We respond to the IASB's third agenda consultation

24 Sep 2021

Deloitte has responded to the request for information the IASB published in March 2021 to seek broad public input on the strategic direction and overall balance of its future work programme.

Overall, we believe that the Board’s time is appropriately allocated to the different activities and that this allocation will remain largely appropriate for the next few years. However, we believe that two key areas will require further direct attention by the Board:

  • Sustainability reporting related issues: As noted earlier, we support the IFRS Foundation continued efforts to establish a sustainability standard-setter under its institutional framework. We also noted that it will be crucial that the two Boards cooperate on fundamental elements that will be common to both Boards to ensure connectivity between financial and sustainability reporting. Amongst others, this would include work on the conceptual framework and on management commentary (beyond the project currently on the work plan of the IASB Board). We believe that the proposed projects on disclosure of intangible assets and on climate and other sustainability-related risks disclosures discussed in the request for information would also benefit from the collaboration between the Board and a future new board working on international sustainability reporting standards.
  • Digital reporting: We note that currently the time spent by the Board in this area is largely focused on taxonomy. We believe that Board should explore how digital reporting is changing the way investors consume information with a view to determine how this should be reflected in the way IFRS Standards are written. This seems to be a critical factor to consider as part of the Board’s project on improving disclosure.

Please click to download our full comment letter, which also includes a list of the key projects that we believe should be added to Board’s work plan, here.

IASB meeting agenda updated

22 Sep 2021

The IASB has added another slot on primary financial statements to its agenda for Friday.

The Board will continue yesterday's discussion on Friday at 11:45. We have updated our agenda for the meeting accordingly.

IFRS Interpretations Committee holds September 2021 meeting

21 Sep 2021

The IFRS Interpretations Committee (Committee) met on Tuesday 14 & Wednesday 15 September 2021. We have posted Deloitte observer notes for the technical issues discussed during this meeting.

The Committee discussed the comment letter analyses for two tentative agenda decisions, input on a Board project and two initial considerations.

IFRS 16 Leases—Non-refundable VAT on Lease Payments: In March 2021, the Committee discussed a submission about whether a lessee includes non-refundable VAT as part of the lease payments. In that meeting, the Committee members generally agreed with the accounting conclusion but some of them were not convinced that the matter is not material or widespread based on the limited outreach performed by the staff. The responses from the comment letters reflected similar views and some respondents requested an explanation of the accounting treatment of the non-refundable VAT in the agenda decision. The Committee decided to finalise the agenda decision.

IAS 32 Financial Instruments: Presentation—Accounting for Warrants that are Classified as Liabilities on Initial Recognition: In March 2021, the Committee discussed a submission asking whether the issuer reclassifies a warrant (which is classified as a financial liability at initial recognition) as equity when the exercise price is subsequently fixed. The staff concluded that the matter, in isolation, is too narrow to be answered and recommended publishing a tentative agenda decision to explain this. On the other hand, they believed that the broader issues of reclassifying financial instruments are better addressed as part of the Board’s Financial Instruments with Characteristics of Equity (FICE) project. In the meeting, the Committee members generally agreed with the staff's recommendations as did most respondents to the tentative agenda decision. The Committee decided to finalise the agenda decision.

Input on Board project

Proposed amendments to IFRS 16 LeasesLease Liability in a Sale and Leaseback: In November 2020, the Board published ED/2020/4 Lease liability in a Sale and Leaseback, which proposed an amendment to IFRS 16. The comment period ended in March 2021 and the Board discussed the feedback on the ED at its meeting. The staff analysed the feedback and provided recommendations on the project direction in the agenda paper.

Most of the Committee members supported the ‘expected payment method’ as an interim provision but a number of them suggested to leave it open at this stage because none of the approaches is perfect.

Initial consideration

IAS 7 Statement of Cash Flows—Demand Deposits with Restrictions on Use: The Committee received a submission asking whether an entity includes demand deposits with restrictions on use as a component of cash and cash equivalents ("C&CE"). The terms and conditions of the demand deposit do not prevent the entity from accessing amounts held in the demand deposit, but the entity cannot use the cash other than for the purpose specified in the agreement. The staff analysed that such demand deposits should be included in C&CE in the statement of cash flows and could be presented as C&CE in the statement of financial position, unless presenting it separately in an additional line item is relevant to an understanding of the entity's financial position. The information about the restrictions is required to be disclosed under various IFRS Standards.

The Committee decided not to add the matter to the standard-setting agenda and instead to publish a tentative agenda decision with edits that were suggested during the meeting.

IFRS 9 Financial Instruments—Cash Received via Electronic Transfer as Settlement for a Financial Asset: The Committee received a submission asking the timing of recognition of cash received via Bacs, a formal automated settlement process, as settlement for a financial asset. The submitter asked whether it is acceptable for the entity to derecognise the trade receivable and recognise the cash on transfer initiation date, rather than the transfer settlement date. The staff concluded that the trade receivable is generally derecognised on the settlement date, the date when the contractual right to the cash flows from the trade receivable expires. Also, cash should be recognised on the transfer settlement date because the entity has a right to obtain cash from the bank only when cash is deposited in its bank account.

The Committee decided not to add the matter to the standard-setting agenda and instead to publish a tentative agenda decision with edits that were suggested during the meeting.

