below is an analysis of all changes made to the work plan since our last analysis on 27 March 2020.

Standard-setting projects

• The Board extended the consultation period for the Exposure Draft General Presentation and Disclosures until 30 September 2020
  

Maintenance projects

• Changes in accounting policies and estimates — Final amendments are now expected in the fourth quarter of 2020 (previously no date given)
• Amendments to IFRS 17 'Insurance Contracts' — Final amendments are now expected in June 2020 (previously second half of 2020)
• Deferred tax related to assets and liabilities arising from a single transaction — The discussion of exposure draft feedback is now expected in June 2020 (previously second quarter of 2020)
• Disclosure initiative — Accounting policies — The last work plan stated that feedback to the exposure draft would be discussed (no date given); this has now changed to final amendments to be expected in  the fourth quarter of 2020 without redeliberations having occurred yet
• Disclosure initiative — Disclosure review — An exposure draft is now expected in the first half of 2021 (previously second half of 2020)
• IBOR reform and its effects on financial reporting — Phase 2 — An exposure was published on 9 April 2020; discussion of the feedback received is expected to occur in the third quarter of 2020
• IFRS 16 and COVID-19 — A project newly added to the work plan; an exposure draft is expected "by 27 April 2020"
• The Board extended the consultation period for the Request for Information Comprehensive Review of the IFRS for SMEs Standard until 27 October 2020

Research projects

• Business combinations under common control — A discussion paper is now expected in the third quarter of 2020 (previously second quarter of 2020)
• Dynamic risk management — Outreach on the core model is now expected in the second half of 2020 (previously second quarter of 2020)
• Extractive Activities — Research findings will now be discussed in June 2020 (previously second quarter of 2020)
• Goodwill and impairment — The feedback received on the discussion paper will be discussed in the first half of 2021 (previously second half of 2020); the consultation period for the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment has been extended until 31 December 2020
• Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 — in the last work plan, the research review was announced for April 2020; this has now been given an entry "fourth quarter of 2020" although the Board will actually discuss the feedback at the upcoming Board meeting

Other projects

• 2020 Agenda Consultation — A request for information is now expected in the first half of 2021 (previously second half of 2020)

The above is a faithful comparison of the IASB work plan at 27 March 2020 and at 18 April 2020. For access to the current IASB work plan at any time, please click here.

The following papers were posted for the March meeting, but were deferred because of the COVID-19 pandemic:

• Financial Instruments with Characteristics of Equity: At the December 2019 Board meeting, the Board discussed the staff’s preliminary analysis on how the fixed-for-fixed requirement in IAS 32 could be clarified. At this meeting the staff recommend that the Board articulate its foundation principle by stating that in a derivative on own equity that meets the fixed-for-fixed condition, the amount of functional currency units to be exchanged with each underlying equity instrument is fixed and does not vary other than (if applicable) with preservation adjustments and passage of time adjustments. The staff also set out recommendations for how the preservation and passage of time adjustments should be expressed.
• Post-implementation review of IFRS 10, 11 and 12: The staff recommend that the Board proceed with the PIR and publish a request for information to gather more information about the application of these Standards.
• Maintenance and Consistent Application: In 2017, the IFRS Interpretations Committee received a question about a particular commodity loan transaction and observed that the transaction may not be captured within the scope of any IFRS Standard. The staff recommend that the Board consider referring to commodity transactions as a potential project in its Request for Information on the 2020 Agenda Consultation.
• Disclosure Initiative—Subsidiaries that are SMEs: In the January 2020 meeting, the Board agreed to move the project from the research programme to the standard-setting programme. The objective is to develop a reduced disclosure IFRS Standard that would apply on a voluntary basis to subsidiaries that are SMEs, adapted from the disclosure requirements of the IFRS for SMEs. The staff expect to start drafting an ED or a DP in Q4 2020.

The new topics are:

Maintenance and Consistent Application:

• Sale and leaseback with variable payments. At its March 2020 meeting, the IFRS Interpretations Committee (Committee) discussed a submission about a sale and leaseback transaction with variable payments. The Committee published a tentative agenda decision but its discussions highlighted that IFRS 16 is not as complete as it could be regarding the subsequent measurement of the lease liability arising in a sale and leaseback transaction. They therefore recommended that the Board make a narrow-scope amendment to IFRS 16. The staff propose amending IFRS 16 to state that for lease modifications or changes in the lease term of a sale and leaseback transaction, the seller-lessee remeasures the lease liability by discounting the revised expected payments for the lease using a revised discount rate.
• Lack of exchangeability. At its November 2019 meeting, the Board decided to propose an amendment to IAS 21 to address the accounting when the spot exchange rate is not observable (because of a lack of exchangeability between two currencies). The staff are recommending a definition of a lack of exchangeability, indicators for assessing exchangeability and disclosure requirements.

Deferred tax related to assets and liabilities arising from a single transaction. In July 2019 the Board published the Exposure Draft Deferred Tax related to Assets and Liabilities arising from a Single Transaction, proposing an amendment to IAS 12 to narrow the scope of the recognition exemption (which affects initial recognition of leases and decommissioning liabilities). The staff will present a summary of feedback received. No decisions are expected at this meeting.

Second comprehensive review of the IFRS for SMEs Standard: The staff will publish a survey on 20 April 2020, with comments to be received by 27 July 2020, for stakeholders who do not have an existing process or do not have sufficient capacity or resources to submit a comment letter.

Management Commentary: The discussion will focus on disclosure objectives and the type of information that would support those objectives. The three areas are business model, strategy and resources and relationships.

There will also be an oral update on amendments to IFRS 17 Insurance Contracts.

More information

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