The first paper Implementation Costs of IFRS 9 for Non-Financial Firms: Evidence from China examined the implementation of the new CAS 22 (equivalent to IFRS 9 Financial Instruments) by Chinese non-financial firms. The authors found that the new accounting standard for financial instruments imposed severe implementation costs on affected firms. They concluded that requirements in the new standard, such as fair value measurement and expected credit loss, present significant implementation challenges for companies and auditors. Overall, the paper concluded that there is evidence that supports the concern that the new accounting standard for financial instruments could be costly for non-financial firms to implement.

The second paper Does IFRS and GRI adoption impact the understandability of corporate reports by Chinese listed companies? examined the level of readability and conciseness of corporate reports and whether IFRS and GRI adoption impacts these aspects of understandability. The authors found that both readability and conciseness of the corporate reports are at a low level and indicate a downward trend over the sample period. They also found that IFRS adoption results in a longer and more readable report, whereas GRI adoption leads to a longer but less readable report.

The third paper Is AASB 6 still fit for purpose? reported on a project completed for the Australian Accounting Standards Board (AASB) as input to the IASB’s project on the extractive industries. The research carried out by the authors showed the primary area of concern related to impairment of exploration and evaluation assets and closure obligations. In addition, the provisioning for site rehabilitation and the difficulties of applying the new leasing standard were noted as accounting challenges. The uncertainty around the future treatment of climate change impacts was also especially noted. Based on the evidence, the paper recommended to proceed with the development of amendments to IFRS 6 Exploration for and Evaluation of Mineral Resources to enhance disclosure requirements.

The fourth paper Do Acquiring Firms Achieve Their Mergers and Acquisitions Objectives?: Evidence from Japan assessed whether acquiring firms achieve the mergers and acquisitions objectives presented in their press releases and financial statements. The study’s findings show that disclosed mergers and acquisitions objectives regarding profitability, efficiency, and growth are usually not realised. The authors also found that describing mergers and acquisitions objectives in financial statements leads to higher short-term stock returns while the stock market adjusts the valuation of firms based on their actual performance in the long run.

The fifth paper The Impact of IFRS Adoption on the Value Relevance of Accounting Information in Saudi Arabia examined the joint and relative value relevance of book value of equity and earnings before and after the mandatory adoption of IFRSs in Saudi Arabia. The study identified a significant and positive change in the relative value relevance of book value of equity after IFRS implementation. The authors also found that profitable firms, firms audited by big4 and large firms exhibit significantly higher joint value relevance compared to their counterparts regardless of the implemented accounting standards.

The sixth paper Decision usefulness of the accounting standard ‘IFRS for SMEs’: Qualitative evidence from Sri Lanka examined the information needs of the users of Sri Lankan small and medium entities' financial statements. The primary users of financial information were identified as banks, the inland revenue department and other government institutions. However, the authors found that the manipulation of financial results, tax orientation, insufficient detail, and out-to-date information mean that the financial statements prepared by Sri Lankan small and medium entities lack decision usefulness. The authors conclude that local standard setters need to pay greater attention to financial reporting by small and medium entities and take steps to make it more credible and relevant to the needs of users.

The seventh paper Is IFRS a “trusted” language for private firm credit decisions? An analysis of country differences in users’ perspectives examined whether creditors trust and use IFRS-based financial statement information for their decision-making in the context of private firm lending. The authors found that (i) IFRS accounting numbers are more trusted than local-GAAP based accounting numbers, (ii) the trust even increases when creditor protection is weak, and (iii) mandatory IFRS adoption in a country influences the trust in the numbers more positively than a voluntary adoption.

The eighth paper What Influences the Implementation of IFRS for SMEs? The Brazilian Case investigated factors influencing the implementation of the IFRS for SMEs in Brazil. The research carried out suggests that inconsistencies and incomprehensibility issues are the main factors preventing implementation. However, further investigation indicated that once participants know the standard, “implementation myths” are mitigated. The authors conclude that regulators should increase the availability of education programs, so accountants feel more secure and boost the standard’s implementation.

