The letter notes the developments of the last few months beginning with the WEF publication Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation, then citing the IFRS Foundation consultation on setting up a global sustainability standards board and the statement of intent of CDP, CDSB, GRI, IIRC, and SASB to work together towards a comprehensive corporate reporting system.

The letter states that the same global standardisation and coordination as is already in place for financial reporting is needed for ESG reporting as well so that that companies of any industry or country are comparable and can be held accountable to investors. The letter outlines three steps for achieving this:

1. An independent global standard setting body should develop ESG standards that can be adopted worldwide. The letter notes that the IFRS Foundation is well positioned to do this and that the WEF supports the proposal to establish a Sustainability Standards Board (SSB) that would sit alongside the International Accounting Standards Board (IASB).
2. For the standards to be enforced in individual capital markets, regulatory authorities must endorse their use. The letter cites the support of the International Organization of Securities Commissions (IOSCO) for the IFRS Foundation initiative and the suggested "building blocks" approach and welcomes the statements.
3. For the IFRS Foundation standard setting process to best succeed, it should build on the main reporting initiatives already in use. The letter points at the work of CDP, CDSB, GRI, IIRC, and SASB and notes that the WEF's work has included helping to facilitate the collaboration among the five organisations and that the WEF looks forward to working even more closely with them in support of creating sustainability reporting standards through the SSB.

The WEF, which is also a member of the recently announced IFRS Foundation sustainability working group, concludes its letter by stating:

These, then, are the steps we need to complete to get to system change on ESG metrics. We support this process and the organizations that are working to achieve it. Concretely, we look forward to supporting the IFRS’s Sustainability Standards Board, as appropriate, during its establishment and as it delivers on its mandate. We will promote opportunities for high-level public-private dialogue to strengthen strategic alignment on these objectives and will mobilize corporate support at the chief executive level in the global business community. We also encourage capital market regulatory bodies to work with the IFRS Foundation and IOSCO to support the Sustainability Standards Board.

Please click to access the full letter on the WEF website.

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

Below is an analysis of all changes made to the work plan since our last analysis on 19 February 2021.

Stan­dard-set­ting projects

• Disclosure Initiative — Subsidiaries that are SMEs — The issuance of an exposure draft is now expected in Q3 2021 (previously H2 2021).
• Disclosure Initiative — Targeted Standards-level Review of Disclosures — This project is now in the exposure draft feedback stage and discussions on the feedback is expected in H1 2022. The exposure draft was issued on 25 March 2021.
• Rate-regulated activities — The comment letter deadline has been extended to 30 July 2021.

Main­te­nance projects

• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) — The issuance of IFRS amendments is now expected in May 2021 (previously Q2 2021).
• IFRS 16 and COVID-19— This project expects to issue IFRS amendments in March 2021.
• Lease Liability in a Sale and Leaseback — Feedback to the exposure draft will now be discussed in May 2021 (previously Q2 2021).

Research projects

• Extractive Activities — The decision of the project’s direction is now expected in May 2021 (previously Q2 2021).
• Goodwill and Impairment — The discussion of the feedback on the discussion paper will continue in April 2021 (began in March 2021).
• Second Comprehensive Review of the IFRS for SMEs Standard — The next project step will be the issuance of an exposure draft (no date given).

Other projects

• IFRS Taxonomy Update — 2020 General Im­prove­ments and Common Practice — This project is removed from the work plan due to the issuance of the IFRS taxonomy update on 24 March 2021.
• IFRS Taxonomy Update — Amend­ments to IFRS 17, IFRS 4 and IAS 16 — This project is removed from the work plan due to the issuance of the IFRS taxonomy update on 24 March 2021.
• IFRS Taxonomy Update — Common Practice (IAS 19 Employee Benefits) — This project is removed from the work plan due to the issuance of the IFRS taxonomy update on 24 March 2021.

The above is a faithful com­par­i­son of the IASB work plan at 19 February 2021 and 26 March 2021. For access to the current IASB work plan at any time, please click here.

Against the backdrop of the final reports on possible EU non-financial reporting standards, participants discussed their expectations for future cooperation and the need and importance for EU sustainability reporting standards to build on as well as contribute to international standard-setting initiatives.

Please click to access the corresponding press release on the EFRAG website.

The Issued IFRS Standards 2021 publication contains the Standards as approved by the International Accounting Standards Board for issue up to 31 December 2020. These Standards include changes that are not yet required at 1 January 2021. The Annotated Issued IFRS Standards 2021 includes the same content as Issued IFRS Standards 2021, but with additional annotations containing extensive cross-references, explanatory notes and IFRS Interpretations Committee agenda decisions.

