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June

IFRS Foundation publishes its 2019 annual report

30 Jun 2020

The IFRS Foundation has published its annual report and audited financial statements for the year ended 31 December 2019.

The report for 2019 provides an overview of the IFRS Foun­da­tion’s ac­tiv­i­ties during the past year and sets out the Foun­da­tion’s and IASB’s pri­or­i­ties for 2020.

For more in­for­ma­tion, see the press release and annual report (available in PDF format, inline XBRL version, and XBRL files)  on the IASB’s website.

June 2020 IASB meeting notes posted

30 Jun 2020

The IASB met via video conference on 23–25 June 2020 to discuss six topics. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

IBOR Reform and the Effects of Financial Reporting: The IASB discussed feedback on the Exposure Draft (ED) Interest Rate Benchmark Reform—Phase 2 (Proposed Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16), published in April 2020. The IASB supported all of the staff recommendations. The proposals on accounting for qualifying hedging relationships and groups of items will be discussed in July 2020, when the staff also expect to ask the IASB to finalise the proposals.

Classification of Liabilities as Current or Non-current—Deferral of Effective Date of Amendments to IAS 1: The IASB decided to finalise its proposal to defer the effective date of the amendments by one year to annual reporting periods beginning on or after 1 January 2023.

Disclosure Initiative: Accounting Policies: The Board decided to apply the concept of materiality to all types of accounting policy information, including accounting policy information that is standardised information or information that duplicates or summarises the requirements of a Standard.

Disclosure Initiative: Targeted Standards-level Review of Disclosures: The Board decided to begin the balloting process on Exposure Draft (ED) Targeted Standards-level Review of Disclosures—Amendments to IAS 19 and IFRS 13. It will have a comment period of 180 days (longer than the normal minimum of 120 days because the proposals could have significant consequences).

Extractive Activities: In September 2019, the IASB asked the staff to assess what problems, if any, entities with extractive activities have when applying IFRS requirements and whether the primary users of their financial statements are getting all the information they need. At this meeting the staff reported the results of their research, which indicated mixed views. The main Board comments focused on challenges in setting the scope of the project and low levels of engagement with users. No decisions were made.

Maintenance and Consistent Application

Sale of a Subsidiary to a Customer. In October 2019, the Board discussed the accounting for transactions that involve the sale of a subsidiary to a customer when that subsidiary holds a single asset and whether IFRS 10 or IFRS 15 should apply. The Board rejected the staff recommendation to amend IFRS 10 to place such transactions within the scope of IFRS 15.

Accounting Policy Changes (proposed amendments to IAS 8 in relation to agenda decisions). In December 2019, the Trustees amended the Due Process Handbook to clarify that the explanatory material in an agenda decision derives its authority from the Standards and accordingly, entities are required to apply the applicable Standards, reflecting the explanatory material in an agenda decision. ED/2018/1 Accounting Policy Changes proposed amending IAS 8 to simplify the application of accounting policy changes that result from an agenda decision. The Board decided not to proceed with the proposed amendments and to do no further work on the project.

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

IASB issues podcast on latest Board developments (June 2020)

30 Jun 2020

The IASB has released a podcast featuring IASB Chair Hans Hoogervorst and Vice-Chair Sue Lloyd discussing deliberations at the June IASB meeting.

The podcast discusses:

  • IBOR reform and the effects on financial reporting — Phase 2;
  • Classification of liabilities as current or non-current;
  • Disclosure initiative — Accounting policies;
  • Disclosure initiative — Targeted standards-level review of disclosures; and
  • Maintenance and consistent application.

The podcast also touches on the publication of the amended insurance contracts standard IFRS 17.

The podcast (17 minutes) can be accessed through the press release on the IASB website.

Comprehensive project update on business combinations under common control

30 Jun 2020

The IASB is currently working on a research project on combinations of businesses under common control as IFRS 3 'Business Combinations' only covers how to account for mergers and acquisitions between unrelated parties. IASB member Gary Kabureck has compiled a comprehensive project update that summarises and discusses the preliminary views the Board has so far reached in the project.

Mr Kabureck's update is structured along the following ten questions:

  1. What are these business combinations?
  2. Why is the Board doing the project?
  3. What is the focus of the project?
  4. What has the Board heard?
  5. Why not a single method in all cases?
  6. When would the acquisition method be applied?
  7. When would a book-value method be applied?
  8. What about costs to companies?
  9. How would financial reporting improve?
  10. What happens next?

Please click to access the comprehensive and informative update on the IASB website.

IAAER grants for research informing the IASB's work

30 Jun 2020

The 'Research Informing the IASB Decision Process programme' of the International Association for Accounting Education and Research (IAAER) has awarded grants to academics from Canada, Sweden, the UK, and the USA to conduct research that will be relevant to the IASB's work.

