IASB issues podcast on latest Board developments (September 2021)

30 Sep 2021

The IASB has released a podcast featuring IASB Chair Andreas Barckow and IASB Vice-Chair Sue Lloyd discussing deliberations at the September 2021 IASB meeting.

High­lights of the podcast include dis­cus­sions on:

  • Decisions on the extractive activities project; 
  • Updates on the financial instruments with characteristics of equity, dynamic risk management, and primary financial statements projects;
  • Re­de­lib­er­a­tions in the goodwill and im­pair­ment project;
  • Chair Andreas Barckow keynote speech at the World Standard-setters conferences;
  • Vice Chair Lloyd thoughts related to the Technical Readiness Working Group.

The podcast 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.

Standard setters discuss intangibles

30 Sep 2021

The International Forum of Accounting Standard Setters (IFASS) is currently holding its fall meeting as a virtual conference. The whole afternoon today was devoted to the discussion of intangibles.

As IASB Chair Andreas Barckow pointed out in his inaugural speech at the WSS meeting on Monday, IAS 38 Intangible Assets is more than 20 years old and has never been revisited other than for consequential changes resulting from other projects. He also indicated that he would like the IASB to look into the accounting for intangibles. Reactions to the IASB's agenda consultation showed that constituents would also be interested in “intangibles” as a potential IASB project (while there seem to be diverse views regarding the scope and objective of that potential project). Other developments such as the IVSC perspectives paper Time to get Tangible about Intangible Assets show that there is a great appetite for addressing the issue.

The IFASS session on intangibles started off with the European Financial Reporting Advisory Group (EFRAG) introducing its discussion paper Better information on intangibles – which is the best way to go?. The discussion paper notes that that the value relevance of financial statements is decreasing, which could be due to financial statements not reflecting information about intangibles, which has become more important for more entities than previously. It considers three approaches for better information on intangibles:

  • Recognition and measurement in the primary financial statements;
  • Information on specific intangibles in the notes to the financial statements or in the management report;
  • Information on future-oriented expenses and risk/opportunity factors that may affect future performance in the notes to the financial statements or in the management report.

The scope of EFRAG’s discussions goes beyond the existing definition of assets in financial reporting and also covers sources of possible economic benefits that would not be controlled by an entity.

Following the EFRAG presentation, the Australian Accounting Standards Board (AASB) presented its research on intangible assets. The research is an work in progress, so the staff presented first insights into the research paper that is expected to be published in Q4 2021 or Q1 2022. The research is working from the premise that IAS 38 is very old and leaves gaps in the information reported. To fill the existing information gap quickly, it would seem that following the third of the three possible approaches identified (do nothing, improve recognition and measurement, improve disclosures) would be the best way to follow. Outreach undertaken revealed great support for the approach while suggested additional information provided on unrecognised internally generated intangible assets varied (financial, non-financial, fair value). The forthcoming AASB paper will include a recommended principle, a recommended disclosure objective and (examples of) recommended implementation guidance.

The AASB research is still ongoing. More information on the project and access to a corresponding survey is available on the AASB website.

Following the presentations, participants discussed the findings, investor needs and aspects the IASB should consider in a potential project. Questions, comments and observations included:

  • IAS 38 is no longer fit for purpose, especially digital assets need to be considered (there are currently some software providers whose most significant asset is not on their balance sheet).
  • The uneven playing field between internally generated and acquired intangible assets needs to be reconsidered.
  • There is no need to reconsider the the definition of intangible assets, it is a definition of the word intangible that is needed.
  • IAS 38 does currently not reflect the economic value of an entity.
  • User needs should be the most important aspect considered.
  • There are challenges as regards the valuation of some intangible assets, maybe a hybrid approach of only recognising those that can be measured reliably should be considered.
  • Most intangibles assets are unique, however, bringing them onto the balance sheet might provide the market with the means of pricing them.
  • If intangible assets are recognised, will there also be corresponding liabilities?
  • There is a strong link between intangible assets and sustainability - which Board should take them on?
  • Are crypto assets and crypto currency intangibles?
  • Where would the information be located?
  • Would it be audited?

The IASB Chair noted that the IASB is currently behind some of the standard setters as regards intangibles. It will consider the research and results once it has "digested" the feedback from the agenda consultation. He also acknowledged the wide variety of views on the scope of a potential IASB project on intangibles - as well as the fact that there was general agreement that the wider the scope of the project, the smaller the chances of a timely solution. A general feeling was also that the IASB should approach the problem in stages, beginning with disclosures.

