2021

Responses to the EFRAG consultation on the due process for EU sustainability reporting standard-setting

23 Nov 2021

In June 2021, EFRAG launched a public consultation on the requirements EFRAG plans to follow in its role as technical advisor to the European Commission in the preparation of European sustainability reporting standards envisioned in the draft Corporate Sustainability Reporting Directive. A summary of the responses to the consultation is now available.

Respondents to the consultation especially stressed the need for proper due process and transparency during the work that is already being carried out before the new Sustainability Standards Board has been established, the need for an orderly and transparent transition to the new governance structure, and the need to build on existing standards and frameworks for sustainability reporting and accounting and to cooperate with other standard setters in the field, especially the IFRS Foundation's ISSB.

The summary of responses is available on the EFRAG website.

Updated IPSAS-IFRS alignment dashboard

22 Nov 2021

The International Public Sector Accounting Standards Board (IPSASB), which develops the International Public Sector Accounting Standards (IPSAS) for financial reporting by governments and other public sector entities, has released an updated IPSAS-IFRS alignment dashboard showing how far individual IPSAS are aligned with corresponding IFRSs.

Please click to access the updated alignment dashboard prepared for the December 2021 IPSASB meeting on the IPSASB website.

In this context, please see also our 2021 edition of IPSAS in your pocket published in February.

November 2021 IFRS Interpretations Committee meeting agenda posted

19 Nov 2021

The IFRS Interpretations Committee has posted the agenda for its next meeting, which will be held by video conference on 30 November and 1 December 2021.

The Committee will discuss the following:

  • IFRS 15 — Principal versus agent: software resellers
  • IFRS 16 — Economic benefits from use of a windfarm
  • IAS 37 — Negative low or new energy vehicle credits
  • IFRS 9 — TLRO III transactions
  • Work in progress

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.

We comment on two IFRS Interpretations Committee tentative agenda decisions

19 Nov 2021

We have published our comment letters on IFRS Interpretations Committee tentative agenda decisions related to IAS 7 and IFRS 9, as published in the September 2021 'IFRIC Update'.

More in­for­ma­tion about the issues is set out below:

Issue

Agenda decision supported?

More in­for­ma­tion

Cash Received via Electronic Transfer as Settlement of a Financial Asset (IFRS 9)

Yes. However, we believe that this issue should be referred to the Board to consider the wider consequences of the analysis in the TAD and to perform a comprehensive cost/benefit analysis before concluding on the matter.

o    Deloitte comment letter

o    Committee dis­cus­sion

Demand Deposits with Restrictions on Use (IAS 7)

Yes

o    Deloitte comment letter

o    Committee dis­cus­sion

Click to access all our comment letters to the IASB, IFRS Foun­da­tion, and IFRS In­ter­pre­ta­tions Committee.

IASB proposes amendments to IAS 1 regarding the classification of debt with covenants

19 Nov 2021

The International Accounting Standards Board (IASB) has published the exposure draft 'Non-current Liabilities with Covenants (Proposed amendments to IAS 1)' to clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability. The deadline for submitting comments is 21 March 2022.

 

Background

In January 2020, the Board issued Classification of Liabilities as Current or Non-current, which amended IAS 1 Presentation of Financial Statements. The amendments clarified how an entity classifies debt and other financial liabilities as current or non-current in particular circumstances. The amendments are effective for annual reporting periods beginning on or after 1 January 2023, with earlier application permitted.

In December 2020, the IFRS Interpretations Committee published a tentative agenda decision in response to informal feedback and enquiries about how an entity applies the amendments to particular fact patterns. After considering feedback to its tentative agenda decision, the Committee handed the matter over to the IASB as that feedback provided information about situations the Board did not specifically consider when developing the 2020 amendments.

In response to that new information, the Board tentatively decided to amend IAS 1 with respect to classification (as current or non-current), presentation and disclosures of liabilities for which an entity’s right to defer settlement for at least 12 months is subject to the entity complying with conditions after the reporting period.