The last paper Fixing diluted earnings per share: recognising the dilutive effects of employee stock options proposed changes to the calculation of diluted earnings per share arguing that the existing IAS 33 approach was flawed as it ignores the time value of options and treats equity-settled options differently to cash-settled options. The authors derived an alternative method and then compared this with the IAS 33 calculation using examples based on a simple firm. The authors conclude that their method best describes the change in economic value of the current shareholders and provides a similar result at a diluted earnings per share level for both cash- and equity-settled options. It could also easily be extended to deal with other dilutive instruments.

Participants praised the valuable exchange and the evidence from research provided that is highly relevant to the IASB's current agenda. The evidence on the application of standards also covered geographical areas not usually covered by research or otherwise easily accessible or was of a granularity that normally goes beyond the means of the IASB to gather.

The presented papers as well as recordings of the presentations and contributions by the discussants will shortly be available on the IFRS Foundation website.

Amendments to IPSAS 5 'Borrowing Costs' – Non-Authoritative Guidance adds non-authoritative guidance to IPSAS 5 Borrowing Costs that consists of implementation guidance and illustrative examples to clarify how the existing principles for when borrowing costs can be capitalised should be applied in various regularly encountered public sector contexts. The authoritative guidance in IPSAS 5 is not amended.

Please click to access the following additional information on the IPSASB website:

• Press release
• Access to the amendments and an At a Glance introduction

In two separate consultations, the IFRS Foundation Trustees consulted on the demand for global sustainability standards and what role the Foundation might play in the development of such standards (September 2020) and on proposed amendments to the IFRS Foundation Constitution that would enable the creation of a new sustainability standards board under the governance of the Foundation (April 2021).

Responses to the consultations showed strong support for the IFRS Foundation's initiative and the Trustees have today published a revised constitution and corresponding feedback statement and have announced the creation of the new ISSB.

The press release also notes that leading investor-focused sustainability disclosure organisations have committed to consolidate into the new board. The Trustees expect to complete the consolidation of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) into the ISSB by June 2022.

In addition to announcing the creation of the ISSB, the Trustees are also providing an update on the work of the Technical Readiness Working Group (TRWG). The TRWG was created in March 2021 to facilitate a running start of the ISSB. It was designed to integrate and build on the work of relevant initiatives focused on meeting investors’ information needs, with the purpose of providing technical recommendations for consideration by the ISSB. The following two documents that resulted from the TRWG's work were published today:

• Climate-related Disclosures Prototype (please see a summary of the prototype here) and
• General Requirements for Disclosure of Sustainability-related Financial Information Prototype (please see a summary of the prototype here)

The two prototypes are accompanied by an overview of the work programme of the TRWG, explaining the technical preparatory work done so far and still to be completed so that a final set of recommendations can be handed over to the ISSB once it begins its work.

Please click for the following additional information on the IFRS Foundation website:

• Press release
• Speech by IFRS Foundation Trustees' Chair Erkki Liikanen at COP 26 announcing the creation of the ISSB (a recording of his speech is available on YouTube)
• Short video introducing the ISSB
• FAQs on the ISSB
• TRWG work programme
• Climate-related Disclosures Prototype
• Supplementary technical protocols for disclosure requirements
• General Requirements for Disclosure of Sustainability-related Financial Information Prototype
• Updated Constitution of the IFRS Foundation
• Feedback statement on the proposed amendments to the Constitution changes

The International Organization of Securities Commissions (IOSCO) and the Board of the International Federation of Accountants (IFAC) have issued statements welcoming the creation of the ISSB and and pledging ongoing support for the ISSB:

• IOSCO statement
• IFAC statement

In addition, see Deloitte's Purpose-driven Business Reporting in Focus — IFRS Foundation creates new board to set sustainability standards newsletter.

Note: On 3 November 2021 14:30 GMT, the ISSB was introduced in a live webcast from COP26. A recording of the event is available on YouTube.