September 2021 IASB meeting notes posted

30 Sep 2021

The IASB met on Monday 20, Tuesday 21, Thursday 23 and Friday 24 September 2021. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

The following topics were discussed:

Board work plan update: In this session, the staff provided an overview of the Board’s technical projects to support decisions about whether to add or remove projects and assessments of overall progress on the work plan, including project prioritisation and timing. No decisions have been made.

Goodwill and Impairment: At the July meeting, the Board said they would like additional information about the disclosures about business combinations to be proposed, and further analysis of the feedback received on the subsequent accounting for goodwill, to help them make their decisions. In response to this, the staff updated the project plan to provide this information to the Board and have now presented the updated project plan for comments from Board members. The Board supported the revised project plan.

Post-implementation review of IFRS 9: In this session, the Board approved the publication of the Request for Information (RFI), which will be published on 30 September 2021. The Board agreed a 120-day comment period for the RFI.

Primary Financial Statements: At this meeting, the Board continued its deliberations of the comments received on ED/2019/7, particularly on management performance measures (MPMs) and principles of aggregation and disaggregation.

The Board decided to amend the definition of MPMs to remove the reference to complementing totals or subtotals specified by IFRS Standards and to state that totals and subtotals specified by IFRS Standards are not MPMs.

In addition, the Board decided to set out the relationship between the general presentation and disclosure requirements and the principles of aggregation and disaggregation.

The Board also decided to require an entity to explain how a disclosed class of items is included in line items in the primary financial statements.

Furthermore, the Board decided to include application guidance summarising characteristics that if shared, might form the basis for aggregating items that comprise a class that enhances the understandability of information provided in the financial statements and if not shared, might form the basis for disaggregating a single class of items into separate classes that provide material information.

Dynamic Risk Management: In this session, the staff presented its preliminary views on potential refinements to the DRM model which aim to closer align the DRM model to entities’ risk management practices by incorporating the concept of risk limits into the target profile. The Board was not asked to make a decision. Instead, the staff sought feedback from the Board on the potential refinements, which will be taken back to draft the refinements and present them to the Board at a future meeting.

Extractive Activities: The Board continued its discussions on extractive activities. The staff presented their further analysis on matters relating to exploration and evaluation (E&E) expenditure and activities, matters primarily relating to development and production activities, and reserve and resource (R&R) information. The Board decided that the future focus of the Extractive Activities project should be the development of requirements or guidance to improve the disclosure objectives and requirements in IFRS 6 about an entity’s E&E expenditures and activities. Furthermore, the Board decided to amend the Basis for Conclusions of IFRS 6 to remove the temporary status of the Standard.

Financial Instruments with Characteristics of Equity: In this session, the Board discussed the accounting for financial instruments that contain contingent settlement provisions and the effects of laws on contractual terms. The Board was not asked to make any decisions. Instead, the Board gave its views on these two practice issues and indicated that it would like to develop potential clarifications. The staff will take back the Board’s feedback to develop proposals for the clarified principles and bring back further analysis at a future meeting.

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

IASB publishes request for information on the post-implementation review of IFRS 9

30 Sep 2021

The International Accounting Standards Board (IASB) has issued a request for information (RFI) seeking comments from stakeholders to identify whether the classification and measurement requirements in IFRS 9 'Financial Instruments' provide information that is useful to users of financial statements; whether there are requirements that are difficult to implement and may prevent the consistent implementation of the standard; and whether unexpected costs have arisen in connection with applying or enforcing the standard.

The post-implementation review process for IFRS 9 was officially taken up in October 2020. While the IASB intends to conduct a post-implemtation review (PIR) of all parts of IFRS 9, the IASB decided to separate the PIR of the IFRS 9 classification and measurement requirements (including FVOCI equity instruments) from the PIR of the rest of IFRS 9 in order to start the PIR on classification and measurement as soon as possible. The Board intends to take up the PIR of the other sections (impairment and hedge accounting requirements) when more information is available about how the requirements in those sections work in practice.

