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June

We comment on the proposed amendments to the IFRS Foundation Constitution

30 Jun 2021

We have commented on the amendments to the IFRS Foundation Constitution the Trustees of the IFRS Foundation have proposed in order to enable the creation of a new sustainability standards board under the governance of the Foundation.

We commend and continue to support the IFRS Foundation Trustees for their ongoing efforts to adapt the IFRS Foundation’s institutional arrangements to support sustainability reporting standard-setting and we encourage the IFRS Foundation to amend the constitution now to anticipate the further components necessary to support sustainability reporting standard-setting, which would increase the IFRS Foundation’s flexibility to respond. We agree with many of the IFRS Foundation’s proposals, but we have some concerns about specific matters. These are in particular:

  • We recommend that the Constitution provides the structures necessary to ensure common ownership of fundamental elements that will be common to both Boards.
  • We disagree with the proposal of a simple majority threshold for the publication of an Exposure Draft or final ISSB Standard. We recommend having the same voting thresholds as those for the IASB.
  • We do not agree with the terminology proposed for the new board and its associated standards. We believe that it is fundamental that ‘reporting’ be included in both the Board’s name and its standards.

Please click to download our full comment letter here.

IASB issues podcast on latest Board developments (June 2021)

29 Jun 2021

The IASB has released a podcast featuring IASB Chair Hans Hoogervorst and IASB Vice-Chair Sue Lloyd discussing deliberations at the June 2021 IASB meeting. The podcast is the last one with Hans Hoogervorst, who steps down as Chair on 30 June 2021. In the podcast he shares some reflections on his 10 years at the helm.

Highlights of the podcast include:

  • the addition of three narrow-scope amendment projects to the Board’s work plan (amendments to IFRS 17 and two projects resulting from submission to the IFRS IC); 
  • decisions taken regarding scope in the projects on primary financial statements and goodwill and impairment; and 
  • a farewell from Hans Hoogervorst. 

The podcast (22 minutes in all, the farewell beginning at 13:00 minutes) can be accessed through the press release on the IASB website.

Please click to view the detailed notes taken by Deloitte observers for the IASB meeting.

Webinar series on disclosure requirements in IFRS Standards — recording of second webinar available

29 Jun 2021

In May 2021, the IFRS Foundation initiated a series of webinars on the IASB exposure draft ‘Disclosure Requirements in IFRS Standards — A Pilot Approach’.

A recording of the second webinar that explored in more detail the proposed new approach to developing disclosure requirements in IFRS Standards and included a discussion of the Board’s views on comparability, enforceability and electronic reporting is now available on the IASB website.

Chair of the IFRS Foundation Trustees discusses path to global sustainability standards

29 Jun 2021

At a CFA Institute symposium today, Erkki Liikanen, Chair of the IFRS Foundation Trustees, talked about the Foundation’s work to meet the information needs of investors and other capital market participants regarding sustainability-related information.

Mr Liikanen began his speech with a strong statement:

There is a path to global sustainability standards if we, on the one hand, can create a global baseline of sustainability-related disclosures to facilitate comparability for investment decision making and, on the other, work with jurisdictions to ensure compatibility between this global baseline and their own initiatives.

He then explained that while governments can establish policy frameworks, it is the investors that price investment capital based on how those policies will impact companies in the long term. This in turn provides companies with an incentive to embrace sustainable business models. Whether this process works smoothly depends on high-quality, globally comparable information on which investors can assess sustainability risks and make informed decisions.

Mr Liikanen then explained that this is the place where an investor-focused international standard-setter such as the IFRS Foundation comes in.

Firstly, the IFRS Foundation's approach to global standards is market and demand led. The Foundation provides a setting where investors, regulators, companies, academics and standard-setters from around the world can work and solve problems together. This work follows a transparent and inclusive due process that has evolved and proven valuable over time.