The TRWG was created in March 2021 to facilitate a running start of the ISSB. It was designed to integrate and build on the work of relevant initiatives focused on meeting investors’ information needs, with the purpose of providing technical recommendations for consideration by the ISSB. The climate-related disclosures prototype published today is structured around the four TCFD pillars of governance, strategy, risk management, and metrics and targets:

• Objective: The recommended objective of the prototype is to require an entity to disclose information about its exposure to climate-related risks and opportunities.
• Scope: The prototype would apply to climate-related risks that the entity is exposed to, climate-related opportunities available to and considered by the entity.
• Governance: Under the prototype, an entity would disclose information that enables users of general purpose financial reporting to understand the governance processes, controls and procedures used to monitor and manage climate-related risks and opportunities.
• Strategy: An entity would disclose information that enables users of general purpose financial reporting to understand the strategy for addressing climate-related risks and opportunities as well as the climate-related risks and opportunities that would affect the strategy and the impact of climate-related risks and opportunities on the strategy.
• Risk management: An entity would disclose information that enables users of general purpose financial reporting to understand how climate-related risks are identified, assessed, managed and mitigated.
• Metrics and targets: An entity would disclose information that enables users of general purpose financial reporting to understand the entity’s performance in managing climate-related risks and opportunities.

There are two appendices to the climate prototype. Appendix A contains the defined terms used; Appendix B sets out industry-based disclosure requirements, organised by sector and industry. Supplementary technical protocols for disclosure requirements describe industry requirements for climate-related metrics.

The climate-related prototype and the supplementary technical protocols for disclosure requirements can be accessed on the IFRS Foundation website.

The TRWG was created in March 2021 to facilitate a running start of the ISSB. It was designed to integrate and build on the work of relevant initiatives focused on meeting investors’ information needs, with the purpose of providing technical recommendations for consideration by the ISSB. The general requirements for disclosure of sustainability-related financial information prototype published today is inspired by IAS 1 Presentation of Financial Statements and sets out the overall requirements for sustainability-related disclosures to investors:

• Objective and scope: The recommended objective of sustainability-related financial disclosures is described as providing information about the significant sustainability-related risks and opportunities to which the reporting entity is exposed that is useful to primary users of general purpose financial reporting in deciding whether to provide resources to the entity. The recommended standard would apply when an entity prepares and discloses sustainability-related financial information in accordance with IFRS Sustainability Disclosure Standards.
• Materiality: An entity would disclose all information on sustainability matters that is material for investors and other providers of capital in respect of a reporting entity. Sustainability-related financial information is described as material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that the primary users of general purpose financial reports make on the basis of those reports.
• Reporting entity boundary and connectivity: The reporting entity's boundary for its general purpose financial reporting is recommended to be the same for its financial statements and sustainability-related financial disclosures. The disclosures provided must enable users to understand the connections, dependencies and trade-offs between sustainability-related financial disclosures and other information in general purpose financial reporting.
• General features: Applying the general requirements prototype an entity would disclose information that focuses on matters critical to the way an entity operates following the four pillars of governance, strategy, risk management, and metrics and targets. The prototype sets out objectives for each of these pillars and disclosure requirements to achieve these objectives.
• Comparative information and frequency of reporting: Under the prototype, an entity would present comparative information regarding the previous period for all amounts including metrics and key performance indicators reported in the current period. An entity would report at least every 12 months and at the same time as its financial statements.
• Reporting channel: Sustainability-related disclosures to investors would be disclosed as part of a reporting entity's general purpose financial reporting that is targeted at investors and other providers of capital and encompasses financial statements and sustainability-related financial information.
• Identifying the related financial statements: Sustainability-related financial disclosures would identify the financial statements to which they relate. If the related financial statements are not prepared in accordance with IFRSs, the sustainability-related financial disclosures would disclose the basis on which the financial statements are prepared.
• Using financial data and assumptions: When sustainability-related financial disclosures incorporates financial data and assumptions, such financial data and assumptions would be consistent with the corresponding financial data and assumptions incorporated in the entity’s financial statements.
• Fair presentation: A complete set of sustainability-related financial disclosures would present fairly the sustainability-related risks and opportunities to which the entity is exposed. A fair presentation requires an entity to disclose information that is relevant, reliable, comparable and understandable and would include additional disclosures when the information provided is insufficient to enable users to understand the impact or potential impact of significant sustainability-related risks and opportunities on the entity’s enterprise value.
• Sources of estimation uncertainty: When sustainability-related financial disclosures cannot be directly quantified and can only be estimated, the use of reasonable estimates is an essential part of preparing sustainability-related financial disclosure and does not undermine the usefulness of the information if the estimates are clearly and accurately described and explained.
• Errors: The general requirements prototype describes prior period errors as omissions from, and misstatements in, the entity’s sustainability-related financial disclosures for one or more prior periods. Unless impracticable, an entity would correct material prior period errors retrospectively in the first general purpose financial reporting authorised for issue after their discovery.
• Statement of compliance: An entity whose sustainability-related financial disclosures comply with all of the relevant requirements of IFRS Sustainability Disclosure Standards would include an explicit and unqualified statement of compliance.

