Comment letters on tentative agenda decision: IFRS 16 Leases—Definition of a Lease: Substitution Rights: In November 2022, the IFRS IC published a tentative agenda decision in response to a submission about how to assess whether a contract contains a lease applying IFRS 16 when the supplier has particular substitution rights.  Almost all respondents agreed with the IFRS IC’s analysis of level at which to evaluate whether a contract contains a lease. Most respondents agreed (or did not necessarily disagree) with the conclusion that, there is an identified asset in the fact pattern described, but some of them raised comments on the analysis in the tentative agenda decision. In this meeting, all IFRS IC members agreed with the conclusion in the agenda decision with suggested amendments to the text.

New item: IFRS 9 Financial Instruments—Guarantee over a Derivative Contract: The IFRS IC received a submission about how to assess whether an issuer accounts for a guarantee written over a derivative contract as a financial guarantee contract or a derivative. In the fact pattern described, Entity C provides a guarantee over a derivative contract between Entity A and Entity B, which promises to reimburse Entity A, in full or in part, the actual loss suffered in the event of a default by Entity B. The submitter asked whether such guarantee written meets the definition of a financial guarantee contract of a derivative. The staff concluded that the matter described in the request is, in isolation, too narrow for the IASB or the IFRS IC to address in a cost-effective manner.  All IFRS IC members agreed with this.

New item: IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments—Premium Receivable from an Intermediary: The IFRS IC received a submission about how an issuer accounts for premiums receivable from an intermediary. In the fact pattern described, a policyholder has paid the premiums to an intermediary when the amounts became due under an insurance contract. At this point, the insurer is legally obliged to provide insurance contract services to the policyholder, even if the intermediary does not pay the premiums to the insurer (under the agreement between the insurer and the intermediary, the intermediary is allowed to pay later). The submission asked, when the policyholder pays the premiums to the intermediary, whether the insurer is required to recognise the premiums receivable from an intermediary as a separate financial asset under IFRS 9 and remove these premiums from the measurement of the group of insurance contracts under IFRS 17. The staff concluded that the premiums receivables from the intermediary remain in the measurement of a group of insurance contracts until recovered or settled in cash. However, the view that the premiums receivable from an intermediary should be recognised as a separate financial asset under IFRS 9 and are removed from the measurement of the group of insurance contracts under IFRS 17 cannot be precluded. Some of the IFRS IC members agreed that both views are acceptable. Some had their preferred view over another, but they accepted or did not preclude another view. Overall, the IFRS IC decided to publish the tentative agenda decision.

New item: Home and Home Loans Provided to Employees: The IFRS IC received a submission about how an entity accounts for homes and loans to buy homes provided to its employees in two fact patters. In view of the fact that outreach indicates that neither of the fact patterns described in the submission is widespread, nor are the amounts involved material, that staff recommend not adding a standard-setting project to the work plan and to publish a tentative agenda decision that explains the reasons. All IFRS IC members agreed with this.

Potential Annual Improvements to IFRS Accounting Standards: IFRS IC members shared their views on the staff’s preliminary views on the following two proposed amendments to IFRS Accounting Standards and to include them in the next annual improvements cycle:

• IFRS 9 Financial Instruments and IFRS 16 Leases—Lessee accounting for lease payments forgiven
• Guidance on implementing IFRS 17 Insurance Contracts: Disclosure of deferred difference between fair value and transaction price

Input on IASB project: Business Combinations—Disclosures, Goodwill and Impairment: Possible changes to the impairment test of cash-generating units (CGU) containing goodwill: The IASB has a project which aims at improving information entities provide about their business combinations at a reasonable cost. The staff identified suggestions for changes to the impairment test of CGUs containing goodwill that the staff considered warrant further consideration. The staff paper provided details of each suggestion and initial staff comments. The purpose of the discussion is to obtain feedback on some suggestions respondents to the Discussion Paper had for changes to the impairment test of CGUs containing goodwill. The IFRS IC members shared their views on each of the suggestions for changes to the impairment test of CGUs containing goodwill.

Work in progress: The new matter, Merger between a parent and its subsidiary in separate financial statements, has not yet been presented to the IFRS IC.

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

Highlights of the podcast include discussions on:

• discussions from the March ISSB meeting;
• activities following final decisions on S1 and S2;
• statements from IOSCO;
• recent meetings in Tokyo;
• the board’s discussions on the SASB Standards;
• update on agenda priorities; and
• next phases of work.

