Background

The issue was initially raised with the IFRS Interpretations Committee that had originally intended to develop an interpretation of IAS 16 Property, Plant and Equipment to deal with it. However, during the course of discussions the Committee concluded that a narrow-scope amendment to IAS 16 would be a better solution. The IASB developed an exposure draft published in June 2017 and has now finalised the amendments.

Changes

Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) amends the standard to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the cost of producing those items, in profit or loss.

Effective date and transition

The amendments published today are effective for annual periods beginning on or after 1 January 2022. Early application is permitted. An entity applies the amendments retrospectively only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments.

Additional information

Please click for:

• IASB press release (link to IASB website)
• IFRS in Focus newsletter
• Our IAS Plus project page on IAS 16 — Proceeds before intended use

Annual Improvements to IFRS Standards 2018–2020 makes amendments to the following standards:

The amendments to IFRS 1, IFRS 9, and IAS 41 published today are all effective for annual periods beginning on or after 1 January 2022. Early application is permitted. The amendment to IFRS 16 only regards an illustrative example, so no effective date is stated.

Please click for the following additional information:

• IASB press release (link to IASB website)
• IFRS in Focus newsletter
• Our IAS Plus project page on Annual improvements — 2019-2020 cycle

Background

In March 2018, the IASB issued the 2018 Conceptual Framework and most references to the Framework included in IFRSs were updated to the 2018 Framework at that time. However, paragraph 11 of IFRS 3 Business Combinations, which continued to refer to the 1989 Framework, was not updated as this could have caused conflicts for entities applying IFRS 3.

Potential conflicts occur as the definition of assets and liabilities in the 2018 Framework differ from those in the 1989 Framework potentially leading to day 2 gains or losses post-acquisition for some balances recognised.

In a May 2019 exposure draft, the IASB identified three possible amendments to IFRS 3 that would update IFRS 3 without significantly changing its requirements. These amendments have now been finalised.

Changes

The changes in Reference to the Conceptual Framework (Amendments to IFRS 3):

• update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework;
• add to IFRS 3 a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination; and
• add to IFRS 3 an explicit statement that an acquirer does not recognise contingent assets acquired in a business combination.

Effective date

The amendments published today are effective for annual periods beginning on or after 1 January 2022. Early application is permitted if an entity also applies all other updated references (published together with the updated Conceptual Framework) at the same time or earlier.

Additional information

Please click for:

• IASB press release (link to IASB website)
• IFRS in Focus newsletter
• Our IAS Plus project page on IFRS 3 — Updating a reference to the Conceptual Framework

Background

The IFRS Interpretations Committee received a request to clarify what costs an entity considers in assessing whether a contract is onerous. The Committee’s research revealed that, for some contracts, differing interpretations of the onerous contract requirements in IAS 37 Provisions, Contingent Liabilities and Contingent Assets could have a material effect on entities that enter into those contracts. Consequently, the Committee recommended that the Board clarifies the onerous contract requirements in IAS 37. The Board supported the Committee’s suggestion and published an exposure draft of proposed clarifications in December 2018, which were finalised today.

Changes

The changes in Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

Effective date and transition requirements

The amendments published today are effective for annual periods beginning on or after 1 January 2022. Early application is permitted.

Entities apply the amendments to contracts for which the entity has not yet fulfilled all its obligations at the beginning of the annual reporting period in which the entity first applies the amendments. Comparatives are not restated.

Additional information

Please click for:

• IASB press release (link to IASB website)
• IFRS in Focus newsletter
• Our IAS Plus project page on IAS 37 — Onerous contracts

More in­for­ma­tion about the issues is set out below:

Click to access all our comment letters to the IASB, IFRS Foun­da­tion, and IFRS In­ter­pre­ta­tions Committee.

IASB Supplementary Meeting

The IASB is holding a supplementary meeting on 15 May 2020 to consider feedback on its proposal to amend IFRS 16 in response to COVID-19.  

The staff recommend that the Board finalise the proposed amendments, but allow the expedient to be applied to COVID-19-related rent concessions to payments originally due on or before 30 June 2021; require disclosure of the amount recognised in profit or loss to reflect changes in lease payments that arise from COVID-19-related rent concessions; and specify that in the reporting period in which a lessee first applies the amendment, it is not required to disclose the amount of the adjustment for each line item affected or its effect on earnings per share.