There are four appendices to the general requirements prototype. Appendix A explains the defined terms used in the general requirements prototype; Appendix B sets out a general-purpose financial report that includes sustainability-related financial information and financial statement information; Appendix C provides an application guidance on materiality; and Appendix D describes qualitative characteristics of useful sustainability-related financial information.

The general requirements prototype can be accessed on the IFRS Foundation website.

The full agenda for the meeting is summarised below:

Agenda papers for this meeting are available on the IASB website.

The following topics were discussed:

Goodwill and Impairment: The IASB began making decisions related to the package of disclosures about business combinations. The IASB decided to confirm that the information about the benefits an entity’s management expect from a business combination can be required in the financial statements. The Board also considered, but made no decisions about, the practical concerns raised by respondents with regard to the proposed package of additional disclosures about business combinations in financial statements, particularly commercial sensitivity of the information, the potentially forward-looking nature of the information, the auditability of the information, and the integration of the information.

Second Comprehensive Review of the IFRS for SMEs Standard: The Board continued to deliberate specific sections of the IFRS for SMEs Standard that could be aligned with IFRS requirements. The IASB decided to: remove the option to apply the recognition and measurement requirements in full IFRS Standards for financial instruments; retain the existing hedge accounting requirements unchanged (i.e. not align with IFRS 9); align the definition of, and guidance on, fair value with IFRS 13; not align with IFRS 14 but revisit this topic once it has completed its project on rate-regulated activities; and align the requirements with IFRS 15.

Post-implementation Review of IFRS 10-12: The IASB considered feedback gathered from its Post-Implementation Review, which the staff conclude, and the IASB agrees, supports the conclusion that IFRS 10, 11 and 12 are working as intended. The IASB decided to consider some topics for further action when developing its work plan for 2022–2026: (high priority) investment entities and collaborative arrangements outside the scope of IFRS 11; (medium priority) definition of an investment entity and corporate wrappers; and (low priority) transactions that change the relationship between an investor and an investee.  The staff are also looking at the disclosure of interests in other entities and assisting the application of IFRS 10 and IFRS 11, which they will bring back to a future meeting. The staff will then prepare a “Report and Feedback Statement” on the PIR.

Equity Method: The staff have updated the IASB on questions identified applying the equity method. The staff have had difficulties identifying underlying principles when the application questions involve the application of IAS 28 paragraph 26 (i.e. the interaction of the principles in IAS 28 with other IFRS Standards, such as IFRS 3 and IFRS 10). The staff plan to undertake more research, and the IASB agreed.