The podcast can be accessed on the IFRS Foundation website.

The following topics are on the agenda.

Climate-related risks in the financial statements: The IASB will start discussions on its project on climate-related risks in the financial statements. Particularly, the staff will present the origins of the project, the purpose of the project and the planned initial steps for the project. The IASB will not be asked to make any decisions on the project.

Work plan update: In this session, the staff will provide an update on the IASB’s work plan since the last update in December 2022. The purpose of the session is to provide a holistic view of the IASB’s technical projects to support decisions about whether to add or remove projects, as may be discussed in individual project papers and assessment of overall progress on the work plan, including project prioritisation and timing.

Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures: In this session, the IASB will continue its redeliberations of the relationship of the new IFRS Accounting Standard with the IFRS for SMEs Accounting Standard. The staff recommend that the IASB assess separately the costs and benefits for subsidiaries applying the reduced disclosure Standard and the costs and benefits for SMEs applying the IFRS for SMEs.

Equity Method: In this session, the IASB will discuss three application questions on its project to revise IAS 28. The staff recommend responses and actions with regard to these application questions.

Primary Financial Statements: The staff recommend detailed revisions to the Exposure Draft in the areas of disclosure of operating expenses by nature in the notes; management performance measures (MPMs)—rebuttable presumption; MPMs—relationship with the requirements of other IFRS Accounting Standards; MPMs—tax disclosure; issues related to categories in the statement of profit or loss; and issues related to the proposals for entities with specified main business activities.

Post-implementation Review of IFRS 15: The IASB will discuss which questions to include in the forthcoming Request for Information. In particular, the staff recommend questions on the standard as a whole and the convergence with US GAAP; the five steps of revenue recognition; principal versus agent considerations; licensing; disclosures; transition; and interaction with IFRS 9, IFRS 10 and IFRS 16.

Business Combinations—Disclosures, Goodwill and Impairment: In this session, the IASB will make decisions about some of the IASB’s preliminary views regarding reducing the cost and complexity of the impairment test, and some aspects of the proposed package of disclosure requirements in IFRS 3.

Our pre-meeting summaries are available on the March meeting notes page and will be supplemented with our popular meeting notes after the meeting.

The following topics are on the agenda:

ISSB Consultation on Agenda Priorities: The staff recommend refining the specifics surrounding the upcoming Request for Information (RFI). In particular, The staff recommend that, within the RFI the scope of the connectivity project be expanded to be more broadly focused on ‘integration in reporting’; the requirements of S1 and S2 related to connected information be included to provide necessary context when considering the project on ‘integration in reporting’; the project be rearticulated as an ISSB project that could be pursued jointly with the IASB, rather than presenting it only as a formal ‘joint project’; and the questions asked are framed in a manner that elicits input about how this project should be pursued.

International Applicability of the SASB Standards: The ISSB is developing an exposure draft (ED) that explains the process and the methodology for updating specific jurisdictional laws and regulations in the SASB Standards in order to enhance the international applicability of the SASB Standards. In this session, ISSB members will receive a status update of the project and details on the concepts and processes that guide that effort. The ISSB expects to publish the ED in May 2023.

Our pre-meeting summaries is available on our March meeting notes page and will be supplemented with our popular meeting notes after the meeting.

The bases for conclusions illustrate the objective and context of each draft standard, the process followed in its preparation, the reasons to include in the standard a disclosure requirement, when relevant the alternative considered, the references to other standard-setting initiatives or European or other relevant regulations and, where appropriate, the argument supporting the need for granular guidance.

Each basis for conclusions appears under the draft standard available on this EFRAG website.

The Board will discuss the following:

• Climate-related risks in the financial statements
• Board work plan update
• Disclosure Initiative — Subsidiaries without public accountability: Disclosures
• Primary financial statements
• Equity method
• PIR of IFRS 15
• Business combinations — Disclosures, Goodwill and Impairment

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 published guidance summarising the improved approach, which involves:

• Early engagement with investors.
• Developing disclosure requirements alongside recognition and measurement requirements.
• Considering digital reporting implications.
• Using objectives to explain investors’ information needs.
• Supporting specific objectives through disclosure requirements.

The IASB intends to use this approach when developing disclosure requirements in future.