The successful research projects relate to projects and standards of the IASB:

  • Extractive activities: Financial Statement Comparability in Extractive Industries: International Evidence 
  • IFRS 9 Financial Instruments: The Impact of Hedging and Hedge Reporting on Managers’ and Investors’ Decisions
  • IFRS 15 Revenue from Contracts with Customers: An Assessment of Corporate Disclosures of IFRS 15: Revenue from Contracts with Customers
  • Primary Financial Statements: Are Non-GAAP Measures Running Amok? Evidence on the Proliferation of Non-GAAP Adjustments and the Quality of the Related Disclosures 
  • Primary Financial Statements: Income Statement Presentation and Forecasting Quality

The researchers will present their findings to the Program Advisory Committee, the Board and its technical staff in three deliverables. The first round of presentations will take place in December 2020.

Please click for more information on the IASB website.

 

IAASB guidance on accounting estimates

29 Jun 2020

The International Auditing and Assurance Standards Board (IAASB) has released COVID-19 pandemic-related guidance on auditing accounting estimates and related disclosures.

Auditing Accounting Estimates in the Current Evolving Environment Due to COVID-19 notes that management is responsible for the recognition and measurement of accounting estimates and related disclosures in accordance with the applicable financial reporting framework. As financial reporting frameworks often require forward-looking information and yet the COVID-19 pandemic comes with a lot of uncertainties, it will likely be more difficult for management to develop accounting estimates, in particular future cash flows. The COVID-19 pandemic could also result in triggers for impairment testing. Therefore, the IAASB notes, auditors will need to focus on the potential impacts of volatility and uncertainty when auditing accounting estimates.

Please click to access the guidance on the IAASB website.

Updated IASB work plan — Analysis (June 2020 meeting)

26 Jun 2020

Following the IASB's June 2020 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 May 2020.

Below is an analysis of all changes made to the work plan since our last analysis on 25 May 2020.

Stan­dard-set­ting projects

  • No changes

Main­te­nance projects

  • Accounting Policy Changes (Amendments to IAS 8) — this project has been removed from the work plan as the Board decided not to continue with this project.
  • Amendments to IFRS 17 — this project has been removed from the work plan due to the issuance of the amendments.
  • IFRS 16 and COVID-19 — this project has been removed from the work plan due to the issuance of the amendments.
  • Supply Chain Financing Arrangements — Reverse Factoring — this project has been added to the work plan with a tentative agenda decision expected in the second half of 2020.
  • The Board decided not to add a project on the sale of a subsidiary to a customer to the work plan (the staff had recommended a narrow-scope amendment).

Research projects

  • No changes.

Other projects

  • IFRS Taxonomy update — Common Practice (IAS 19 Employee Benefits) — this project has been added to the work plan with a proposed IFRS taxonomy update expected in the fourth quarter of 2020.
  • IFRS Taxonomy update — Covid-19-re­lated rent con­ces­sions (Amendment to IFRS 16) — feedback on the proposed update is expected in July 2020.
  • IFRS Taxonomy update — Interest rate benchmark reform — Phase 2  — this project has been added to the work plan with a proposed IFRS taxonomy update expected in the third quarter of 2020.

The above is a faithful com­par­i­son of the IASB work plan at 25 May 2020 and at 26 June 2020. For access to the current IASB work plan at any time, please click here.

EFRAG undertakes first step in the endorsement process for IFRS 4/IFRS 9 amendment

26 Jun 2020

Yesterday, the International Accounting Standards Board (IASB) issued in addition to 'Amendments to IFRS 17' also 'Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)'. While the two pronouncements result from the same project, publishing two documents instead of one will help the endorsement process for the amendments in the European Union.

Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4) defers the fixed expiry date of the exemption in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments from annual periods beginning on or after 1 January 2021 to annual periods beginning on or after 1 January 2023. Therefore, in order to be meaningful to European issuers, the amendment needs to be endorsed by the fourth quarter of 2020. As a first step, EFRAG has now published draft endorsement advice and in view of the urgency of the matter requests comments on it by 3 July 2020. As a next step, EFRAG intends to issue final endorsement advice on 7 July 2020.

Please click for the press release on the EFRAG website, which offer access to the draft endorsement advice and additional information.

IASB finalises narrow-scope amendments to IFRS 17 and IFRS 4

25 Jun 2020

The International Accounting Standards Board (IASB) has issued 'Amendments to IFRS 17' to address concerns and implementation challenges that were identified after IFRS 17 'Insurance Contracts' was published in 2017. The amendments are effective for annual periods beginning on or after 1 January 2023 with earlier application permitted. The IASB has also published 'Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)' to defer the fixed expiry date of the amendment also to annual periods beginning on or after 1 January 2023.

 

Background

Since IFRS 17 Insurance Contracts was issued in May 2017, the Board has been monitoring the implementation and has learned about concerns and implementation challenges. The Board had previously indicated that it would consider whether additional action is needed to address matters arising during implementation. At the October 2018 meeting of the Board a list of 25 potential amendments to the standard was identified and the criteria against which any possible amendment would be considered were agreed. An exposure draft of proposed amendments was published on 26 June 2019 with comments requested by 25 September 2019.

