The following topics were discussed:

Performance reporting

FASB: Disaggregation—Income statement expenses 

The boards discussed the FASB project on disaggregation which is aimed to improve the disclosures about a public business entity’s expenses by providing more detailed information about certain types of expenses (such as employee compensation) that are included in expense captions commonly presented on the income statement (such as cost of sales).

IASB: Primary Financial Statements — Disaggregation and management-defined performance measures

The boards discussed the IASB’s project on primary financial statements that aims at improving the quality of financial reporting, including digital reporting, through presentation of defined subtotals in statement of profit or loss to improve comparability, disclosures about management-defined performance measures (MPMs) to provide transparency, and enhanced requirements for aggregation and disaggregation to provide useful information.

FASB and IASB: Financial KPIs for business entities

The boards discussed research activities to explore standardising the definitions of financial key performance indicators. The research will be informed by the progress of the FASB’s Disaggregation — Income Statement Expenses project and considers interactions with the regulatory framework.

Other Disclosure Projects

FASB: Improvements to income tax disclosures

The boards discussed the FASB project that aims to improve the transparency and decision usefulness of income tax disclosures. The project focuses primarily on the rate reconciliation table and disclosures on income taxes paid.

IASB: International Tax Reform—Pillar Two Model Rules

The boards discussed the recent amendments of the IASB titled International Tax Reform—Pillar Two Model Rules, which amended IAS 12. The amendments introduced a temporary exception to the accounting for deferred taxes arising from the implementation of the Pillar Two model rules and targeted disclosure requirements.

FASB: Segment Reporting — Improvements to reportable segment disclosures

The boards discussed the FASB project on segment reporting that aims to improve the reportable segment disclosures.

Business Combinations/Equity Method of Accounting

IASB: Business Combinations—Disclosures, Goodwill and Impairment

The boards discussed the IASB’s project on Business Combinations — Disclosures, Goodwill and Impairment that aims at improving the information entities provide about their acquisitions at a reasonable cost. The IASB decided to focus on a package of disclosure requirements about business combinations and changes to the impairment test of cash-generating units containing goodwill in IAS 36. An Exposure Draft is expected in the first half of 2024.

FASB: Purchased financial assets under CECL

The boards discussed the FASB project on purchased financial assets under current expected credit losses (CECL). The project was initiated after the issuance of Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on which the FASB received feedback that the accounting for acquired financial assets is complex and the understandability and decision-usefulness of the information is questionable.

IASB: Equity Method—Project update—Including a comparison of the IASB's tentative decisions with US GAAP

The boards discussed the IASB’s Equity Method project which aims at developing answers to application questions about the equity method, as set out in IAS 28, using the principles derived from IAS 28, where possible. Tentative decisions have been made on applications questions for associates. As a next step, the IASB will discuss the implications of applying its tentative decisions to joint ventures and subsidiaries in separate financial statements.

Accounting for Sustainability-related Matters in the Financial Statements

IASB: Classification and Measurement of Financial Instruments—ESG-Linked Financial Instruments

The boards discussed the IASB’s Exposure Draft (ED) Amendments to the Classification and Measurement of Financial Instruments published in March 2023. In the ED, the IASB proposed for financial assets to:

• Clarify the definition of a 'basic lending arrangement'
• Clarify how to assess terms that change the timing or amount of contractual cash flows
• Provide examples to illustrate the application of these principles to assets with ESG-linked features
• Introduce disclosure requirements for instruments with changes in cash flows linked to a contingent event specific to the debtor

For financial liabilities the IASB did not propose amendments to the classification and measurement requirements. However, the disclosure requirements proposed for financial assets are also applicable to financial liabilities.

IASB: Power Purchase Agreements

The boards discussed the IASB’s project on power purchase agreements (PPAs) that was initiated after the IFRS Interpretations Committee (IFRS IC) discussed a submission asking about applying paragraph 2.4 of IFRS 9 (the ‘own-use’ exception) to physical-delivery contracts to buy renewable energy (physical PPAs). As a result of the discussion, the IFRS IC recommended that the IASB consider undertaking a narrow-scope standard-setting project to clarify how entities apply the own-use exception to some physical PPAs.

The IASB discussed the IFRS IC’s recommendation and tentatively decided to add a project to the work plan to research whether narrow-scope amendments could be made to IFRS 9. The IASB’s research will focus on applying the own-use exception to physical PPAs and applying the hedge accounting requirements in IFRS 9 using a virtual PPA as the hedging instrument.

FASB: Definition of a derivative

The boards discussed the FASB’s project on the definition of a derivative, in which the FASB will consider potential refinements to the scope of Topic 815, Derivatives and Hedging, including certain aspects of the definition of a derivative and derivative scope exceptions, and the application to certain arrangements. The project will also consider whether to address related areas such as the bifurcation criteria for an embedded derivative and the accounting for derivative contract modifications.

FASB: Accounting for environmental credit programs

The boards discussed the FASB’s project on accounting for environmental credit programmes, that aims to provide recognition, measurement, presentation and disclosure requirements for:

• Credits obtained for compliance programmes
• Credits obtained for voluntary use
• Non-governmental creators of environmental credits
• Obligations arising from regulatory compliance programmes

IASB: Climate-related Risks in the Financial Statements

The boards discussed the IASB’s project on climate-related risks in the financial statements that will explore whether and how financial statements can better communicate information about climate-related risks. The project will also explore the nature and causes of stakeholder concerns about reporting on the effects of climate-related risks in the financial statements. The IASB will consider possible courses of action, if any.

The IASB decided that the project will not seek to:

• Develop an Accounting Standard on climate-related risks, or extensive application guidance on how to consider the effects of such risks when applying Accounting Standards
• Broaden the objective of financial statements or change the definitions of assets and liabilities
• Develop accounting requirements for pollutant pricing mechanisms

Intangibles

FASB: Accounting for and disclosure of crypto assets

The boards discussed the FASB’s proposed update on accounting for and disclosure of crypto assets. The proposed updated focuses on:

• Crypro assets in scope
• Improved accounting guidance
• Transition guidance for implementing the proposed amendments
• Enhanced disclosure requirements

FASB: Accounting for and disclosure of software costs

The boards discussed the FASB’s project on recognition, measurement, presentation and disclosure of costs to internally develop or acquire software, which encompasses all of the software costs currently subject to the guidance in Subtopics 350-40 and 985-20. The objective of the project is to modernise the accounting for software costs and to enhance the transparency about an entity’s software costs.

Other projects

IASB: Rate-regulated Activities

The boards discussed the IASB’s project on rate-regulated activities. The project aims to provide information about the effects of regulatory income, regulatory expense, regulatory assets and regulatory liabilities on companies’ financial performance and financial position.

FASB: Statement of cash flows

The boards discussed the FASB’s research project on statement of cash flows, which will explore improvements to the statement of cash flows in order to provide additional decision-useful information for investors and other allocators of capital.

FASB: Accounting for government grants

The boards discussed the FASB’s Invitation to Comment (ITC), Accounting for Government Grants by Business Entities: Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into Generally Accepted Accounting Principles, with a comment letter due date of 12 September 2022.