And secondly, the IFRS Foundation's experience in international standard-setting can help to overcome a situation where many initiatives attempt to improve comparability, but their numbers have led to greater diversity. The major players in the field, including the TCFD, the VRF and the CDSB, affirm that consolidation is required and have welcomed the IFRS Foundation's proposals to establish a new International Sustainability Standards Board within the governance structure of the IFRS Foundation. Mr Liikanen declared:

Our shared ambition is to introduce a global baseline of standards for sustainability-related disclosures which are focused on meeting the information needs of investors globally when assessing enterprise value. Enterprise value is a key concept, designed to capture expected value creation for investors in the short, medium and long term, and is interdependent with value creation for society and the environment.

Mr Liikanen then turned to the question of how jurisdictional and international standards can be reconciled. He noted that the approach advocated by IOSCO and others is to establish a global baseline of sustainability-related disclosure standards to meet investor needs, which would be made available for use by jurisdictions as a base for public policy needs. This approach would provide global comparability for investors in a way that allows jurisdictions to combine the global standards with their own additional requirements. He concluded his speech by stating:

To make this work will require political will, compromise and flexibility from all parties — including the IFRS Foundation. Success is by no means certain, but if you want global sustainability-related disclosures for investors, this offers a path.

Please click to access the full text of Mr Liikanen's speech on the IASB website.

IOSCO report on sustainability-related disclosures, speech by IOSCO Chair

29 Jun 2021

The Board of the International Organization of Securities Commissions (IOSCO) has published a report on issuers’ sustainability-related disclosures that elaborates on IOSCO's vision and expectations for the IFRS Foundation’s work towards a global baseline of investor-focused sustainability standards to improve the global consistency, comparability and reliability of sustainability reporting. In addition, the manuscript of a speech by IOSCO Chair Ashley Alder on the 'crucial' IFRS global baseline has been made available.

The report, developed by IOSCO’s Sustainable Finance Taskforce (STF), reiterates the urgent need to improve the consistency, comparability and reliability of sustainability reporting for investors. It describes IOSCO’s engagement with the IFRS Foundation’s efforts to develop a common set of global sustainability standards to help meet investor needs and to set a sound baseline for jurisdictions to consider when setting or implementing their sustainability-related disclosure requirements. It notes:

IOSCO recognises that individual jurisdictions have different domestic arrangements for adopting, applying or otherwise availing of international standards. It will be important for individual jurisdictions to consider how the common global baseline of standards might be adopted, applied or otherwise utilized within the context of these arrangements and wider legal and regulatory frameworks, in a way that promotes consistent, comparable and reliable sustainability disclosures across jurisdictions.

In a speech given at City Week 2021 on 23 June 2021, IOSCO Chair Ashley Alder stressed the same point:

Within IOSCO, we fully accept that jurisdictional-level approaches are bound to differ. But for corporate reporting, it is essential that these domestic approaches will be fully interoperable with the emerging global baseline, avoiding the rule conflicts or overlaps that could devalue the overall effort. We cannot work in jurisdictional silos when the climate emergency does not respect national boundaries. It is absolutely essential that we resist fragmentation, which is a real risk all regulators are very aware of.

Please click for the following additional information:

In addition, the International Federation of Accountants (IFAC) has published a statement supporting IOSCO's approach (link to IFAC website).

IASB announces webinar on management commentary exposure draft

28 Jun 2021

The IASB will be holding a webinar on 13 July 2021 to provide an overview of Exposure Draft (ED) ‘Management Commentary’.

On 27 May 2021, the IASB published the ED in an effort to update the 2010 IFRS Practice Statement 1 'Management Commentary'. The one-hour webinar will be hosted by IASB Board member Nick Anderson and technical staff and include a question-and-answer session. In addition, the webinar will be presented in two sessions to accommodate for different time zones.

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

Update: On 21 July 2021, the IASB published a recording of this webinar.

Updated IASB work plan — Analysis (June 2021)

28 Jun 2021

Following the IASB's June 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 May 2021. Three new maintenance projects have been added to the work plan.

Below is an analysis of all changes made to the work plan since our last analysis on 28 May 2021.

Stan­dard-set­ting projects

  • No changes.

