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May

June 2021 IFRS Interpretations Committee meeting agenda posted

28 May 2021

The IFRS Interpretations Committee has posted the agenda for its next meeting, which will be held by video conference on 8-9 June 2021.

The Committee will discuss the following:

  • IAS 2 — Costs necessary to sell inventories
  • IAS 10 — Preparation of financial statements when an entity is no longer a going concern
  • IFRS 9 — European Central Bank’s third targeted longer-term refinancing operations programme
  • IFRS 16 — Power purchase agreements in a gross pool electricity market
  • Work in progress

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.

Updated IASB work plan — Analysis (May 2021)

28 May 2021

Following the IASB's May 2021 meeting, we have analysed the IASB work plan to see what changes have resulted from the meetings and other developments since the work plan was last revised in April 2021.

Below is an analysis of all changes made to the work plan since our last analysis on 30 April 2021.

Standard-setting projects

  • Management commentary —  ED/2021/6 was published on 27 May 2021 with comments requested by 23 November 2021; feedback to the exposure draft is expected to be discussed in H1 2022
  • Rate-regulated activities — feedback to the exposure draft is now expected to be discussed in Q4 2021 (previously H2 2021)

Maintenance projects

  • Deferred tax related to assets and liabilities arising from a single transaction — This project has been removed from the work plan due to the issuance of the final amendments on 7 May 2021
  • Lease Liability in a Sale and Leaseback — feedback on the exposure draft was discussed at the IASB's May meeting; a decision on the future project direction is expected in Q3 2021

Research projects

  • Extractive Activities — a decision on the project direction is now expected in July 2021 (previously Q3 2021)
  • Goodwill and Impairment — feedback on the discussion paper was discussed at the IASB's May meeting; a decision on the future project direction is expected in Q3 2021
  • Post-implementation Review of IFRS 10-12 — feedback on the request for information is now expected to be discussed in July 2021 (previously Q3 2021)

Other projects

  • no changes

The above is a faithful comparison of the IASB work plan at 30 April 2021 and 28 May 2021. For access to the current IASB work plan at any time, please click here.

Discounting in financial reporting

28 May 2021

On 9 July 2021, the European Accounting Association (EAA), the European Financial Reporting Advisory Group (EFRAG), and the Institute of Chartered Accountants of Scotland (ICAS) will host a webinar on discounting in financial reporting.

At the event, three studies on discount rates in financial reporting will be presented:​​

  • The Theory and Practice of Discounting in Financial Reporting Under IFRS
  • Discount rate in accounting: How practitioners depart the IFRS Maze – Towards the end of determinism in accounting
  • Black Box Accounting: Discounting and disclosure practices of decommissioning liabilities

The presentation of the studies will be followed by a panel discussion that will include Sue Lloyd, Vice Chair of the IASB.

Please click for more information on the EFRAG website.

IFRS Foundation appoints new Trustee

28 May 2021

The IFRS Foundation has announced the appointment of Masamichi Kono as Trustee of the IFRS Foundation. His appointment will begin on 1 July 2021.

Mr Kono is currently serving as Deputy Secretary General of the Organisation for Economic Cooperation and Development (OECD), where his responsibilities include setting the strategic direction of OECD policy on environment, tax, trade and agriculture, along with leading financial and enterprise affairs. He oversees initiatives on infrastructure and sustainable growth and represents the OECD at the Financial Stability Board.

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

IASB supports narrow-scope amendment to IFRS 17

27 May 2021

At its meeting this afternoon, the IASB discussed the presentation of comparative information on initial application of IFRS 17 and IFRS 9. Insurers had raised concerns about an accounting mismatch between financial assets and insurance contract liabilities that could arise from the continued application of IAS 39. The staff suggested the Board could consider adding a specific transition requirement to IFRS 17 to enable insurers to present comparative information on a basis that is consistent with how IFRS 9 would be applied going forward, without unnecessarily disturbing the transition requirements in IFRS 9.

The majority of Board members and all Board members who participated in the discussion agreed that something should be done. When discussing the staff's analysis, they stressed that

  • communication about this possible narrow-scope amendment is very important,
  • they had been aware of the problem, but not of its magnitude,
  • evidence provided by the insurers has become much more well-founded because implementation is progressing,
  • the amendment would be very specific and narrow-scope, so this is not "opening IFRS 17 up again",
  • the stable platform for IFRS 17 is very important, however, this possible amendment is smoothing implementation, rather than disrupting it,
  • while the optionality of the amendment would mean a decrease of comparability between companies, comparability within the financial statements of the individual companies increases.