In the redeliberations in the project on possible amendments to IFRS 17 following the end of the comment period, the IASB refined its proposals and took additional feedback by constituents on board resulting in the final amendments issued today.

 

Changes

The main changes resulting from Amendments to IFRS 17 and Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4) are:

  • Deferral of the date of initial application of IFRS 17 by two years to annual periods beginning on or after 1 January 2023 and change the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after 1 January 2023.
  • Additional scope exclusion for credit card contracts and similar contracts that provide insurance coverage as well as optional scope exclusion for loan contracts that transfer significant insurance risk.
  • Recognition of insurance acquisition cash flows relating to expected contract renewals, including transition provisions and guidance for insurance acquisition cash flows recognised in a business acquired in a business combination.
  • Clarification of the application of IFRS 17 in interim financial statements allowing an accounting policy choice at a reporting entity level.
  • Clarification of the application of contractual service margin (CSM) attributable to investment-return service and investment-related service and changes to the corresponding disclosure requirements.
  • Extension of the risk mitigation option to include reinsurance contracts held and non-financial derivatives.
  • Amendments to require an entity that at initial recognition recognises losses on onerous insurance contracts issued to also recognise a gain on reinsurance contracts held.
  • Simplified presentation of insurance contracts in the statement of financial position so that entities would present insurance contract assets and liabilities in the statement of financial position determined using portfolios of insurance contracts rather than groups of insurance contracts.
  • Additional transition relief for business combinations and additional transition relief for the date of application of the risk mitigation option and the use of the fair value transition approach.
  • Several small amendments regarding minor application issues.

Although the IASB had in its discussions leading up to the exposure draft voted unanimously to leave the annual cohort requirement in IFRS 17 unchanged and did not ask a question on it in the draft, some respondents commented on the IASB’s decision to retain the requirements unchanged. The IASB, therefore, included in its deliberations the question of annual cohorts in February 2020 once more. However, it came to the same conclusion as before and decided to retain, unchanged, the annual cohort requirement in IFRS 17.

 

Effective date and transition

The amendments to IFRS 17 are effective for annual periods beginning on or after 1 January 2023. Earlier application is permitted. They are applied retrospectively.

Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4) defers the fixed expiry date of the amendment to annual periods beginning on or after 1 January 2023. 

 

Additional information

Please click for:

 

Pre-meeting summaries for the June 2020 IASB meeting

23 Jun 2020

The IASB will meet via video conference on 23–25 June 2020 for its regular meeting. We have posted our pre-meeting summaries for the meetings 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.

Disclosure Initiative: Accounting Policies: The Board will continue to discuss disclosures that simply duplicate the requirements of a Standard. The staff continue to recommend that the Board apply the concept of materiality to all types of accounting policy information, including accounting policy information that is standardised information or information that duplicates or summarises the requirements of a Standard.

Disclosure Initiative: Targeted Standards-level Review of Disclosures: The Board will decide whether the staff can begin the balloting process on Exposure Draft (ED) Targeted Standards-level Review of Disclosures—Amendments to IAS 19 and IFRS 13. The staff recommend proceeding with a comment period of 180 days (longer than the normal minimum of 120 days because the proposals could have significant consequences).

Extractive Activities: In September 2019, the IASB asked the staff to assess what problems, if any, entities with extractive activities have applying IFRS requirements and whether the primary users of their financial statements are getting all the information they need.  At this meeting the staff report the results of their research, which indicated mixed views. The Board is not asked to make any decisions in this session. Board members are invited to ask questions and to comment on the feedback.

Maintenance and Consistent Application

  • Sale of a Subsidiary to a Customer. In October 2019, the Board discussed the accounting for transactions that involve the sale of a subsidiary to a customer when that subsidiary holds a single asset and whether IFRS 10 or IFRS 15 should apply. The staff conclude that if the inventory that is an output of its ordinary activities, but that inventory (and any related income tax asset or liability) are sold in a corporate wrapper IFRS 15 should apply. The entity cannot retain any interest in the inventory transferred to the customer.
  • Accounting Policy Changes (proposed amendments to IAS 8 in relation to agenda decisions). In December 2019, the Trustees amended the Due Process Handbook to clarify that the explanatory material in an agenda decision derives its authority from the Standards and accordingly, entities are required to apply the applicable Standards, reflecting the explanatory material in an agenda decision. ED/2018/1 Accounting Policy Changes proposed amending IAS 8 to simplify the application of accounting policy changes that result from an agenda decision. The staff recommend that the Board not proceed with the proposed amendments and do no further work on the project.

IBOR: The IASB will discuss feedback on the Exposure Draft (ED) Interest Rate Benchmark Reform—Phase 2 (Proposed Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16), published in April 2020. The staff provide recommendations on all topics except for the proposals on accounting for qualifying hedging relationships and groups of items. That topic will be discussed in July 2020, when the staff also expect to ask the IASB to finalise the proposals.

More information

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

Correction list for hyphenation

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