After discussing feedback from outreach, the Board decided in July 2021 to examine further certain aspects of the following matters:

  • Business model assessment for financial assets
  • Contractual cash flow characteristics assessment for financial assets
  • Option for equity instruments to present fair value changes in other comprehensive income
  • Financial liabilities designated as fair value through profit or loss
  • Modifications to contractual cash flows
  • Transition to IFRS 9

In addition, the IFRS Interpretations Committee received a question on amortised cost and the effective interest method that the Committee suggested to include in the PIR as the question is relevant in a wider context.

Accordingly, the RFI is structured into nine sections:

Classification and measurement — general Asks for a general assessment of whether the classification and measurement requirements in IFRS 9 are working as the Board intended and whether they lead to useful information to users in order to understand. Special focus of this section are the effects of the classification and measurement changes introduced by IFRS 9, including the ongoing costs and benefits in preparing, auditing, enforcing or using information about financial instruments.
Business model for managing financial assets Asks whether the business model assessment is working as the Board intended, whether it can be applied consistently, and whether any unexpected effects have arisen. Special focus of this section is the reclassification of financial assets.
Contractual cash flow characteristics Asks whether the cash flow characteristic assessment is working as the Board intended, whether it can be applied consistently, and whether any unexpected effects have arisen. Special focus of this section are financial assets with sustainability-linked features and contractually linked instruments.
Equity instruments and other comprehensive income Asks whether the option to present fair value changes on investments in equity instruments in other comprehensive income is working as the Board intended, for what equity instruments entities elect to use the option, and whether any unexpected effects have arisen. Special focus of this section is the recycling of gains and losses.
Financial liabilities and own credit Asks whether the requirements in IFRS 9 for presenting the effects of own credit in other comprehensive income is working as the Board intended and whether there are any other matters relating to financial liabilities that the Board should consider.
Modification to contractual cash flows Asks whether the requirements for modifications to contractual cash flows is working as the Board intended and whether they can be applied consistently.
Amortised cost and effective interest method Asks whether the effective interest method is working as the Board intended and whether it can be applied consistently. Special focus of this section are interest rates subject to conditions and estimating future cash flows.
Transition Asks whether the transition requirements worked as the Board intended, whether there were any unexpected effects or challenges resulting from applying the transition requirements, and how those were overcome.
Other matters Asks whether there any other matters that the Board should examine as part of the PIR of the classification and measurement requirements of IFRS 9 and whether there are lessons to be learned from the Board’s approach to developing IFRS 9.

    Comments on the RFI are requested by 28 January 2022. The request for information and a corresponding press release are available on the IASB website. Deloitte has published an IFRS in Focus newsletter explaining the RFI in more detail.

    AASB research into executive remuneration disclosure requirements

    30 Sep 2021

    The Staff of the Australian Accounting Standards Board (AASB) has published 'Review of Executive Remuneration Disclosure Requirements'.

    The review was undertaken to understand the current disclosure requirements in relation to executive remuneration that extend beyond disclosures of the total remuneration of key management personnel required under IAS 24 Related Party Disclosures. Australian executive remuneration disclosure requirements were compared to eight overseas jurisdictions for for-profit (listed), not-for-profit and public sector entities to provide further input into the public discussion on this topic.

    The research shows that a large number of similarities exist across the jurisdictions, as well as a number of significant differences in the breadth and depth of the information required to be disclosed. Only two jurisdictions (Australia and Germany) currently require the disclosed remuneration information to be audited and only two countries (Australia and South Africa) require the remuneration information presented outside financial statements to be measured in accordance with the relevant accounting standards.

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

    XRB representative introduces ambitious NZ climate standard at IFASS meeting

    29 Sep 2021

    The International Forum of Accounting Standard Setters (IFASS) is currently holding its fall meeting as a virtual conference. During one presentation today, the New Zealand External Reporting Board (XRB) offered insights on the forthcoming climate reporting standard that is being developed by the XRB.

    In September 2020, the NZ Government announced its intention to implement mandatory reporting on climate risks and tasked the XRB with developing reporting standards to support the new reporting regime. While the corresponding Bill is still making its way through Parliament, the XRB has already established structures and begun developing the standard as "the government has a strong appetite to move fast". A final standard is expected to be issued in December 2022 with entities required to disclose according to the standard for accounting periods that start on or after 1 January 2023.