Main­te­nance projects

  • Classification of Debt with Covenants as Current or Non-current (IAS 1) — A project newly added to the work plan as result of a tentative agenda decision; an exposure draft for this project is expected in Q4 2021.
  • Initial Application of IFRS 17 and IFRS 9 — Comparative Information (Amendments to IFRS 17) — This project has been added to the work plan with an exposure draft expected in July 2021.
  • Lease Liability in a Sale and Leaseback — A decision on the project direction is now expected in Q4 2021 (previously Q3 2021).
  • Supplier Finance Arrangements — This project has been added to the work plan as result of an agenda decision; an exposure draft is expected in Q4 2021.

Research projects

  • Dynamic Risk Management — A decision on the project direction is expected in the H1 2022 (no entry before).
  • Pension Benefits that Depend on Asset Returns —  Review of research  is now expected in Q4 2021 (previously Q3 2021).

Other projects

  • No changes.

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

June 2021 IASB meeting notes posted

25 Jun 2021

The IASB met on Tuesday 22 and Wednesday 23 June 2021, by video conference. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

This was the last meeting with Hans Hoogervorst as Chair.

The following topics were on the agenda:

Board work plan update: The staff provided an update of its activities. The Board completed amendments to: IAS 8 (Definition of Accounting Estimates); IAS 1 (Disclosure of Accounting Policies); IFRS 16 (Covid-19-Related Rent Concessions beyond 30 June 2021); and IAS 12 (Deferred Tax related to Assets and Liabilities arising from a Single Transaction).

At future meetings, the Board will be asked whether it wants to add projects for the interaction of IFRS 10 and IFRS 16 (sale of a subsidiary with a leaseback) and amendments to IFRS Practice Statement 2 relating to information about possible future events that have not affected the entity’s financial performance or financial position and have uncertain outcomes, similar to the proposals in the Exposure Draft Management Commentary.

The Board currently has six consultation documents open for comment and expects to publish in the next six months an Exposure Draft on disclosure by subsidiaries without public accountability and a Request for Information as part of its post-implementation review of the classification and measurement requirements in IFRS 9.

Board members provided no comments.

Initial application of IFRS 17 and IFRS 9: In May, the Board discussed an accounting mismatch between financial assets and insurance contract liabilities that could arise at the beginning of the comparative period on transition to IFRS 17 when financial assets have been derecognised during the comparative period. The Board decided to propose a narrow-scope amendment to IFRS 17 to permit an entity to apply a classification overlay in the comparative period(s) presented on initial application of IFRS 17 and IFRS 9. The proposal will have a 60-day comment period (which the Trustees have approved).

Equity Method—Identifying the principles in IAS 28 Investments in Associates and Joint Ventures:  The staff have identified what they consider to be the principles in IAS 28, and principles they say are missing. They plan to use the analysis to address application questions. They do not intend incorporating the principles into IAS 28.

Goodwill and Impairment: The Board reaffirmed the project’s objective and scope.   

Primary Financial Statements: The Board decided to require that, if a numerator or a denominator of a ratio meets the definition of an MPM, that numerator or denominator should be included in the scope of the MPM requirements in order to ensure all subtotals of income and expenses used in communicating performance are in the scope of MPMs. The Board decided not to explore expanding the scope of MPM to include measures based on line items presented in the statement(s) of financial performance, the cash flow statement, the statement of financial position or ratios. 

Maintenance and Consistent Application:

IFRS Interpretations Committee Agenda Decisions

No Board members objected to the publication of two agenda decisions: Costs Necessary to Sell Inventories (IAS 2) and Preparation of Financial Statements when an Entity is No Longer a Going Concern (IAS 10).

Supplier Finance Arrangements

The Board decided to start a narrow-scope standard-setting project on supplier finance arrangements to add qualitative and quantitative disclosure requirements to IAS 7, and ‘sign-posts’ to existing disclosure requirements in IFRS 7. The requirements would explain the type of arrangements within its scope, rather than include specific definitions.

