In its comment letter, GRI agrees with the assessment of the IFRS Trustees that demand for reporting on sustainability is growing, and that a global solution has to reflect the needs of the companies preparing sustainability reports together with the information needs of their stakeholders, including investors, as well as the information needs of the jurisdictions they operate in.

GRI also notes that not only is a global solution needed, sustainability reporting should also become mandatory to truly contribute to better decision-making. The comment letter also states that financial reporting itself must be strengthened to reflect the financial implications of sustainability issues on the reporting entity. Enhanced financial reporting would then exist alongside sustainability reporting. Under such a regime, GRI believes, financial reporting will be able to leverage the information made available through sustainability reporting so as to fully reflect the financial implications of all impacts of corporate activities.

GRI also comments on the role of the IFRS Foundation:

The IFRS Foundation is in a position to support the further evolution of the existing public interest oversight mechanism to become inclusive of sustainability reporting, thereby allowing even more jurisdictions that have mandated a global solution for financial reporting to do the same for sustainability reporting.

Please click to access the full comment letter through the press release on the GRI website.

GRI also offers two webinars on its response to the consultation: On 17 December 2020, at 9:00 GMT and at 17:00 GMT (links are to registration pages).)

Listed companies who wish to publish their ESEF annual financial reports in 2021 will still be able to proceed.

The announcement Coronavirus: EU agrees to rules to make it easier for firms to raise capital through the 'EU Recovery Prospectus' is available on the European Commission website.

In September 2020, even before the Trustees launched their sustainability consultation, IFAC had already called for an IASB sister board for setting global sustainability standards.

In response to the Trustees' consultation, IFAC now reiterates its call for an international sustainability standard-setting Board under the IFRS Foundation. The comment letter states (emphasis in original):

The Consultation identifies important and challenging questions that should be considered by the IFRS Trustees — including the scope and sequencing of standards, the approach to materiality, and how to build off existing initiatives. However, in answer to the fundamental issues at stake—is there a need for a global set of internationally recognized sustainability reporting requirements, and should the IFRS Foundation play a leading role through the establishment of a new sustainability standards board (SSB) — IFAC believes, based on extensive stakeholder outreach, that the answer is a resounding “Yes.”

Please click to access the full comment letter on the IFAC website.

The amendments clarify existing guidance for four public sector instruments:

• Monetary gold;
• Currency in circulation;
• IMF quota subscriptions; and
• IMF special drawing rights.

Please click to access Non-Authoritative Amendments to IPSAS 41 'Financial Instruments', a short introductory webinar and an At a Glance introduction on the IPSASB website.

In 2002, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued a Memorandum of Understanding, which set out priorities and milestones to be achieved on major joint projects. The two boards worked together to improve their standards and seek convergence. The results were mixed with respect to convergence. There has been significant convergence in topics such as business combinations and revenue recognition. However, key differences have increased for topics such as financial instruments and the subsequent measurement of leases.

This comprehensive publication reflects differences for standards that are mandatory as of 31 December 2019, for public business entities that have a calendar-year annual reporting period. In addition, since ASC 326 Financial Instruments – Credit Losses became effective for public business entities with fiscal years beginning after 15 December 2019, the publication also offers Appendix A Allowance for expected credit losses in loans and receivables and some debt securities to highlight the key differences between ASC 326 Financial Instruments – Credit Losses and IFRS 9 Financial Instruments.

The publication generally does not cover (1) disclosure-related differences, (2) any guidance related to IFRS Standards for small and medium-sized entities, (3) any guidance related to Private Company Council alternatives for private companies under U.S. GAAP, or (4) any impact of U.S. GAAP industry-specific accounting guidance. It does cover U.S. GAAP and IFRS Standards differences in segment reporting as the impairment rules under both frameworks depend upon the identification of operating segments.

Please click to download the publication here.

IAS 37 mandates that the future cost of clean-up be estimated and accounted for using an appropriate discount rate to calculate the present value of these costs. However, the standard does not mandate for businesses to disclose the rate they have used, nor makes clear whether the basis for calculating the discount rate should be an accounting choice.