    The forthcoming Bill requires that the NZ standard will build on the TCFD recommendations that address governance, strategy, risk management, and metrics and targets, and are supported by 11 recommended disclosures. The XRB has, therefore, taken the TCFD recommendations as well as the host of other standards, frameworks and guidance that have been developed in the sustainability area and is merging them into the NZ standard, improving them or making them NZ-specific where necessary. Large listed issuers and large financial organisations will have to apply the standard and currently it is expected that about 150 NZ organisations will come under the requirements and "a significant part of NZ emissions" will be covered. The resulting climate statement will have to be included in the annual report or must be accessible through a direct link from the annual report.

    The XRB representative noted several challenges regarding the new standard:

    • Standard-setting in such a short time is ambitious, therefore, outreach, research and development are being undertaken in parallel with initial drafts on certain subsections being published in October 2021 and March 2022 before a formal exposure draft of the full standard will be published in July 2022.
    • The ambitious timeline means that the XRB is moving ahead of the IFRS Foundation and everybody else while trying to keep the NZ standard internationally aligned.
    • The TCFD recommendations are recommendations and rather loosely worded. Turning them into a standard requires a lot of work regarding definitions to come up with to arrive at information that can be measured, reported and assured.
    • Developments in the area of sustainability are moving very fast and "what was best practice 12 months ago is now middle of the road".
    • Data to enable high-quality reporting might not be readily available, or be in formats or at the level of accuracy desired by reporting entities.

    The XRB representatives overall message was: The NZ standard will be ambitious, forward-looking, principles-based. While developments are ongoing and moving fast, the new standard is intended to give entities a clear direction of where climate reporting is headed. The key consideration is usability by entities and by users. And while the first standard will focus on climate, the XRB approach is "climate first, but not climate only". The Bill enabling the climate reporting standard also gives the XRB the ability to issue guidance on a wider range of environmental, social, and governance (ESG) matters.

    More information on the XRB climate standard-setting is available here on the XRB website.

    Trustees decision on the ISSB expected in October

    28 Sep 2021

    The IFRS Foundation Trustees held a video conference on 20 September 2021.

    The Trustees were provided with a briefing on the work of the Technical Readiness Working Group, which included the planning for the appropriate transfer of technical expertise, content and resources to the proposed ISSB and steps taken in order to provide the proposed ISSB with a ‘running start’. In addition, the Trustees were updated on (1) the capital funding and other support received from jurisdictions and (2) feedback received on the proposed amendments to the IFRS Foundation Constitution.

    The next meeting is scheduled for the week of 18 October 2021. During that meeting, the Trustees will make a final determination about establishing the new board.

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

    We comment on the proposed narrow-scope amendment to IFRS 17

    28 Sep 2021

    Deloitte has commented on the IASB's exposure draft 'Initial Application of IFRS 17 and IFRS 9 — Comparative Information (Proposed amendment to IFRS 17)' published in July 2021.

    We support the proposals in the exposure draft and provide recommendations in a number of areas. These regard:

    • The scope of financial assets to which the classification overlay applies;
    • the application of the expected credit loss impairment model; and
    • the disclosure of the impact of the classification overlay.

    Please click to download our full comment letter here.

    IASB Chair addresses WSS meeting

    27 Sep 2021

    IASB Chair Andreas Barckow today delivered his inaugural speech at the World Standard Setters (WSS) conference that is currently being held in a virtual format. His key topics were his first impressions in his new role as IASB Chair, the IASB's agenda for the coming years, and the relationship between the IASB and national standard setters.

    Mr Barckow, who is the former president of the German standard setter ASCG, noted that his previous role had prepared him well for the new job as "technical issues are technical issues, wherever you sit". However, he also noted that working for a global standard setter means building consensus and creating standards that work globally, which would be more difficult given the wider variety of economic backgrounds and reporting challenges. Concluding his remarks on his experience in his new role, Mr Barckow noted that as IASB Chair he would surely want to "make my mark, set out my ideas and pursue my priorities", but he noted that given the enduring pandemic and its consequences on everybody's lives he counted as one of the first big successes of his chairmanship that the changeover from his predecessor Hans Hoogervorst has been effective, seamless and quiet.

    Mr Barckow then turned to the IASB's agenda for the coming years and in this context noted the IASB agenda consultation and consultations and changes in general, the interaction with the new possible sister board ISSB, and intangibles. On the agenda consultation, he noted, while the Board was seeking feedback on areas of focus, on criteria for new projects and on possible new projects themselves, the IASB has an ongoing work plan based on feedback to the previous agenda consultation and also needs to allocate resources to undertake post-implementation reviews of major standards. Mr Barckow also noted that the IASB has to be mindful of how many consultations and how much change it imposes on stakeholders.

