The following topics were discussed:

Business Combinations—Disclosures, Goodwill and Impairment: The IASB decided not to proceed with its preliminary view to remove the requirement to perform a quantitative impairment test each year and instead retain the requirement for an entity to perform an annual impairment test. The IASB also decided to maintain its preliminary view that it is infeasible to design a different impairment test that is significantly more effective at a reasonable cost.

IASB work plan update: The staff provided an update on the IASB’s work plan since its last update in March 2023.

Post-implementation review (PIR) of IFRS 15: The IASB approved the publication of a Request for Information (RFI) for the PIR of IFRS 15 and agreed with a comment period of 120 days. The publication of the RFI is expected for the end of June 2023.

Maintenance and consistent application: The IASB decided to include ‘Lessee derecognition of lease liabilities (IFRS 9)’ and ‘Disclosure of deferred difference between fair value and transaction price (IFRS 7 IG)’ to their previously approved annual improvements package. The IASB also decided that early application of the package should be permitted and the comment period for the exposure draft should be 90 days. Furthermore, the IASB gave the staff permission to begin the balloting process for the exposure draft.

Primary Financial Statements: The IASB made decisions about investments in associates and joint ventures accounted for using the equity method, and on issues related to management performance measures and IFRS 8.

Subsidiaries without Public Accountability: The IASB decided to retain the disclosure requirements proposed in the draft Standard, with some targeted changes. The IASB also decided that the paragraph in the draft Standard that addresses materiality of disclosure requirements should be retained. Further, the IASB decided to proceed with its proposal in the ED that disclosure requirements about the transition to a new or amended IFRS Accounting Standard set out in that new or amended Standard apply to eligible subsidiaries. Lastly, the IASB decided that until it issues an amendment to the prospective Standard, eligible subsidiaries would be required to comply with disclosure requirements in amendments to IFRS Accounting Standards that have been issued after the publication of the ED.

Management Commentary: The staff held an educational session on the comparison between the Management Commentary Exposure Draft and the Integrated Reporting Framework. No decisions were made.

Dynamic Risk Management (DRM): The IASB discussed potential illustrative examples of the application of the current DRM model to support stakeholders in their analysis of the model requirements. No decisions were made.

Financial Instruments with Characteristics of Equity (FICE): The IASB decided to propose consequential amendments resulting from the forthcoming FICE ED to the forthcoming Subsidiaries without Public Accountability Standard. The IASB also agreed on a comment period of 120 days for the ED and gave the staff permission to begin the balloting process for the ED. One IASB member indicated an intention to dissent from the proposals in the ED.

Rate-regulated Activities: The IASB decided that the prospective Standard would retain the proposal to require recognition of all regulatory assets and all regulatory liabilities existing at the end of the reporting period. The IASB also decided to retain the proposal to treat any regulatory assets or regulatory liabilities arising from regulated rates denominated in a foreign currency as monetary items when applying IAS 21.

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

Meeting ac­tiv­i­ties included the following:

• Approval for a shortened comment period for an exposure draft of proposed amendments to the IFRS for SMEs Accounting Standard
• Update on the IFRS Taxonomy Consultative Group

For more in­for­ma­tion, see the summary of the DPOC meeting on the IFRS Foun­da­tion’s website.

High­lights of the podcast include dis­cus­sions on:

• Sup­ple­men­tary meeting on proposed amendments to the IFRS for SMEs Accounting Standard on international tax reform.
• Decisions and de­vel­op­ments related to the projects on primary financial statements, disclosure initiative — subsidiaries without public accountability: disclosures, dynamic risk management, business combinations — disclosures, goodwill and impairment, and management commentary.

The podcast can be accessed through the press release on the IASB website.

The Committee will discuss the following:

• IFRS 9 Financial In­stru­ments:Application of the ‘Own Use’ exception in the light of current market and geopolitical questions
• IFRS 27 Separate Financial Statements: Merger between a parent and its subsidiary in the separate financial statements
• Climate-related risks in the financial statements
• IAS 21 The Effects of Changes in Foreign Exchange Rates and IAS 29 Financial Reporting in Hyperinflationary Economies
• Business combinations under common control
• Ad­min­is­tra­tive matters

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.