Maintenance and consistent application:

• Two Agenda Decisions from the IFRS Interpretations Committee were finalised by virtue of no IASB members objecting to their publication: Non-refundable Value Added Tax on Lease Payments (IFRS 16) and Accounting for Warrants that are Classified as Financial Liabilities on Initial Recognition (IAS 32)
• The staff have been preparing the ED Supplier Finance Arrangements, which proposes to amend IAS 7 and IFRS 7. During drafting, the staff identified one issue that they want the IASB to consider. The IASB decided to add a requirement for an entity to disclose, as at the beginning and end of the reporting period, the line item(s) in the statement of financial position in which the entity presents the carrying amount of financial liabilities that are part of a supplier finance arrangement.
• IASB members had no comments or questions on the September 2021 IFRIC Update.

Pensions Benefits that Depend on Asset Returns: Following the 2015 Agenda Consultation, the Board has been considering whether to propose amendments to IAS 19 for pension benefits that depend on the return on a specified pool of assets (reference assets). The pension benefits to be paid to employees reflect the variability inherent in the reference assets, yet IAS 19 requires a discount rate that reflects high-quality corporate bonds. Applying the IAS 19 discount rate can overstate the pension liability, producing information that is not relevant to users of financial statements. The staff recommended the Board propose that an entity estimate the ultimate cost of providing pension benefits that vary with asset returns applying the IAS 19 discount rate, but only when the IAS 19 discount rate is lower than the expected rate of return on the reference assets. Only 5 IASB members voted to continue the project and therefore the project will be stopped. All Board members supported the staff recommendation to consider any further work as part of the Third Agenda Consultation.

IFRS Taxonomy due process: The IASB decided to shorten the comment period for the Proposed IFRS Taxonomy Update for the amendment Initial Application of IFRS 17 and IFRS 9—Comparative Information to 30 days.

Primary Financial Statements: The IASB discussed two papers carried over from the September meeting, relating to associates and joint ventures and the analysis of operating expenses. The IASB decided to proceed with the proposal to present income and expenses from equity-accounted associates and joint ventures outside of operating profit, but not to require income and expenses from integral associates and joint ventures to be identified and presented separately from non-integral associates and joint ventures. They also decided to provide application guidance that builds on the description of the function of expense method in the ED to set out the relationship with expenses of the same nature; the attributes of functions; and the interaction with the role of the primary financial statements and the principles of aggregation and disaggregation.

Additionally, the IASB decided:

• Not to develop a definition of ‘cost of sales’
• To explore an approach to analysing and presenting operating expenses in the statement of profit or loss that would:
  • Retain the proposal to require operating expenses to be analysed and presented based on their nature or function
  • Not retain the proposed prohibition on a mixed presentation in the statement of profit or loss and instead provide application guidance and disclosure requirements to improve comparability
  • Retain the proposal to provide application guidance on how to determine which presentation method should be used to provide the most useful information to users of the financial statements
• Undertake more research on providing a partial cost relief from the proposed requirement for an entity that presents an analysis of operating expenses by function in the statement of profit or loss to also disclose an analysis of its total operating expenses by nature
• Amend the definition of the specified subtotal ‘operating profit or loss before depreciation and amortisation’ to also exclude impairments of assets within the scope of IAS 36 and label that subtotal ‘operating profit or loss before depreciation, amortisation, and specified impairments’

Amendments to IFRS 17 Insurance Contracts: The Board's Exposure Draft (ED) Initial Application of IFRS 17 and IFRS 9—Comparative Information (Proposed amendment to IFRS 17) was published in July 2021. The proposed amendment allows an entity to apply a classification overlay when first applying IFRS 17 and IFRS 9 at the same time for the purpose of presenting comparative information about a financial asset, if the comparative information for that financial asset has not been restated for IFRS 9.

The ED proposed that an entity would not be permitted to apply the classification overlay to financial assets held in respect of an activity that is unconnected with contracts within the scope of IFRS 17. Most respondents suggested the IASB remove this scope restriction, and the staff agree. The ED also proposed that an entity that first applies IFRS 17 and IFRS 9 at the same time it is permitted to apply the classification overlay. The proposed classification overlay would not apply to entities that have already applied IFRS 9 before initial application of IFRS 17, however the staff considered that the scope of the classification overlay should be expanded to apply in such cases. The staff recommended no substantive changes be made to the classification overlay proposed in the ED relating to impairment of financial assets or disclosures. The Board supported all of the staff recommendations with the addition to add a disclosure requirement for the impairment method used for the asset overlay and expect to issue the amendments to IFRS 17 before the end of 2021.

