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Pre-meeting summaries for the November 2021 IASB meeting

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12 Nov 2021

The IASB meets in London on Monday, Tuesday and Friday of the week beginning 15 November 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:

Third Agenda Consultation: The Board published its Request for Information (RfI) Third Agenda Consultation in March 2021. The purpose of this meeting is to provide the Board with a summary of the feedback on the RfI. Most respondents commented on the strategic direction and balance of the Board’s activities and supported the Board’s current strategic direction. In terms of specific projects, most respondents rated climate-related risks, cryptocurrencies and related transactions, and intangible assets as high priority. Many rated going concern, pollutant pricing mechanisms, and the statement of cash flows and related matters as high priority.

Goodwill and Impairment: In September 2021, the Board decided to prioritise making tentative decisions about proposing disclosures about business combinations and perform further analysis of the feedback received on the subsequent accounting for goodwill. In this meeting, the Board will continue to make tentative decisions about the package of disclosures about business combinations. The proposals include a requirement to disclose quantitative information about expected synergies from a business combination. The staff recommendation not defining ‘synergies’. The staff recommend that rather than requiring an entity to explain when expected synergies from a business combination are expected to be realised they should be required to disclose information about when the benefits from synergies are expected to start, and the expected duration of those benefits.

Primary Financial Statements: The staff recommend that the Board retain ‘providing insight into management’s view of an aspect of performance’ as the objective of the requirements for MPMs and ‘management’s view of an aspect of performance’ in the definition of MPMs. The staff also recommend that the Board establish a rebuttable presumption that a subtotal of income and expenses included in public communications outside financial statements represents management’s view of an aspect of performance, allow an entity to rebut the presumption when there is reasonable and supportable information demonstrating that a subtotal of income and expenses does not represent management’s view of an aspect of performance and provide application guidance on how to assess whether there is reasonable and supportable information to support the rebuttal. The staff recommend that the Board narrow the scope of public communications considered for the purposes of applying the definition of MPMs to exclude oral communications, transcripts, and social media posts. The staff also recommend that the Board add application guidance clarifying how an entity applies the requirement to describe an MPM in a clear and understandable manner that does not mislead users.

Board Work Plan—Timing of PIRs: The staff suggest the Board begin the PIR of the impairment requirements of IFRS 9, and of IFRS 15 in the second half of 2022 and consider in the second half of 2022 when to begin the PIR of the hedge accounting requirements of IFRS 9, and IFRS 16.

Post-implementation Review of IFRS 10-12: The purpose of this session is for the Board to conclude which, if any, topics it could consider further. The staff have identified as medium priorities: the relationship between substantive rights and protective rights; a change in relevant activities during the life-cycle of an investee; assessing non-contractual agency relationships and accounting for disproportionate share of output compared to share of ownership. The staff will prepare a “Report and Feedback Statement” on the PIR, subject to Board approval.

Dynamic Risk Management: The staff recommend revising the definition of the target profile to “the range (risk limits) within which the current net open risk position can vary while still being consistent with the entity’s risk management strategy”. They also recommend introducing the risk mitigation intention, described as “the extent to which an entity intends to mitigate the current net open risk position through the use of derivatives” The staff asks whether the Board agrees with the staff view that no further refinements to the DRM model are needed in respect of the designation of a portion of prepayable assets.

Second Comprehensive Review of the IFRS for SMEs Standard: The Board will continue to deliberate specific sections of the IFRS for SMEs Standard that could be aligned with IFRS requirements. The staff recommend the Board develop amendments to the IFRS for SMEs Standard to align Section 20 with IFRS 16, with simplifications for the determination of the discount rate and the subsequent measurement of the lease liability (reassessment). The staff also recommend that the Board align with the 2011 amendments to IAS 19 in respective of the recognition requirement for termination benefits and eliminate the accounting policy option in paragraph 28.24 of the IFRS for SMEs Standard and require actuarial gains and losses to be presented in other comprehensive income.

Rate-regulated Activities: In January 2021, the Board published Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities. Most respondents agreed with the proposals to present all regulatory income minus all regulatory expense, including regulatory interest income and regulatory interest expense, as a separate line item immediately below revenue. Most respondents who commented agreed with the focus of the proposed overall disclosure objective on information about an entity’s regulatory income, regulatory expense, regulatory assets and regulatory liabilities. Some suggested the Board develop a broader overall objective of providing users of financial statements with information about the nature of the regulatory agreement, the risks associated with it and its effects on an entity’s financial performance, financial position or cash flows. Most respondents did not support the proposed requirement to apply the Standard retrospectively on initial application. Most respondents who commented asked for a longer transition period.

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

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