May

May 2023 IASB meeting notes posted

31 May 2023

The IASB met in London on 22–24 May 2023. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

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.

Due Process Oversight Committee hold May 2023 meetings

31 May 2023

The Due Process Oversight Committee (DPOC) met on 4 May 2023 via video conference. A summary of the meeting is now available.

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.

IASB issues podcast on latest Board developments (May 2023)

30 May 2023

The IASB has released a podcast featuring IASB Chair Andreas Barckow and Executive Technical Director Nili Shah discussing deliberations at the May 2023 IASB meetings.

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.

June 2023 IFRS Interpretations Committee meeting agenda posted

30 May 2023

The IFRS Interpretations Committee has posted the agenda for its next meeting, which will be held on 6–7 June 2023.

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.

IASB publishes second request for information on the post-implementation review of IFRS 9

30 May 2023

The International Accounting Standards Board (IASB) has issued a request for information (RFI) seeking comments from stakeholders to identify whether the impairment requirements in IFRS 9 'Financial Instruments' provide information that is useful to users of financial statements; whether there are requirements that are difficult to implement and may prevent the consistent implementation of the standard; and whether unexpected costs have arisen in connection with applying or enforcing the standard.

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:

Impairment — overall assessment
Asks whether the impairment requirements in IFRS 9 result in a more timely recognition of credit losses compared to IAS 39 and address the complexity caused by having multiple impairment models for financial instruments and in an entity providing useful information to users of financial statements about the effect of credit risk on the amount, timing and uncertainty of future cash flows.
General approach
Asks whether there are fatal flaws regarding the general approach and whether its costs of applying are significantly greater than expected/ benefits to users significantly lower than expected.
Determining significant increases in credit risk Asks whether there are fatal flaws regarding the assessment of significant increases in credit risk and whether the assessment of significant increases in credit risk can be applied consistently.
Measuring expected credit losses Asks whether there are fatal flaws regarding the requirements for measuring expected credit losses and whether the measurement requirements can be applied consistently.
Purchased or originated credit-impaired financial assets Asks whether the requirements in IFRS 9 for purchased or originated credit-impaired financial assets can be applied consistently.
Simplified approach for trade receivables, contract assets and lease receivables Asks whether there are fatal flaws regarding the simplified approach and whether its costs of applying are significantly greater than expected/ benefits to users significantly lower than expected.
Application of the impairment requirements in IFRS 9 with other requirements Asks whether it is clear how to apply the impairment requirements in IFRS 9 with other requirements in IFRS 9 or with the requirements in other IFRSs.
Transition Asks whether the costs of applying the transition requirements and auditing and enforcing their application are significantly greater than expected/ benefits to users significantly lower than expected.
Credit risk disclosures Asks whether there are fatal flaws regarding the disclosure requirements in IFRS 7 for credit risk and whether their costs of applying are significantly greater than expected/ benefits to users significantly lower than expected.
Other matters Asks whether there any other matters that the Board should examine as part of the PIR of the impairment requirements of IFRS 9 and whether there are lessons to be learned from the Board’s approach to developing the requirements in respect of understandability and accessibility.

    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.

    AASB/AUASB research into intangibles

    30 May 2023

    The Australian Accounting Standards Board (AASB) and the Auditing and Assurance Standards Board (AUASB) of Australia have jointly published a research report 'Australian Listed Entities: Recognised intangible assets and key audit matters'.

    The report explores the frequency, magnitude and nature of intangible assets recognised by Australian Securities Exchange (ASX) listed entities on their balance sheets. It also identifies the frequency of key audit matters related to intangible assets in auditor’s reports to provide insights into the areas that auditors are focusing on, possibly due to the complexity of the accounting requirements.

    Specifically, through a review of the financial statements from 2010 to 2021, the report finds that:

    • with the exception of micro-mining entities, the majority of Australian entities recognised some intangible assets on their balance sheets;
    • the level of investment in intangibles for the majority of entities, as a percentage of total assets, is relatively low; however, there are some entities that recognised a significant level of intangibles as a percentage of total assets;
    • there is a wide variety of category descriptions used to present intangible assets, possibly impeding both comparability and a precise understanding of the nature of the intangible asset; and
    • intangibles are the most frequent key audit matter subject matter, suggesting a substantial fraction of auditors' resources are required to assure such information, despite the relatively low level of recognised intangibles.

    Please click to access the research report on the AASB website.

    Agenda for the May 2023 Islamic Finance Consultative Group meeting

    28 May 2023

    An agenda has been released for the meeting of the Islamic Finance Consultative Group that will be held virtually and in London on 31 May 2023.

    A summary of the agenda is set out below:

    Wednesday 31 May 2023 (08:30-11:30)

    • Current practices on Mudarabah — Profit equalization reserve (SOCPA presentation)
    • Issues relating to the applicability of IAS 29 to Islamic financial institutions (AAOIFI presentation)
    • ISSB update
    • IASB and IFRS Interpretations Committee update

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

    Chair of the Trustees speaks at EAA Conference

    28 May 2023

    Erkki Liikanen, Chair of the IFRS Foundation Trustees, spoke at the he European Accounting Association Conference about relationships between the IFRS Foundation, its standard-setting boards, and the academic community around the world.

    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.

    IASB publishes amendments to IAS 7 and IFRS 7 regarding supplier finance arrangements

    25 May 2023

    The International Accounting Standards Board (IASB) has published 'Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)' to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that ask entities to provide qualitative and quantitative information about supplier finance arrangements.

     

    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:

     

    May 2023 ISSB meeting notes posted

    25 May 2023

    The ISSB met in London on 18 May 2023. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

    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.

    Correction list for hyphenation

    These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.