Financial Instruments with Characteristics of Equity: The Board discussed potential disclosures that could be developed as part of the FICE project. The Board also discussed the classification of particular financial instruments that contain obligations that arise only on liquidation of the entity, which IAS 32:16 classifies as equity. The 2018 DP proposed that at least some of these instruments should be classified as financial liabilities. The Board agreed with the staff that the information needs of users of financial statements could be met by supplementing the existing IAS 32 classification requirements with new presentation and disclosure requirements rather than changing the classification.

Management Commentary: The Board considered several issues identified during the drafting of the ED for the revised Practice Statement, mainly as a result of feedback from reviewers: (a) the status of the Practice Statement and how it compares to the status of the Materiality Practice Statement; (b) materiality—the staff recommended that the Practice Statement definition of material information should refer to the decision investors and creditors make on the basis of the management commentary and the related financial statements; (c) thresholds—clarifying why the ED uses the terms ‘key’, ‘fundamental(ly)’, ‘severely’ and ‘underpin’, and explaining how those terms relate to the materiality threshold; (d) Long-term prospects, intangible resources and relationships and ESG matters—the staff plan to restructure the appendix by providing a more summarised description of applicable requirements and guidance.

Extractive Activities: The Board had a non-decision making session in which the staff explained the life cycle of a minerals and oil and gas property, the activities that are performed in the different phases of that life cycle, and the financial reporting challenges associated with those different phases. Board members were concerned about the diversity in accounting practices for capitalisation of exploration expenditures. They want to understand if the differences in practice reflect simple policy choices or differences in the underlying activities. Several Board members observed that many of the issues were not limited to extractive activities, but are observed in pharma and mining as well, for example.

Agenda Consultation: The Board gave the staff permission to publish the Request for Information, which will lead to the Board setting priorities for 2022 to 2026 with 120 days as a comment period. This is shorter than the normal 180 days previously provided, because commenting on a strategic consultation should require less time for respondents.

Disclosure Initiative—Subsidiaries that are SMEs: The Board decided to start the process for publishing the ED. It will have a comment period of 180 days.  

SME Standard review: The staff provided an oral update of most recent meeting of the SME Implementation Group. They intend to present a plan for the project direction for the second phase of the review for the Board to consider at its meeting in March. 

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

The full agenda for the meeting is summarised below.

The Accounting Standards Committee of Germany (ASCG) has published the results of a study of how companies comply with the reporting obligations on environmental, social and governance (ESG) aspects in connection with the requirements of the EU Non-Financial Reporting Directive (NFRD). The study included a horizontal study of 100 representatively selected companies and outreach events with participants from all stakeholder groups; it also includes  recommendations for action on the upcoming revision of the NFRD. Please click to access the study on the ASCG website.

Following the publication of guidance for integrating climate matters into financial reporting in December 2020, the Climate Disclosure Standards Board (CDSB) now welcome companies, preparers, accountants, the finance function and other stakeholders to join a two-part webinar on how to account for climate in financial reporting. Please click for more information on the CDSB website: Part one (25 February) and part two (11 March).

The CDSB also invites comments from multi-stakeholders on the CDSB Framework application guidance for water-related disclosures and how it can support the integration of material water-related information in corporate mainstream reports. Comments are requested by 1 March 2021. Please click for more information on the CDSB website.

A recording is available of a workshop held in the Baltic region on Enhancing Climate-Related and Environmental Disclosure. The worhshop was held jointly by the CDSB and the United Nations Sustainable Stock Exchanges (SSE) initiative. Please click to access the recording on the SSE website.

Ten UN Environment Finance Initiative (UNEP FI) members (financial institutions from banking, investment and insurance) have issued a statement calling for greater action on assessment, reporting and management of the physical risks of climate change, and asking policy makers to deliver mandatory disclosure requirements on climate risk. Please click to access the statement on the UNEP FI website.

