The thematic review of IFRS 15 focused on those areas which gave the FRC greatest cause for concern in its thematic review of October 2019. The bulk of the review was focused on certain aspects of revenue reporting by a sample of 22 companies but also covered ‘quick reviews’ of 50 companies to substantiate and further inform the findings. Although the FRC notes some progress, it continues to identify disclosures by many companies that do not meet the FRC’s quality threshold. Companies should critically review their revenue-related disclosures to ensure they provide a clear understanding of how they have applied the requirements of the standard to their own particular circumstances. 

The thematic review of IFRS 16 focused on the disclosures made by a sample of twenty companies following the first year of adoption of IFRS 16 and is a follow up to the FRC’s report published in November 2019 that focused on disclosures made by interim reporters. The FRC found that most companies provided a good explanation of the impact of adopting IFRS 16. However, the quality of their disclosures should improve in future reporting.

For additional information and links to the reports, please see the press release on the FRC website.

This issue features:

• Spotlight — Covid-19-Related Rent Concessions
• Spotlight — Supply Chain Finance
• We need your views
• Stay up to date
• Resources for investors

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

The publication discusses the new environmental, social, and governance (ESG) disclosure framework developed by the Big Four accounting firms. The framework includes a universal set of metrics and recommended disclosures intended to lead to a more comprehensive global corporate reporting system. The framework divides disclosures into four pillars — principles of governance, planet, people, and prosperity — that serve as the foundation for ESG reporting standards.

Please click to access the report and a corresponding press release on the WEF website.

In addition, see Deloitte's Purpose-driven Business Reporting in Focus — Progress towards a comprehensive corporate reporting system.

New Matter

IFRS 10 Consolidated Financial Statements and IFRS 16 Leases — Sale and Leaseback in a Corporate Wrapper: The Committee decided not to add the matter to its agenda but to publish a tentative agenda decision to analyse the application of both IFRS 10 and IFRS 16 to the transaction in which an entity sells its equity interest in a subsidiary that holds only a real estate asset and then leases that real estate asset back. Most of the Committee members agreed with the conclusion but expressed their concerns on various aspect of the analysis and suggested amendments in wordings to the agenda decision.

Interpretations Committee Advice

IAS 12 Income Taxes — Deferred Tax arising from a Single Transaction: Most of the Committee members agreed with the preliminary proposed recommendations by the Committee to the Board's Exposure Draft ED/2019/5 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). Some gave opinions on certain areas for the staff's consideration for further recommendation or clarification.  

More In­for­ma­tion

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

Maintenance and Consistent Application — Lease Liability in a Sale and Leaseback — Sweep Issue: The staff are drafting the exposure draft (ED) to amend IFRS 16. They have identified matters that the Board needs to consider. They recommend that the ED specify that when measuring the ROU asset and lease liability arising from a sale and leaseback, a seller-lessee determines the proportion of the asset sold that relates to the right of use it retains by comparing the present value of the expected payments for the lease to the fair value of the asset sold.  They also recommend that the Board modify its tentative proposed approach for how a seller-lessee subsequently measures the lease liability arising from the leaseback such that the seller-lessee would reduce the carrying amount of the lease liability to reflect expected payments for the lease at market rates.

Business Combinations under Common Control: The BCUCC Discussion Paper is expected to be published in November 2020. The staff recommend a comment period of 120 days.

Management Commentary: The staff recommend that the proposed revised practice statement remain a non-binding framework for the preparation of management commentary; require management commentary to include an unqualified statement of compliance with the Practice Statement if it complies with all the requirements in the Practice Statement or explain which requirements it does not comply with if it does not comply; retain the requirement that when management commentary relates to financial statements, an entity should either make the financial statements available with the management commentary or identify in the management commentary the financial statements to which it relates; and require an entity to specify the date when its management commentary is authorised for issue and to reflect any material information about events occurring after the end of the reporting period and before the date when the management commentary was authorised for issue.

Extractive activities: The staff papers summarise the results of outreach to determine what problems, if any, entities with extractive activities have applying IFRS Standards and whether the primary users of financial statements of entities with extractive activities are obtaining all the information they need for these entities.

Rate-regulated Activities: The staff are drafting the ED on regulatory assets and liabilities. They have identified matters that the Board needs to consider, including the definition of a regulatory asset and regulatory liability, regulatory returns on assets not yet available for use. Additionally, the staff recommend extending the comment period to 180 days.

Board work plan update: The staff will give the Board an oral update on the work plan.

More in­for­ma­tion

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

Representatives were present from the Accounting Regulatory Department of the Chinese Ministry of Finance, the China Accounting Standards Committee (CASC), the Accounting Standards Board of Japan (ASBJ), the Korea Accounting Standards Board (KASB), and the IASB, together with guests from Hong Kong and Macao.

At this meeting, the delegates from the three countries provided updates on the recent applications of IFRSs and the developments of the local accounting standards in their respective jurisdictions and had in-depth discussions on accounting issues related to COVID-19, consolidated financial statements and primary financial statements.

Please click for the full communiqué (link to ASBJ website).

The errata affect the numbering of paragraphs in IFRS 9 Financial instruments.

Editorial corrections and errata do not change the meaning or application of pronouncements, but instead correct inadvertent errors. The list of errata can be viewed on the editorial corrections page of the IASB's website.

The purpose is to collect input on the proposals in the IASB's discussion paper DP/2020/1 Business Combinations — Disclosures, Goodwill and Impairment and on EFRAG’s suggestions included in its draft comment letter.

Responses on the survey are requested by 26 October 2020. Please click for more information and access to the survey on the EFRAG website.

Please note that the deadline for responses has been extended to 13 November 2020.

The Board will discuss the following:

• Board work plan update
• Maintenance and consistent application
• Rate-regulated activities
• Management commentary
• Business combinations under common control
• Extractive activities

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.

IFAC calls for the IFRS Foundation to create an International Sustainability Standards Board (ISSB). This new Board could leverage the independence and success of IFRS governance to develop global standards and rationalise the current fragmented ecosystem. As with the IASB, clear support from global institutions like IOSCO and appropriate funding would be critical to success. Under the structure the IFAC envisions, the IASB would remain focused on financial reporting standards and coordinate with the ISSB to avoid overlaps and gaps.

The ISSB itself would adopt a “building blocks” approach, working with and leveraging the expertise and disclosure requirements of leading initiatives, including CDP, CDSB, GRI, IIRC, and SASB. These building blocks would consist of:

• Requirements for material non-financial information focused on company performance, risk profile, economic decisions and enterprise value creation.
• Collaboration with respect to reporting requirements designed to address broader, material sustainable development and company impacts on economy, environment, and people. These requirements may ultimately be incorporated or endorsed into ISSB standards.
• Supplemental jurisdictional requirements to support local public accountability.

Financial and non-financial information would be connected through a common conceptual framework.

The IFAC notes that the time for a global solution is now — to answer the demand from investors, policymakers and other stakeholders for a reporting system that delivers consistent, comparable, reliable, and assurable information relevant to enterprise value creation, sustainable development and evolving expectations. A fragmented approach would perpetuate inefficiency, increased cost, and a lack of trust. Therefore, the IFAC argues, that important work that is currently underway should be continued, but with the aim of ultimately contributing to the emerging global system.

Please click to access Enhancing Corporate Reporting: The Way Forward on the IFAC website.