New item: IFRS 9 Financial Instruments—Application of the “Own Use” Exemption: The IFRS IC received a submission about the possibility of applying the own use exception in IFRS 9:2.4 to contracts for the procurement of renewable energy (power purchase agreements or “PPAs”) as part of an entity’s commitment to reduce the effects of climate change and to decarbonise their production and products for each of the three fact patterns. Based on the analysis, the staff were of the view that the principles and requirements in IFRS 9 do not provide an adequate basis for an entity to determine the appropriate accounting for PPAs and recommend that the IASB develop a narrow-scope amendment that addresses the application of IFRS 9:2.4 particularly to contracts for the purchase of a non-financial item that cannot be stored and has to be consumed within in a short time interval in accordance with the market structure in which the item is traded.
New item: IAS 27 Separate Financial Statements—Merger between a Parent and Its Subsidiary in the Separate Financial Statements: The IFRS IC received a submission about how an entity applies IAS 27 to account for a merger with its subsidiary in its separate financial statements and whether the parent should apply the business combination accounting requirements in IFRS 3. From the findings of the information request and additional research, the “carrying amount method” (i.e. the parent entity recognises the subsidiary’s assets and liabilities at their previous carrying amounts) is the predominate method in practice and the staff did not observe diversity in accounting. The staff recommend not to add a standard-setting project to the work plan but to publish a tentative agenda decision.
Follow-up discussion on previous matter: IAS 21 The Effects of Changes in Foreign Exchange Rates and IAS 29 Financial Reporting in Hyperinflationary Economies—Consolidation of a Non-hyperinflationary Subsidiary by a Hyperinflationary Parent: In its June 2022 meeting, the IFRS IC discussed a submission about the accounting applied by a parent, whose functional currency is the currency of a hyperinflationary economy, when it consolidates a subsidiary, whose functional currency is the currency of a non-hyperinflationary economy. The IFRS IC concluded that the parent could restate or not restate the subsidiary’s results and financial position in terms of the measuring unit current at the end of the reporting period. After conducting additional research, the staff recommended the IASB develop a narrow-scope amendment that addresses the submitted fact pattern and a related matter (a situation in which an entity with a non-hyperinflationary functional currency presents its financial statements in a hyperinflationary currency).
Input on IASB project: Climate-related Risks in the Financial Statements: The focus of the project is to explore whether and how financial statements can better communicate information about climate-related risks. The purpose of the discussion is to obtain IFRS IC members’ feedback on nature of concerns, causes of concern and courses of action and scope of the project.
Input on IASB project: Business Combinations under Common Control (BCUCCs): After the analysis of feedback on selecting the measurement method to apply to a BCUCC, the IASB set out options for the project direction. The purpose of the discussion is to understand what problems are caused by the gap in guidance in IFRS Accounting Standards for reporting BCUCCs, whether there are specific examples where the reporting for a BCUCC resulted in financial statements that were misleading or failed to provide useful information about the BCUCC and ask IFRS IC members the preference of the project direction.
Work in progress: The update from the March 2023 meeting will be presented to the IFRS IC.
The full agenda for the meeting and our comprehensive pre-meeting summaries can be found here.