Research into corporate transparency practices in Hispanic American capital markets has set a benchmark for the prevalence of sustainability reporting in the region. The study by the Global Reporting Initiative (GRI) involved all 762 listed companies in five countries – Argentina, Chile, Colombia, Mexico and Peru – and found that 37.5% produce a report. Please click for more information on the GRI website.

The report notes that the COVID-19 pandemic has massively accelerated the adoption of technology across business and communications. These changes are driving some to ask if the digitisation of communications will permanently switch from physical to digital. Whilst the ultimate answer to this is currently unclear, it remains a good time to consider how virtual and augmented reality (the latter of which bridges the physical and digital) might work for corporate reporting. The report includes examples of current practice and highlights some possible future uses.

Please click to access the report on the FRC website.

The paper notes that the industry will need to navigate valuation challenges that are interrelated and can be grouped under three broad headings:

• valuation impact of terms in existing IBOR inventory;
• valuation impacts of evolving market liquidity;
• valuation impacts of new risks.

The paper also outlines the areas that can contribute to ‘valuation uncertainty’ and thereby increase valuation risk in valuations of financial instruments arising from the cessation of IBOR.

Please click to access the perspectives paper on the IVSC website.

The ITCG discussed the following:

• IFRS Taxonomy 2020 — Proposed Update 4 General Improvements and Common Practice — Presentation of information in primary financial statements

For more in­for­ma­tion, see the summary on the IASB’s website.

On 28 January 2021, the IASB published the ED which would replace IFRS 14 Regulatory Deferral Accounts and would apply when the entity is party to a regulatory agreement that determines the regulated rate the entity can charge for the goods or services it supplies to customers.

For more in­for­ma­tion, see the press release on the IASB’s website.

On 1 March 2021, the IASB released the recording of this webinar as well as the accompanying slide deck.

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.

The evidence presented in the research papers will aid the IASB’s on its targeted standards-level review of disclosures project. The research papers are requested by 31 March 2021.

In addition, the Australian Accounting Review is seeking academic research papers related to the application and impact of IFRS 9. The deadline to submit these research papers is 15 April 2021. 

For more information, see the press release on the IASB’s website.

Financial Instruments with Characteristics of Equity: The Board will discuss potential disclosures that could be developed as part of the FICE project, although the staff are not seeking any decisions. The Board will also discuss the classification of particular financial instruments that contain obligations that arise only on liquidation of the entity, which IAS 32:16 classifies as equity. The 2018 DP proposed that at least some of these instruments should be classified as financial liabilities. The staff now believe that the information needs of users of financial statements could be met by supplementing the existing IAS 32 classification requirements with new presentation and disclosure requirements rather than changing the classification. The Board will be asked if it agrees with that view. 

Management Commentary: The Board will consider several issues identified during the drafting of the ED for the revised Practice Statement, mainly as a result of feedback from reviewers: (a) the status of the Practice Statement and how it compares to the status of the Materiality Practice Statement; (b) materiality—the staff recommend that the Practice Statement definition of material information should refer to the decision investors and creditors make on the basis of the management commentary and the related financial statement; (c) thresholds—clarifying why the ED uses the terms ‘key’, ‘fundamental(ly)’, ‘severely’ and ‘underpin’, and explaining how those terms relate to the materiality threshold; (d) long-term prospects, intangible resources and relationships and ESG matters—the staff suggest restructuring the appendix by providing a more summarised description of applicable requirements and guidance.

Extractive Activities: The Board will have a non-decision making session in which the staff will explain the life-cycle of a minerals and oil and gas property; the activities that are performed in the different phases of that life-cycle; and the financial reporting challenges associated with those different phases.

Agenda Consultation: The staff are seeking permission to publish the Request for Information, which will lead to the Board setting priorities for 2022 to 2026. The staff recommend 120 days as a comment period. Although this is shorter than the normal 180-days previously provided, they think that commenting on a strategic consultation should require less time for respondents.

Disclosure Initiative—Subsidiaries that are SMEs: The staff are seeking permission to begin the balloting process for the ED, and is recommending a 120-day comment period.

There will also be an oral update for the SME Standard review.

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