The IASB has decided that while reviewing IFRS 9 in its entirety, it will do so in three parts:

• In 2022, the IASB completed its review of the classification and measurement requirements, concluding that these requirements are working as intended.
• With the request for information published today, the IASB is seeking feedback on the impairment requirements.
• The IASB will seek feedback separately on the hedge accounting requirements.

The post-implementation review process for the impairment requirements in IFRS 9 was officially taken up in July 2022. From September 2022 – February 2023, the IASB conducted outreach to ask stakeholders what matters the IASB should examine within the context of the objectives of the post-implementation review (PIR).

After discussing feedback from outreach, the Board decided in February 2023 to examine further:

• the general approach to recognition of expected credit losses (ECL),
• significant increases in credit risk,
• the measurement of ECL,
• the prevalence of particular questions from entities on how to apply the ECL requirements to purchased or originated credit-impaired financial assets,
• the simplified approach to recognition of ECL for trade receivables, contract assets and lease receivables, 
• the accounting for loan commitments, collateral and other credit enhancements held, and issued financial guarantee contracts that are in scope of IFRS 9,
• the application of the ECL requirements alongside other requirements in IFRS 9 or in other IFRS Accounting Standards,
• the effects of transition reliefs provided by the IASB and the balance between reducing costs for preparers of financial statements and providing useful information to users of financial statements, and
• the disclosure requirements for credit risk in IFRS 7.

Accordingly, the RFI is structured into the following sections:

Comments on the RFI are requested by 27 September 2023. The request for information and a corresponding press release are available on the IASB website. There is also a short video with IASB Board member Zach Gast explaining the RFI. In addition, see Deloitte's iGAAP in Focus newsletter.

A summary of the agenda is set out below:

Agenda papers for the meeting are available on the IFRS Foundation website.

Mr Liikanen opened his speech by introducing the recent work of the IASB and the ISSB and pointing out parallels between what lead to establishing the two Boards. He noted that companies, investors, regulators, auditors and academics all benefited from the global lingua franca of IAS/IFRS and will also do so from a global global baseline of sustainability disclosures for the capital markets.

Mr Liikanen also noted that none of this would have been or will be possible without the deep involvement of the academic community:

We value academic research for its independence and rigour. We continually look for high-quality evidence that can assist in making standard-setting decisions.

Please click to access the full transcript of his speech on the IFRS Foundation website.

Background

The IFRS Interpretations Committee received a submission about supply chain finance arrangements asking:

• How an entity presents liabilities to pay for goods or services received when the related invoices are part of a supply chain finance (or reverse factoring) arrangement; and
• what information about reverse factoring arrangements an entity is required to disclose in its financial statements.

In response to that submission, the Committee published an agenda decision in December 2020. However, feedback and input received — in particular from investors and analysts — suggested the information entities provide about supplier finance arrangements applying existing IFRS requirements does not meet all investor information needs.

In response to that feedback, the Board decided to amend IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that ask entities to provide qualitative and quantitative information about supplier finance arrangements.

Key changes

The amendments in Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7): 

• Do not define supplier finance arrangements. Instead, the amendments describe the characteristics of an arrangement for which an entity is required to provide the information. The amendments note that arrangements that are solely credit enhancements for the entity or instruments used by the entity to settle directly with a supplier the amounts owed are not supplier finance arrangements.
• Add two disclosure objectives. Entities will have to disclose in the notes information that enables users of financial statements
  • to assess how supplier finance arrangements affect an entity’s liabilities and cash flows and
  • to understand the effect of supplier finance arrangements on an entity’s exposure to liquidity risk and how the entity might be affected if the arrangements were no longer available to it.
• Complement current requirements in IFRSs by adding to IAS 7 additional disclosure requirements about:
  • the terms and conditions of the supplier finance arrangements;
  • for the arrangements, as at the beginning and end of the reporting period:
    • a) the carrying amounts of financial liabilities that are part of the arrangement and the associated line item presented;
    • b) the carrying amount of financial liabilities disclosed under a) for which suppliers have already received payment from the finance providers;
    • c) the range of payment due dates (for example, 30 to 40 days after the invoice date) of financial liabilities disclosed under a) and comparable trade payables that are not part of a supplier finance arrangement; and
  • the type and effect of non-cash changes in the carrying amounts of the financial liabilities that are part of the arrangement.
  The IASB decided that, in most cases, aggregated information about an entity’s supplier finance arrangements will satisfy the information needs of users of financial statements.
• Add supplier finance arrangements as an example within the liquidity risk disclosure requirements in IFRS 7.