    Working with a sister board, the proposed International Sustainability Standards Board (ISSB) would also require resources, as Mr Barckow explained. The necessary connectivity and joined-up standard-setting would mean that each Board commits resources and at the same time benefits from the other Board’s expertise and resources while while acknowledging each other’s independence.Mr Barckow stressed that working together and developing requirements from joint principles and concepts was, in fact, one of the key selling points for having both Boards in the same organisation.

    Turning to intangibles, Mr Barckow noted that IAS 38 Intangible Assets is more than 20 years old and has never been revisited other than for consequential changes resulting from other projects while the significance of intangibles, especially self-generated intangibles, has increased substantially over the last two decades. Therefore, he stated, he would like the IASB to explore what can be done to increase transparency in this area.

    Concluding his speech, Mr Barckow commented on the relationship between the IASB and national standard setters. He noted that as a result of his previous role as national standard setter he could step back and look at the IASB’s work from the perspective of a national standard setter and to identify what is working well and where the IASB can get better. And he had learned in recent years what national standard setters are able to do. Mr Barckow mentioned the many examples of excellent research and outreach by national standard setters he had seen and that he was keen to explore whether the IASB can tap into those capabilities even more. He noted:

    National standard-setters are essentially the eyes and ears of the IASB. They also have valuable expertise. You will always be closer to local stakeholders, especially investors, than the IASB can ever be, no matter how much outreach we do. Furthermore, you are more likely to see issues arising in your jurisdiction far sooner and help us to resolve them before they boil up in other jurisdictions as well. You provide a very helpful interface when it comes to the IASB liaising with stakeholders from your jurisdiction — whether in conducting outreach, addressing agenda item requests that have come to the IFRS Interpretations Committee or developing educational material, to name but a few.

    And this was, Mr Barckow concluded, why the relationship with national standard setters will always be an important cornerstone in the IASB's work.

    Please click to access a transcript of Mr Barckow's full speech on the IASB website.

    Updated IASB work plan — Analysis (September 2021)

    27 Sep 2021

    Following the IASB's September 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 July 2021. The updated work plan shows that the request for information on the post-implementation review of IFRS 9 is to be expected this week.

    Below is an analysis of all changes made to the work plan since our last analysis on 24 July 2021.

    Standard-setting projects

    • Disclosure initiative — Subsidiaries that are SMEs An exposure draft was published on 26 July 2021 with comments requested by 31 January 2022; feedback received will be discussed in H1 2022; in addition, the project was renamed to Disclosure initiative — Subsidiaries without public accountability: Disclosures
    • Disclosure initiative — Targeted standards-level review of disclosures  The discussion of feedback is now expected in Q1 2022 (previously H1 2022)
    • Rate-regulated activities The discussion of feedback is now expected in October 2021 (previously Q4 2021)

    Maintenance projects

    • Classification of debt with covenants as current or con-current — An exposure draft is now expected November 2021 (previously Q4 2021)
    • Initial application of IFRS 17 and IFRS 9 — Comparative Information — An exposure draft was published on 28 July 2021 with comments requested by 27 September 2021; feedback received will be discussed in October 2021
    • IAS 21 — Lack of exchangeability — The discussion of feedback is now expected in Q1 2022 (previously Q4 2021)
    • Supplier finance arrangements — An exposure draft is now expected November 2021 (previously Q4 2021)

    Research projects

    • Extractive activities — A decision on the project direction is now expected in H1 2022 (previously September 2021)
    • Goodwill and impairment — A decision on the project direction is now expected in H1 2022 (previously September 2021)
    • Pension benefits that depend on asset returns Research will now be reviewed in October 2021 (previously Q4 2021)
    • Post-implementation review of IFRS 10-12 A feedback statement is now expected in Q1 2022 (previously H1 2022)
    • Post-implementation review of IFRS 9 A request for information is still expected in September 2021, which would mean "this week"

    Other projects

    • Agenda consultation 2020 The discussion of feedback is now expected in November 2021 (previously Q4 2021)

    The above is a faithful comparison of the IASB work plan at 24 July 2021 and 27 September 2021. For access to the current IASB work plan at any time, please click here.

    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.