 

Key proposals

The main proposals in ED/2021/9 Non-current Liabilities with Covenants (Proposed amendments to IAS 1) would: 

  • Modify the requirements introduced by Classification of Liabilities as Current or Non-current on how an entity classifies debt and other financial liabilities as current or non-current in particular circumstances: The Board proposes that conditions an entity must comply with within twelve months after the reporting period would have no effect on whether an entity has the right to defer settlement of a liability for at least twelve months after the reporting period, i.e. such conditions have no effect on the classification of a liability as current or non-current. When an entity classifies such a liability as non-current, however, it would be required to disclose information that enables users of financial statements to assess the risk that the liability could become repayable within twelve months. An entity would also present separately, in its statement of financial position, liabilities classified as non-current for which the entity’s right to defer settlement for at least twelve months after the reporting period is subject to compliance with certain conditions within twelve months after the reporting period.
  • Defer the effective date of the 2020 amendments to no earlier than 1 January 2024.

The deadline for submitting comments on these proposals is 21 March 2022.

 

Effective date

The Board intends to decide on the effective date after exposure, but the date would be no earlier than 1 January 2024. The amendments would be applied retrospectively in accordance with IAS 8. Earlier application would be permitted.

 

Alternative views

The exposure draft contains alternative views by two Board members. Both members dissented because they disagree with the Board’s proposal to require an entity to present separately, in its statement of financial position, non-current liabilities subject to covenants. They would have preferred these conditions to be communicated through the notes to the financial statements.

 

Additional information

The following additional information is available on the IASB website and on IAS Plus:

 

Agenda for the November 2021 ITCG meeting

18 Nov 2021

The agenda is available for the next meeting of the IFRS Taxonomy Consultative Group (ITCG), which will be a virtual meeting on 29 November 2021.

The ITCG will discuss the following topic:

  • Digital reporting implications for the Exposure Draft Management Commentary (continued from the September 2021 ITCG meeting)

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

EFRAG seeks to broaden its membership by including civil society chapter

17 Nov 2021

In its process of creating a new sustainability reporting pillar alongside its existing financial reporting pillar, the European Financial Reporting Advisory Group (EFRAG) aims to enlarge the EFRAG General Assembly to allow additional relevant and interested organisations to participate in and contribute to EFRAG and become EFRAG Member Organisations.

To ensure a balanced representation of stakeholders, the membership of the EFRAG General Assembly will extended with a Chapter covering Civil Society (including NGOs, academics, trade unions, and consumer organisations) in addition to its European Stakeholder Organisations Chapter and National Organisations Chapter. EFRAG Member Organisations can contribute to the sustainability reporting pillar or to the financial reporting pillar or to both.

EFRAG has published a call for expressions of interest for EFRAG membership, and is inviting all organisations including civil society to join its new sustainability reporting pillar. Expressions of interest are welcome by 8 December 2021.

Please click for more information on the EFRAG website.

Note: A briefing note published on 3 December 2021 explains who qualifies for EFRAG membership.

Summary of the September 2021 ITCG meeting

16 Nov 2021

The IASB has published a summary of the IFRS Taxonomy Consultative Group (ITCG) meeting held on 16 September 2021.

The ITCG discussed the following:

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

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

Pre-meeting summaries for the November 2021 IASB meeting

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.

ISAR 38 — presentations available

12 Nov 2021

The thirty-eighth session of the United Nations Conference on Trade and Development (UNCTAD) Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) was held in Geneva on 9 - 12 November 2021.

The two main topics for the meeting were:

  • Review of practical implementation, including measurement, of core indicators for entity reporting on the contribution towards the attainment of the Sustainable Development Goals; and
  • Climate-related financial disclosures in mainstream entity reporting: good practices and key challenges.

The presentations from the meeting (including the presentations from the workshop on "Impact of COVID 19 on company financial and non-financial reporting“ on 8 November 2021) can now be accessed online.

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