Effective date and transition

An entity applies the amendments to IAS 7 for annual reporting periods beginning on or after 1 January 2024 (with earlier application permitted) and the amendments to IFRS 7 when it applies the amendments to IAS 7.

There is a certain amount of transition relief provided, including relief regarding comparative information and interim period information.

Additional information

The following additional information is available on the website of the IFRS Foundation and on IAS Plus:

• IASB press release (link to IFRS Foundation website)
• Webcast explaining the amendments (link to IFRS Foundation website)
• Investor Perspectives article (link to IFRS Foundation website)
• iGAAP in Focus newsletter
• Our IAS Plus project page on Supplier finance arrangements

The following topic was discussed:

Maintenance of the SASB Standards: In this meeting, the ISSB ratified consequential amendments to the SASB Standards in connection with the issuance of IFRS S2 Climate-related Disclosures. The ISSB also confirmed it is satisfied that it has complied with the applicable due process requirements to publish the climate-related revisions to the SASB Standards.

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

Background

In March 2022, the OECD released technical guidance on its 15% global minimum tax agreed as the second ‘pillar’ of a project to address the tax challenges arising from digitalisation of the economy. This guidance elaborates on the application and operation of the Global Anti-Base Erosion (GloBE) Rules agreed and released in December 2021 which lay out a co-ordinated system to ensure that multinational enterprises with revenues above €750 million pay tax of at least 15% on the income arising in each of the jurisdictions in which they operate.

The IASB decided to respond to stakeholders’ concerns about the potential implications of the imminent implementation of these rules on the accounting for income taxes by jurisdictions. In particular, the IASB noted that the situation is very complicated as:

• jurisdictions may change statutory tax rates to avoid being considered a low-tax environment;
• companies might decide to move their business to jurisdictions with higher statutory tax rates; and
• companies might engage in business that comes with tax incentives that might bring down their statutory tax rate to below 15% although the jurisdiction they are doing business in is not generally considered a low-tax environment.

All of these and further considerations would entail most complicated calculations of deferred tax in a situation that is highly volatile due to the fact that jurisdictions implement the OECD rules at different speed and different points of time. Due to the many unknown variables involved, the IASB has decided to develop a mandatory exemption until the global tax system has settled and reestablished itself and the IASB can thoroughly assess the situation and provide a reliable solution.

Changes

The amendments in International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12) are:

• An exception to the requirements in IAS 12 that an entity does not recognise and does not disclose information about deferred tax assets and liabilities related to the OECD pillar two income taxes. An entity has to disclose that it has applied the exception.
• A disclosure requirement that an entity has to disclose separately its current tax expense (income) related to pillar two income taxes.
• A disclosure requirement that state that in periods in which pillar two legislation is enacted or substantively enacted, but not yet in effect, an entity discloses known or reasonably estimable information that helps users of financial statements understand the entity’s exposure to pillar two income taxes arising from that legislation.
• The requirement that an entity applies the exception and the requirement to disclose that it has applied the exception immediately upon issuance of the amendments and retrospectively in accordance with IAS 8. The remaining disclosure requirements are required for annual reporting periods beginning on or after 1 January 2023.

The IASB will continue to monitor developments related to the implementation of the pillar two model rules. It plans to undertake further work to determine whether to remove the temporary exception — or to make it permanent — after there is sufficient clarity about how jurisdictions implemented the rules and the related effects on entities.

The IASB has also decided that the pillar two model rules (and the amendments to IAS 12) are relevant to entities applying the IFRS for SMEs. The IASB has added to its work plan a narrow-scope standard-setting project to amend Section 29 Income Tax of the IFRS for SMEs. An exposure draft is expected in June 2023.

Dissenting opinion

The final amendments contain a dissenting opinion as one Board member is concerned that these amendments will result in an entity disclosing less useful information to help users of financial statements assess the entity’s future cash flows.

Additional information

Please click for:

• IASB press release (link to IASB website)
• iGAAP in Focus newsletter explaining the amendments
• Our IAS Plus project page on IAS 12 — OECD pillar two model rules