The ICAS research used a large international sample across the mining, utilities, and oil and gas sectors, and found substantial variations exist in companies’ choice to disclose the discount rate when accounting for decommissioning and environmental liabilities. Furthermore, the research notes that when a company with a decommissioning liability becomes insolvent the clean-up liability remains attached to the asset, which may therefore become less attractive to a potential buyer, and so, if eventually the asset remains unsold, the taxpayer ends up picking up the decommissioning tab. ICAS points out that this scenario is likely to be more frequent in a post-COVID world.

The report arrives at two recommendations:

• Standard setters should require disclosing the discount rates applied to facilitate comparability and thus allow for users of financial statements and other key stakeholders to see inside the ‘black box’ of accounting for decommissioning liabilities; and
• Preparers should include, and auditors demand, enhanced disclosures, to include not only the discount rate but also undiscounted future estimated cash flows and timing of decommissioning activities, augmented by a comprehensive narrative on the major uncertainties surrounding these items.

Please click to access Black Box Accounting: Discounting and disclosure practices of decommissioning liabilities on the ICAS website.

Academics and financial reporting stakeholders from the public sector, for-profit and not-for-profit sectors discussed the following projects:

• The Use and Usefulness of Equity Accounting
• Implementing AASB 16 Leases: The User and Preparer Perspectives
• Are Accounting Standards Understandable?

In addition, there were presentations on the IASB’s work programme and research opportunities and on how financial statements are used by professional investors. The slides for all presentations as well as recordings of the presentations are available on the AASB website.

The three apparent paradoxes Mr Maijoor identified were:

• the need to ensure that reporting standards are, at the same time, international and jurisdiction-specific;
• the importance of ensuring that the disclosure standards are sufficiently robust to help prevent the risk of greenwashing, while at the same time allowing for sufficient flexibility for entities to tell their own story; and
• the difficulty of establishing a robust and extensive disclosure regime covering as many companies as possible so to ensure that information by (actual or potential) investee companies is available, while maintaining a proportionate set of requirements especially for smaller companies.

On the first paradox, he stated that he did not believe that global and EU-specific standardardisation are in contradiction, rather, he said, they would be complementary to one another. Mr Maijoor explained that to be effective, a set of international standards would need to be modular to cater for the needs of jurisdictions that are at different stages of progress in the area of sustainable finance.

On the second paradox, Mr Maijoor explained that principles-based standards are typically well-suited to support the efforts of those issuers that aim at innovating in their reporting practices, but they are also helpful in preventing the risk that non-financial reporting is merely based on a check-list approach.

And on the third paradox, he suggested that one potential way forward would be to acknowledge that the size of a company alone is an imperfect proxy of its ESG impact, but that at the same time it is a relatively good indicator of the resource constraint that a company might face if a heavy reporting burdens is imposed on it.

Mr Maijoor concluded his speech by noting:

The future of sustainability reporting depends, in my view, upon good international cooperation, robust, proportionate and principles-based reporting requirements and, most importantly, on a standard-setting process that is centred around the public interest. Like for any standard setting process, extensive and thorough consultation of all relevant stakeholders will also be essential.

Please click to access the full text of Mr Maijoor's speech on the ESMA website.

Maintenance and Consistent Application — IFRIC Update: At its December meeting the IFRS Interpretations Committee finalised an agenda decision in relation to supplier financing. At this meeting, the Board will be asked to clear that decision. If four or more Board members object, the decision will not be published. This is the first agenda decision to be subjected to the revised due process.

Disclosure Initiative — Subsidiaries that are SMEs: The IASB is developing a Standard setting out reduced disclosure requirements for subsidiaries that apply IFRS Standards, but meet the definition of an SME. At this meeting, the staff is seeking views on whether the consultation document should include proposed reduced disclosure requirements for IFRS 17; and recommend that IFRS 1 not be amended and that transition provisions are not required. The staff also recommend that if an entity stops applying the reduced disclosure Standard that the comparatives should apply full IFRS; that the reduced disclosures can be applied for the ‘first time’ more than once; and that the Standard is optional and an entity can reverse its decision to apply it.