In addition, the IASB has published a project summary and feedback statement on the project, which provides an overview of the project, summarises feedback on the exposure draft ED/2021/3 Disclosure Requirements in IFRS Standards — A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19), and sets out the IASB’s response to that feedback. The publication of this document officially concludes the the IASB's targeted standards-level review of disclosures project.

For more information, see the press release on the IFRS Foundation’s website.

Comment letters on tentative agenda decision: IFRS 16 Leases—Definition of a Lease: Substitution Rights: In November 2022, the IFRS IC published a tentative agenda decision in response to a submission about how to assess whether a contract contains a lease applying IFRS 16 when the supplier has particular substitution rights.  Almost all these respondents agreed with the IFRS IC’s analysis of level at which to evaluate whether a contract contains a lease. Most respondents agreed (or did not necessarily disagree) with the conclusion that, there is an identified asset in the fact pattern described, but some of them raised comments on the analysis in the tentative agenda decision.

New item: IFRS 9 Financial Instruments—Guarantee over a Derivative Contract: The IFRS IC received a submission about how to assess whether an issuer accounts for a guarantee written over a derivative contract as a financial guarantee contract or a derivative. In the fact pattern described, Entity C provides a guarantee over a derivative contract between Entity A and Entity B, which promises to reimburse Entity A, in full or in part, the actual loss suffered in the event of a default by Entity B. The submitter asked whether such guarantee written meets the definition of a financial guarantee contract of a derivative. The staff concluded that the matter described in the request is, in isolation, too narrow for the IASB or the IFRS IC to address in a cost-effective manner.

New item: IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments—Premium Receivable from an Intermediary: The IFRS IC received a submission about how an issuer accounts for premiums receivable from an intermediary. In the fact pattern described, a policyholder has paid the premiums to an intermediary when the amounts became due under an insurance contract. At this point, the insurer is legally obliged to provide insurance contract services to the policyholder, even if the intermediary does not pay the premiums to the insurer (under the agreement between the insurer and the intermediary, the intermediary is allowed to pay later). The submissions asked, when the policyholder pays the premiums to the intermediary, whether the insurer is required to recognise the premiums receivable from an intermediary as a separate financial asset under IFRS 9 and remove these premiums from the measurement of the group of insurance contracts under IFRS 17. The staff concluded that the premiums receivables from the intermediary remain in the measurement of a group of insurance contracts until recovered or settled in cash. However, the view that the premiums receivable from an intermediary should be recognised as a separate financial asset under IFRS 9 and are removed from the measurement of the group of insurance contracts under IFRS 17 cannot be precluded.

New item: Home and Home Loans Provided to Employees: The IFRS IC received a submission about how an entity accounts for homes and loans to buy homes provided to its employees in two fact patters. In view of the fact that outreach indicates that neither of the fact patterns described in the submission is widespread, nor are the amounts involved material, that staff recommend not adding a standard-setting project to the work plan and to publish a tentative agenda decision that explains the reasons.

Potential Annual Improvements to IFRS Accounting Standards: The staff will ask whether the IFRS IC members agree with their preliminary views on the following two proposed amendments to IFRS Accounting Standards and to include them in the next annual improvements cycle:

• IFRS 9 Financial Instruments and IFRS 16 Leases—Lessee accounting for lease payments forgiven
• Guidance on implementing IFRS 17: Disclosure of deferred difference between fair value and transaction price

Input on IASB project: Business Combinations—Disclosures, Goodwill and Impairment: Possible changes to the impairment test of cash-generating units (CGU) containing goodwill: The IASB has a project which aims at improving information entities provide about their business combinations at a reasonable cost. The staff identified suggestions for changes to the impairment test of CGUs containing goodwill that the staff considered warrant further consideration. The staff paper provided details of each suggestion and initial staff comments. The purpose of the discussion is to obtain feedback on some suggestions respondents to the Discussion Paper had for changes to the impairment test of CGUs containing goodwill.  

Work in progress: The following new matter has not yet been presented to the IFRS IC: Merger between a parent and its subsidiary in separate financial statements.

The full agenda for the meeting and our comprehensive pre-meeting summaries can be found here.

The Trustees are inviting applications from all geographical regions. They encourage applications from candidates who use the financial statements of small and medium-sized entities (investors and providers of finance).

Nominations for membership of the SMEIG close on 6 April 2023. Please click for more information in the press release on the IFRS Foundation website.

A summary of the agenda is set out below:

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