The books are available in electronic format for subscribers to eIFRS Professional. Printed copies of the books are available for sale through the IASB's web shop.

The statement stresses that the responsibility for developing and maintaining high-quality standards lies with the IASB and especially welcomes the recent IASB educational material on the topic of going concern disclosures as the topic is likely to be relevant for a larger number of public companies for 2020 and 2021 financial reporting periods in many jurisdictions.

IOSCO highlights that is important for investors to receive high-quality information about the existence of material uncertainties that may cast significant doubt on an entity’s ability to continue as a going concern. IOSCO also notes that it is important for investors to receive complete information about significant judgements that management may have exercised in determining the entity’s ability to continue as a going concern.

In conclusion, IOSCO reminds issuers, audit committees, and external auditors of the important role each plays in providing investors with high-quality, reliable, timely, and transparent financial information, especially in times of heightened uncertainty.

Please click to access the full statement on the IOSCO website.

Background

The IASB noted constituent concern about the cumulative effect of disclosure requirements introduced by new and revised standards and conducted a research project with the aim of a general review of disclosure requirements.

As a first step, the Board published a discussion paper DP/2017/1 Disclosure Initiative — Principles of Disclosure in March 2017 that contained an appendix with two examples of how existing standards could be re-drafted using the principles described in the DP.

Many respondents to the DP highlighted the ‘checklist’ approach as a significant factor contributing to the disclosure problem and that the Board’s way of developing and drafting disclosure requirements in IFRSs is partly responsible for this as there often are a large number of disclosure requirements without specific disclosure objectives. In addition, disclosure sections are drafted inconsistently.

The Board acknowledged these concerns and decided to pursue a project following a four-step approach:

• Develop draft guidance for the Board to use when developing and drafting disclosure sections;
• Select two standards on which to apply the draft guidance;
• Test the draft guidance by applying it to those standards; and
• Prepare an ED of amendments to those standards.

The exposure draft published today includes the draft guidance as well as proposed amendments to IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits that result from applying the draft guidance to those standards. 

Draft guidance and suggested changes

The exposure draft ED/2021/3 Disclosure Requirements in IFRS Standards — A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19) is made up of three blocks: the draft guidance for the IASB to apply when developing and drafting disclosure requirements in IFRSs in future; proposed amendments to IFRS 13; and proposed amendments to IAS 19.

Draft guidance

As one of the main reasons for the perceived disclosure problem was the 'checklist' mentality, the IASB decided to develop an approach that would shift the focus to the use of judgement and to determining whether the objective behind the disclosures has been met by the entity.

To this end, the the Board proposes to use overall disclosure objectives in future that that describe the overall information needs of users of financial statements and specific disclosure objectives that describe the detailed information needs of users of financial statements. An entity would then need to apply judgement to identify items of information for each specific disclosure objective by considering whether the information is relevant or irrelevant and whether it helps the entity to communicate effectively. For the overall disclosure objectives, the IASB would use more prescriptive language, while for the information needed to meet specific disclosure objectives it would typically use less prescriptive language.

The draft guidance is not a standard. However, once finalised, the Board will apply the guidance in developing and drafting disclosure sections of IFRSs in the future. The Board expects that the broad application of the guidance will have a significant effect on the behaviour of entities, auditors and regulators. Instead of checking whether a specific piece of information required by an IFRS has been provided, auditors and regulators will have to use judgement to assess compliance. Compliance will be achieved if the information provided effectively meets the disclosure objectives in the entity’s case.

Proposed amendments to IFRS 13

In line with the draft guidance, the Board proposes an overall disclosure objective that requires an entity to disclose information that shows

• the significance of the assets and liabilities measured at fair value;
• how the fair value measurements have been determined; and
• how changes in those measurements affect the entity’s financial statements.

Specific disclosure objectives would then regard the fair value hierarchy, measurement uncertainties, possible alternative fair value measurements, and drivers of change in fair value measurements. The proposed amendments also note the kind of information needed to meet the disclosure objectives. In addition, the specific disclosure requirements also cover disclosures regarding assets and liabilities not measured at fair value in the statement of financial position but for which fair value is disclosed in the notes.