Rate-regulated Activities: In January 2021, the Board published Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities. The proposals in the ED have generally been well-received by respondents, agreeing  with: the proposed definitions for regulatory assets and regulatory liabilities; the existence threshold of ‘more likely than not’ for recognising regulatory assets and regulatory liabilities; using a cash-flow-based measurement technique to measure regulatory assets and regulatory liabilities; and using the regulatory interest rate for a regulatory asset or regulatory liability as the discount rate for that regulatory asset or regulatory liability. However, concerns were expressed about the scope; returns on assets not yet available for use; regulatory assets and regulatory liabilities arising from differences between assets’ regulatory recovery pace and their useful lives; recognition, measurement and discount rate; minimum interest rate; and the interaction with IFRIC 12. The IASB discussed the feedback but made no decisions. The IASB will continue its discussions of the feedback in November, but no decisions are expected to be made at that meeting.

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

Below is an analysis of all changes made to the work plan since our last analysis on 27 September 2021.

Standard-setting projects

• Management commentary — Feedback on the exposure draft will now be discussed in Q1 2022 (previously H1 2022)
• Rate-regulated activities — The discussion of feedback to the exposure draft will continue in November 2021

Maintenance projects

• Initial application of IFRS 17 and IFRS 9 — Comparative Information — After discussion of the feedback received at the October 2021 meeting, final amendments are expected in December 2021
• IAS 21 — Lack of exchangeability — The discussion of feedback is now expected in January 2021 (previously Q1 2022)
• Lease liability in a sale and leaseback — a decision on the project direction is now expected in December 2021 (previously Q4 2021)

Research projects

• Business combinations under common control — Feedback received on the discussion paper will now be discussed in December 2021 (previously Q4 2021)
• Goodwill and impairment — A decision on the project direction is now expected in Q1 2022 (previously H1 2022)
• Pension benefits that depend on asset returns — The IASB decided at the October 2021 meeting to discontinue this project; the publication of a project summary will be the final project step (no date given)
• Post-implementation review of IFRS 10-12 — A feedback statement is now expected in H1 2022 (previously Q1 2022)
• Post-implementation review of IFRS 9 — A request for information was published on 30 September 2021, the discussion of the feedback received is expected in H1 2022

Other projects

• IFRS Taxonomy Update — 2021 General improvements and common practice — newly added to the work plan; a proposed update is expected in December 2021
• IFRS Taxonomy Update — Amendments to IAS 1, IAS 8 and IFRS Practice Statement 2 — a final update is now expected in December 2021 (previously November 2021)
• IFRS Taxonomy Update — Initial Application of IFRS 17 and IFRS 9 ― Comparative Information — newly added to the work plan; a proposed update is expected in December 2021
• Sustainability-related reporting — While the work plan still says that the discussion of the feedback on the exposure draft is expected to occur in October 2021, the publicly expected next step is a formal announcement of the current state of developments at COP26

The above is a faithful comparison of the IASB work plan at 27 September 2021 and 1 November 2021. For access to the current IASB work plan at any time, please click here.

Generally, the declaration stresses that sustainable finance is crucial for promoting orderly and just transitions towards green and more sustainable economies and inclusive societies, in line with the 2030 Agenda for Sustainable Development and the Paris Agreement. On the setting of sustainable disclosure standards, the declaration notes:

We also welcome the work programme of the International Financial Reporting Standards Foundation to develop a baseline global reporting standard under robust governance and public oversight, building upon the FSB’s Task Force on Climate-Related Financial Disclosures framework and the work of sustainability standard-setters.

Please click to access the full G20 Leaders' Declaration.