The staff will bring back detailed proposals for the possible narrow-scope amendment at a future meeting.

IASB publishes exposure draft of revised Practice Statement on Management Commentary

27 May 2021

The International Accounting Standards Board (IASB) has published the exposure draft 'Management Commentary' in an effort to update the 2010 IFRS Practice Statement 1 'Management Commentary'. The deadline for submitting comments is 23 November 2021.

 

Background

At its meeting in March 2017, the IASB generally agreed that they should be playing a more active role in wider corporate reporting. At the meeting in November 2017, the Board members decided preliminarily that being the specialists in financial reporting they are best placed to provide the link between financial and non-financial information and the best way forward would be to revise the Management Commentary Practice Statement so that it could serve as an anchoring point for other frameworks. One of the key points to address would be to promote alignment between financial and ‘other’ information disclosed by an entity.

Since the IASB's decision to revise the Practice Statement, reporting on sustainability and ESG aspects has gained a lot of traction and the information needs of investors and creditors have evolved. Independently of the IASB’s work on management commentary, the Trustees of the IFRS Foundation have taken up an initiative on sustainability reporting and are currently considering setting up a board for setting IFRS sustainability standards. The IASB's project on management commentary and the initiative of the IFRS Foundation are connected in that entities would be able to use the standards issued by the new sustainability standards Board to to help them identify some of the information needed to comply with the revised Practice Statement

 

Key proposals

The proposals in ED/2021/6 Management Commentary are divided into three parts, each of which has several subsections:

  • Part A — General requirements. This part specifies requirements for identifying management commentary and the related financial statements, for authorising management commentary and for including a statement of compliance. It also sets out the objective of management commentary. Key proposals are:
    • Management commentary identifies the financial statements to which it relates. If the related financial statements are not prepared in accordance with IFRSs, the management commentary would disclose the basis on which the financial statements are prepared.
    • Management commentary that complies with all requirements of the Practice Statement includes an explicit and unqualified statement of compliance.
    • Management commentary that complies with some, but not all, of the requirements of the Practice Statement may include a qualified statement of compliance that identifies the departures from the requirements of the Practice Statement and gives the reasons for those departures.
    • The objective of management commentary is to provide information that enhances investors' and creditors’ understanding of the entity’s financial performance and financial position reported in its financial statements and provides insight into factors that could affect the entity’s ability to create value and generate cash flows across all time horizons, including in the long term.
  • Part B — Areas of content. This part specifies six areas of content for management commentary, and requires management commentary to provide information that meets disclosure objectives for each of those areas of content. It also includes the requirement that management commentary should focus on key matters. Key proposals are:
    • The proposed six areas of content are:
      • the entity’s business model,
      • management’s strategy for sustaining and developing the entity’s business model,
      • the entity’s resources and relationships,
      • risks to which the entity is exposed,
      • the entity’s external environment, and
      • the entity’s financial performance and financial position.
    • The proposed disclosure objectives for the areas of content are:
      • a headline objective describing the overall information needs of investors and creditors for the area of content,
      • assessment objectives describing the assessments that rely on information provided for the area of content, and
      • specific objectives describing the detailed information needs of investors and creditors for the area of content.
    • Key matters that management commentary should focus on are:
      • key features of the entity’s business model,
      • key aspects of management’s strategy,
      • key resources and relationships,
      • key risks,
      • key factors and trends in the external environment, and
      • key aspects of financial performance and financial position.
    • Generally, an entity would report on matters that could affect the entity’s long-term prospects, on intangible resources and relationships, and on environmental and social matters.
  • Part C — Selection and presentation of information. This part contains guidance on the selection of information to include in management commentary and the presentation of that information. Key proposals are:
    • In the context of management commentary, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that investors and creditors make on the basis of the management commentary and of the related financial statements.
    • Identifying material information requires management to apply judgement.
    • Information about a matter may be material because of the nature or magnitude of that matter, or a combination of both.
    • Information about possible future events that have not yet affected the entity’s financial performance or financial position may be material depending on the potential effects of the events on the amount and timing of the entity’s future cash flows.
    • Materiality judgements need to be reassessed each reporting period.
    • Information provided in management commentary must be complete, balanced, accurate as well as clear and concise.
    • Information in management commentary is more useful if it is comparable, verifiable, and coherent.
    • Metrics used to describe material information in management commentary should be derived from metrics that management uses to monitor key matters and to measure progress in managing those matters.