Proposed amendments to IAS 19

The overall disclosure objectives proposed for IAS 19 distinguish between defined benefit plans and define contribution plans. For defined benefit plans, the overall disclosure objective requires an entity to disclose information that shows enables users of financial statements to evaluate the uncertainties associated with the entity’s involvement in its defined benefit plans and to assess the effect that the defined benefit plans have on the financial performance, financial position and cash flows of the entity. For defined contribution plans, the overall disclosure objective requires requires an entity to disclose information that enables users of financial statements to understand the effect that defined contribution plans have on the financial performance and cash flows of the entity.

While the Board does not propose specific disclosure objectives for defined contribution plans, the proposed specific disclosure objectives for defined benefit plans include amounts in the primary financial statements relating to defined benefit plans, the nature of, and risks associated with, defined benefit plans, expected future cash flows relating to the defined benefit obligations at the end of the period, future payments to members of defined benefit plans that are closed to new members, measurement uncertainties associated with the defined benefit obligation, and drivers of change in the amounts in the statement of financial position relating to the defined benefit plans. The proposed amendments also note the kind of information needed to meet the disclosure objectives.

In addition, the proposed amendments also touch on  multi-employer plans and defined benefit plans that share risks between entities under common control as well as other types of employee benefit plans.

Comments on the draft guidance and the proposed changes are requested by 12 January 2022 (comment letter deadline extended on 21 July 2021).

Effective date

The exposure draft does not contain a proposed effective date as the IASB intends to decide on this after exposure. Early application would be permitted.

Additional information

Please click for:

• IASB press release including a short explanatory video (link to IASB website)
• Access to the exposure draft on the IASB website
• Access to the basis for conclusions on the IASB website
• Snapshot overview of the exposure draft (link to IASB website)
• Deloitte's IFRS in Focus newsletter explaining the proposals in the ED
• Our IAS Plus project page on Disclosure initiative — Disclosure review

Board Work Plan Update: This is a regular update for the Board. The Board decided to increase the comment period 30 days for the ED Regulatory Assets and Regulatory Liabilities, because of ongoing challenges from the pandemic and the volume of consultation documents out for comment. They also decided to have longer consultation periods for two documents due to be released shortly—ED Targeted Standards-level Review of Disclosures from 180 days to 210 days (rather than the 270 days proposed) and the Request for Information on the Third Agenda Consultation from 120 days to 180 days.

Management Commentary: The Board decided that the comment letter period for the forthcoming ED to revise Practice Statement 1 Management Commentary should be set to avoid overlapping with other projects and (possibly) to avoid publication at the same time as the Trustees consultation on sustainability reporting.

Equity Method: The staff updated the Board on the equity method research project. The staff have compiled from various sources 71 application questions for consideration. Using the project scope decided by the Board in October 2020, the staff plan to consider only those issues that can be resolved without fundamentally rewriting IAS 28 or amending other Standards. The staff consider that issues not meeting these criteria should not be considered in this project and that issues should be removed if they are not important or do not affect the consistent application of IAS 28. Board members suggested that the criteria be used as guidelines and not imposed strictly.

Goodwill and Impairment: In March 2020, the Board published Discussion Paper DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment. During the comment period, Board members and the staff attended 94 meetings with outside parties, received feedback from its consultative bodies, recorded two webinars, conducted fieldwork and received 193 comment letters. The Board discussed a high-level summary of the feedback received on the DP but no decisions were made.

Maintenance and Consistent Application: The Board discussed the latest IFRIC Update. No decisions were made.

Primary Financial Statements: The Board discussed detailed feedback on three topics: Subtotals in the statement of profit or loss—operating profit; scope of management performance measures (MPMs); and statement of cash flows. The Board decided to proceed with the proposal to require all entities to present an operating profit subtotal. The operating category would include volatile and unusual income and expenses arising from an entity’s operations. The Board decided to proceed with the proposal to include information about measures meeting the definition of MPMs in the financial statements and explore possible approaches to expand the scope of MPMs to include measures other than subtotals of income and expenses. The Board also decided to proceed with the limited proposals in the ED in relation to cash flows and make no additions to the scope of the work. 

IFRS for SMEs: The Board decided to move the project from its research programme to its standard-setting work plan, treating alignment with IFRS Standards as the starting point, applying the principles of relevance to SMEs, simplicity and faithful representation in determining whether and how that alignment should take place. The next step should be an ED.

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

The IFRS Taxonomy 2021 is consistent with IFRSs as issued by the IASB at 1 January 2021, including those issued but not yet effective.

The IFRS Taxonomy 2021 also incorporates the six updates made to the IFRS Taxonomy in 2020 reflecting amended IFRSs and providing new common practice elements.

For more information, see the press release and the IFRS Taxonomy 2021 page on the IASB's website.