Classification of Debt with Covenants as Current or Non-current (IAS 1)

The Board decided to amend IAS 1 to specify that, if the right to defer settlement for at least twelve months is subject to an entity complying with conditions after the reporting period, then those conditions do not affect whether the right to defer settlement exists at the end of the reporting period (the reporting date) for the purposes of classifying a liability as current or non-current. There would be additional disclosure requirements and ‘non-current liabilities subject to conditions that need to be met within one year’ would need to be presented separately in the primary financial statements. As a consequence, the Board also decided to defer the effective date of the 2020 amendments by one year.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting. An analysis of how the work plan of the IASB has changed as a result of this meeting is available here.

Recent sustainability and integrated reporting developments

24 Jun 2021

A summary of recent developments at IFAC, The Investor Agenda, VBA, ACCA, IIRC, SASB, GRI, CDP, ASCG, The Reporting Exchange, and Deloitte.

The International Federation of Accountants (IFAC) examined global practices for sustainability reporting and assurance over that information, including the prevalence of assurance, level of assurance, and the standards used by practitioners. It found wide variations in how sustainability information is being reported by companies, and how accountants are providing assurance services to vet the information. More information is available on the IFAC website.

The seven Founding Partners of The Investor Agenda are calling on governments to commit to implementing mandatory climate risk disclosure requirements aligned with the TCFD recommendations, ensuring comprehensive disclosures that are consistent, comparable, and decision-useful. Please click for more information here.

The Value Balancing Alliance (VBA), whose goal it is to enable stakeholders to compare the non-financial performance of companies like financial performance today, has published a position paper on the standardisation of disclosure requirements. Please click to access the paper here.

The Association of Chartered Certified Accountants (ACCA) has published a report examining how a selection of organisations in the Business Network of the International Integrated Reporting Council (IIRC) are communicating integrated thinking in their integrated reports. Please click to access the report here.

Ahead of the merger with the Sustainability Accounting Standards Board (SASB) to form the Value Reporting Foundation (VRF) the International Integrated Reporting Council (IIRC) has publishesd its latest integrated report Driving Cohesion. Please click to access the report here.

The IIRC has also published an updated translation of the International Framework in Russian, to support the understanding and adoption of integrated reporting in Russia. Please click to access the translation here.

The Sustainability Accounting Standards Board (SASB) has announced the availability of French translations of its standards. Please click for more information here.

The Global Reporting Initiative (GRI) has released research conducted internally by GRI South Asia that finds that sustainability reporting is on the rise in three target countries – India, Bangladesh, and Sri Lanka. Please click for more information here.

The Carbon Disclosure Project (CDP) has released a regional Asia Pacific Analysis of 2020 corporate Eenvironmental disclosures. Please click for more information here.

The CDP has also released a Q&A with comments from CDP Europe on what the proposed CSRD means for companies. Please click for more information here.

Also on the proposed CSRD, the Accounting Standards Committee of Germany (ASCG) has published key messages. Please click for more information here.

The ASCG is also the first national standard setter to publish publicly available information on how Germany will support the ISSB financially. Please see the ASCG press release here.

The Reporting Exchange has moved to a new website: https://www.arabesque.com/

Deloitte has commented on the SEC's requests for input on climate-related and other ESG disclosures. Please see our comment letter here.

Deloitte has also published a Heads Up Newsletter — Do ESG Matters Affect Accounting and Financial Reporting Today? Please click to access the newsletter here.

Recording of EAA-EFRAG-IASB research workshop on the management commentary proposals

24 Jun 2021

The International Accounting Standards Board (IASB) in conjunction with the European Accounting Association (EAA) and European Financial Reporting Advisory Group (EFRAG) held a virtual research workshop on 18 June 2021 that provided an overview of the IASB’s exposure draft (ED) ‘Management Commentary’. A recording of this workshop is now available.

On 27 May 2021, the IASB issued the ED in an effort to update the 2010 IFRS Practice Statement 1 'Management Commentary'. The workshop was hosted by EAA President Thorsten Sellhorn, EFRAG Secretariat Vincent Papa, and Peter Kajueter and included discussions on the objectives-based approach, selecting and presenting information, and reporting on sustainability matters.

Recording of the pre­sen­ta­tion as well as the slide deck are now available on the IASB website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.