The staff recommend that the Board take no further action in response to requests to provide similar relief to lessors.  If the Board agrees with its recommendations, the staff expect issuing a final amendment on or around 28 May 2020.

IASB Meeting

The IASB is meeting on Wednesday 20 and Thursday 21 May 2020.

Amendments to IFRS 17 Insurance Contracts: The amendments to IFRS 17 are being finalised by the staff. During this process the staff identified five (sweep) issues for which the staff are recommending that that make additional changes to the Standard.

Maintenance and Consistent Application: Sale and leaseback with variable payments: At its April 2020 meeting, the Board decided to amend IFRS 16 for sale and leaseback transactions when the lease has variable payments. At this meeting the staff are recommending that the proposed amendment be applied retrospectively in accordance with IAS 8, except when hindsight is required, and that early application be permitted.

Disclosure Initiative—Accounting policies: The staff recommend that the Board finalise the proposal to require entities to disclose ‘material’ accounting policies instead of ‘significant’ accounting policies, with minor changes. The finalisation should not be delayed to align with any changes arising from the ED General Presentation and Disclosures. However, the staff will consider whether to align the effective date of this amendment with the amendments to IAS 8 under the Accounting Policies and Accounting Estimates project.

Management Commentary: The discussion will continue to focus on disclosure objectives and the type of information that would support those objectives. There are two areas this month: risk and the external evironment.

Research Programme update: The staff will update the Board on the research programme, including recent the changes to the timetable and priorities.

There will also be an oral update of IBOR Reform and the Effects on Financial Reporting.

More information

Our pre-meeting summaries are available on our May meeting notes and supplementary meeting notes pages and will be supplemented with our popular meeting notes after the meeting.

Specifically, Ms Ko discussed:

• Background on how the IFRS Foundation started and its role in the development of the IFRS Standards.
• Current state of sustainability report where there are over 650 different metric available and the desire by many to consolidate the metrics into a global comparable framework.
• Actions taken by (1) the IASB which include the update to its Practice Statement Management Commentary and (2) the Trustees which include the establishment of a working group to determine the role of the IFRS Foundation in sustainability reporting.

The full presentation is available on the IASB’s website.

The topics covered during the meeting were the following (numbers in brackets are ref­er­ences to the cor­re­spond­ing para­graphs of the summary):

• IBOR reform and its effects on financial reporting — Phase 2 (1–12): The ASAF were provided with an overview of the IASB’s proposed amendments for the forthcoming Exposure Draft Interest Rate Benchmark Reform — Phase 2 and gave their initial views to the expected proposals, which they were in broad agreement. In addition, the ASAF members provided feedback on what constitutes a ‘modification’ of financial assets and financial liabilities, disclosures, and other topics.
• Update on agenda planning (13–17): The ASAF was given an update on the IASB’s work plan and the change of timelines of various projects due to the coronavirus pandemic. The ASAF expects its next meeting to be held in July 2020 and will likely be virtual.
• Goodwill and Impairment (18–25): The ASAF were provided with an overview of the IASB’s preliminary views on Discussion Paper Business Combinations — Disclosures, Goodwill and Impairment and provided recommendations on how to conduct outreach and fieldwork activities.
• Better Communication — Primary Financial Statements (26–46): The ASAF discussed topics related to the proposals in Exposure Draft General Presentation and Disclosures. Topics discussed include subtotals and categories in the statement of profit or loss, disaggregation, management performance measures, and statement of cash flows.

A full summary of the meeting is available on the IASB's website.

In the draft comment letter, EFRAG agrees with the proposals in the exposure draft published on 4 May 2020 that would defer the effective date of the January 2020 amendments to IAS 1 by one year.

EFRAG acknowledges that there may be related operational consequences of the amendments, but opines that the advantages of a deferral during this time of significant disruption due to COVID-19 would outweigh the disadvantages, as earlier application of the amendments will continue to be permitted. ​

Comments on EFRAG's draft comment letter are requested by 25 May 2020. For more information, see the press release and the draft comment letter on the EFRAG website.

Please note that the collections do in part overlap - especially the IASB statements on IFRS 9 and IFRS 16 are included in almost all of them. Please be also aware that these collections will continue to be updated throughout the crisis. This page was last updated on 2 September 2020.

If you are aware of additional collections that would be of interest to an international financial reporting audience, please feel free to contact us.