The deadline for submitting comments on these proposals is 23 November 2021.

 

Effective date and status of the Practice Statement

The exposure draft proposes that the Practice Statement would supersede IFRS Practice Statement 1 Management Commentary for annual reporting periods beginning on or after the date of its issue. The Practice Statement is not an IFRS and its application is not mandatory. Financial statements can comply with IFRSs even if they are not accompanied by management commentary or if they are accompanied by management commentary that does not comply with the Practice Statement.

 

Additional information

The following additional information is available on the IASB website and on IAS Plus:

 

Second IVSC perspectives paper on ESG and business valuation

27 May 2021

The International Valuation Standards Council (IVSC) has published a second perspectives paper 'A Framework to Assess ESG Value Creation' to analyse the impact of environmental, social, and governance (ESG) factors on value creation and explore how such a framework may be incorporated into the capital allocation process and bring much needed financial discipline to ESG investments.

The paper is a follow-up to the perspectives paper ESG and Business Valuation released in March 2021 which began to explore how ESG characteristics are, or can be, incorporated into the value measurement process. Please click to access A Framework to Assess ESG Value Creation on the IVSC website.

New agenda paper for IASB's session on a possible narrow-scope amendment to IFRS 17

26 May 2021

As reported earlier, the IASB will discuss the accounting for derecognised financial assets when insurers first apply IFRS 17 'Insurance Contracts' and IFRS 9 'Financial Instruments' on Thursday. An updated agenda paper for the session has now been made available on the IASB website that provides additional information and staff analysis. The question for Board members has also been amended.

The original agenda paper analysed feedback from some insurers and recommended the Board make a narrow-scope amendment to IFRS 17 to address the issue of accounting mismatches arising from financial assets derecognised in the comparative period. After releasing the paper, the staff received subsequent information provided by insurers that suggested that the staff recommendation included in that agenda paper was too narrow, not sufficiently clear and would not completely address the issue of concern for those insurers. It was also stated that implementing the recommended amendment would cause operational challenges.

Based on that information, the staff prepared the updated agenda paper to analyse and clarify additional aspects concerning the presentation of comparative information on initial application of IFRS 9 and IFRS 17 and updated the question for Board members accordingly.

Please click to access the updated agenda paper on the IASB website. A detailed summary of the new paper has been added to our meeting note page. As noted earlier, the session is now scheduled for Thursday 27 May 2021, 13:30-14:30.

AASB staff paper comparing narrative reporting requirements

26 May 2021

The staff of the Australian Accounting Standards Board (AASB) has published a paper 'Comparison of Narrative Reporting Requirements Applicable to For-Profit Entities' that examines several aspects of narrative reporting requirements for for-profit entities in Australia and selected overseas jurisdictions through their comparison to the draft disclosure objectives expected to be included in the forthcoming IASB exposure draft of a revised IFRS Practice Statement 1 'Management Commentary'.

In preparation for the public outreach to inform the AASB response to the forthcoming IASB exposure draft expected tomorrow, the paper compares the draft disclosure objectives included in publicly available IASB staff papers for each of the main content areas to be included in the forthcoming exposure draft of the revised practice statement with existing narrative reporting requirements applicable to for-profit entities in Australia, Canada, Germany, Hong Kong, New Zealand, Singapore, South Africa, the United Kingdom, and the United States.

The staff paper identifies possible sources of the best practice in relation to the narrative reporting requirements for for-profit entities and outlines several areas that could be considered in the effort to maintain Australian narrative reporting in step with global best practice.

Please click to access the staff paper on the AASB website.

We comment on two IFRS Interpretations Committee tentative agenda decisions

25 May 2021

We have published our comment letters on IFRS Interpretations Committee tentative agenda decisions related to IFRS 16 and IAS 32, as published in the March 2021 'IFRIC Update'.

More information about the issues is set out below:

Issue

Agenda decision supported?

More information

IFRS 16 — Non-refundable VAT on lease payments

Yes. However, we do not agree with the proposed wording of the agenda decision.

o    Deloitte comment letter

o    Committee discussion

IAS 32 — Warrants classified as financial liabilities on initial recognition

Yes

o    Deloitte comment letter

o    Committee discussion

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

Correction list for hyphenation

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