Work in progress: The staff are in the process of analysing three matters:

  • Principal versus agentIT resellers (IFRS 15)
  • Deficits in low/new energy vehicle credits (IAS 37)
  • Rent Concessionslessors and lessees (IFRS 16 and IFRS 9)

More In­for­ma­tion

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

IASB publishes "Investor Perspectives" article on disclosures in financial statements

21 Sep 2021

The IASB has issued the latest issue of 'Investor Perspectives'. In this edition, IASB Board member Nick Anderson discusses the new approach to developing and drafting disclosure requirements in IFRSs.

Specifically, this issue features insight into the proposed approach and discusses some of the changes that investors would see in the financial statements since investors have been calling for better disclosures in financial statements.

For more information, see the press release and Investor Perspectives article on the IASB’s website.

Pre-meeting summaries for the September 2021 IASB meeting

17 Sep 2021

The IASB is meeting on Monday 20, Tuesday 21, Thursday 23 and Friday 24 September 2021. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. We summarised the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

The following topics are on the agenda:

Board work plan update: In this session, the staff will provide 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.

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 have updated the project plan to provide this information to the Board and will now present the updated project plan for comments from Board members.

Post-implementation review of IFRS 9: In this session, the staff will ask the Board to approve the publication of the Request for Information (RFI), which if approved will be published in the last week of September 2021. The staff will also ask the Board if they agree with a 120-day comment period for the RFI.

Primary Financial Statements: At this meeting, the Board will continue its deliberations of the comments received on ED/2019/7, particularly on management performance measures (MPMs), principles of aggregation and disaggregation, analysis of operating expenses, and associates and joint ventures. The Board will be asked to make decisions with regard to all these topics.

Dynamic Risk Management: In this session, the staff will present 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 will not be asked to make a decision. Instead, the staff is seeking 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 will continue its discussions on extractive activities. The staff will present 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 information. Based on this analysis, the staff recommend that the 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 staff recommend amending 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 will discuss the accounting for financial instruments that contain contingent settlement provisions and the effects of laws on contractual terms. At this meeting, the staff does not have recommendations for the Board and will instead ask Board members’ views on these two practice issues. The staff will

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

IFAC calls on G20 leaders to focus on sustainability reporting

16 Sep 2021

The International Federation of Accountants (IFAC) has released 'Four themes, two actions, one goal: G20 Call to Action 2021' urging G20 leaders to continue their commitment to sustainability, inclusion, prosperity, and global collaboration.

In order to achieve the goal of a more sustainable, inclusive, and prosperous economy and society, IFAC describes four areas the G20 should focus on:

  1. Accelerate sustainability and inclusiveness
  2. Recommit to global collaboration
  3. Resist regulatory fragmentation
  4. Focus on public sector transparency and integrity

IFAC comments that delivering on these will take a concerted effort from policymakers, businesses, other organisations, investors and individuals.

IFAC believes these priorities require two actions to be taken urgently:

On the first point, the press release states:

Momentum is growing around developing a global baseline of sustainability standards, with the IFRS Foundation poised to deliver. IFAC strongly supports this crucial work.

Please click to access the Call to Action on the IFAC website.

IVSC perspectives paper on intangible assets

15 Sep 2021

The International Valuation Standards Council (IVSC) has published a perspectives paper 'Time to get Tangible about Intangible Assets' that notes that despite the importance of intangible assets to the capital markets, only a small percentage are recognised on balance sheets.

In order to support public discussion on this topic, the IVSC is publishing a multi-part article series exploring certain fundamental questions in this area. the first part The Case for Realigning Reporting Standards with Modern Value Creation can now be accessed through the press release on the IVSC website.

Agenda for the September 2021 ITCG meeting

10 Sep 2021

The agenda is available for the next meeting of the IFRS Taxonomy Consultative Group (ITCG), which will be a virtual meeting on 16 September 2021.

The ITCG will discuss the following topics:

  • Review of common reporting practice
  • Digital reporting implications for the Exposure Draft Management Commentary
  • Technology update

The agenda papers for this meeting are available on the IASB website.

September 2021 IASB meeting agenda posted

10 Sep 2021

The IASB has posted the agenda for its next meeting, which will be held via video conference on 20–24 September 2021. There are seven topics on the agenda.

The Board will discuss the following:

  • Board work plan update
  • Goodwill and impairment
  • Post implementation review of IFRS 9
  • Primary financial statements
  • Dynamic risk management
  • Extractive activities
  • Financial instruments with characteristics of equity

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.

IFAC calls on stakeholders to prepare now for global sustainability reporting standards

10 Sep 2021

The International Federation of Accountants (IFAC) published a framework for implementing global sustainability standards at the local level. It focuses on the May 2021 'building blocks approach'. IFAC believes that jurisdictions must begin examining how global standards that the envisioned International Sustainability Standards Board (ISSB) would develop can fit together with sustainability-related reporting requirements set at the jurisdictional level.

The ongoing work of the IFRS Foundation is expected to result in first standards in June 2022, including the ISSB climate standard. Jurisdictions that begin engaging with policymakers now will be able to capitalise on the forthcoming standards as soon as they are finalised. IFAC, therefore, urges its member organisations to continue their support for the IFRS initiative, to engage now with local policymakers, and to provide feedback on the framework for making global sustainability standards local.

Please click for more information on the IFAC website.

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