SME Standard review and update: The IASB published Request for Information (RFI) ‘Comprehensive Review of the IFRS for SMEs Standard' in January. The IASB received 66 comment letters, mainly from accountancy bodies and standard-setting bodies. Overall, respondents expressed support for the IFRS for SMEs Standard to be based on full IFRS Standards. The paper also contains feedback on the specific questions asked in the RFI. The staff recommend that the SME Implementation Group (SMEIG) be asked to develop a set of recommendations for the Board in its review of the IFRS for SMEs Standard. The next meeting of the SMEIG is planned for February 2021.

Disclosure Initiative — Accounting Policies: The Board is amending IAS 1 and its Practice Statement on applying materiality. The staff recommend that the Board does not add transition requirements or an effective date to the amendments to the Practice Statement, as well as a small change to the wording in IAS 1:117B.

Primary Financial Statements: In December 2019, the IASB published Exposure Draft ED/2019/7 General Presentation and Disclosures. The staff have summarised feedback from the 215 comment letters it received, outreach activities, fieldwork and a review of academic literature. There are 11 papers, each summarising an aspect of the feedback. To give a flavour of the feedback, there was support for many aspects of the proposals, such as defined subtotals and categories in the statement of profit or loss and introducing a definition for unusual items. But many respondents thought additional guidance was required and most did not agree with the proposed definition of unusual items. There was broad support for the proposed roles for the primary financial statements and the notes. However, there was almost no support for separating integral and non-integral associates and joint ventures and the proposals related to management performance measures received mixed, and strongly expressed, views. The staff is not asking the Board to make any decisions but are asking for feedback and for the Board to identify areas which would require further research.

Post-implementation review of IFRS 9 — Classification and Measurement: In October 2020, the Board decided to begin the post-implementation review (PIR) of the IFRS 9 classification and measurement requirements. The staff plan to identify and assess the matters to be examined, which will then form the basis for a public Request for Information (RFI). The staff expect the PIR will take around 18-24 months to complete, with the RFI being issued in the third quarter of 2021. The staff will ask the Board if they have any comments on the PIR project objectives or timeline.

Financial Instruments with Characteristics of Equity: The staff recommend that the Board move the FICE project from the research programme to the standard-setting programme.

Pensions Benefits that depend on Asset Returns: In January, the Board decided to develop examples to illustrate how a proposed capped approach would compare to the outcome of the existing requirements in IAS 19 for defined benefit plans with benefits that vary with asset returns. The staff are asking the Board to provide feedback on an illustrative example.

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

The post-implementation review process for IFRS 10, IFRS 11, and IFRS 12 was officially added to the IASB's agenda in September 2019. The IASB has been gathering information to determine the scope of the review and to identify the main questions that need to be answered before the implementation of IFRS 10, IFRS 11, and IFRS 12 can be assessed.

The information gathered so far indicates that many stakeholders believe that the standards work, however, IASB stakeholders have also indicated that there are areas where the standards to their mind might still benefit from improvements. Based on this feedback, the Board agreed the following matters be examined further in the RFI:

IFRS 10 Consolidated Financial Statements provides a single consolidation model that identifies control as the basis for consolidation for all types of entities. The following areas might warrant further investigation:

• power over an investee, including relevant activities, rights that give an investor power over an investee and control without a majority of voting rights;
• the link between power and returns, including principal and agent and non-contractual agency relationships;
• investment entities, including criteria for identifying an investment entity and subsidiaries that are investment entities; and
• accounting requirements for
  • transactions that give rise to a change in ownership; and
  • the partial acquisition of a subsidiary that does not constitute a business.

IFRS 11 Joint Arrangements establishes a principle-based approach for the accounting for joint arrangements, in which the parties recognise their rights and obligations arising from the arrangements. The following areas might warrant further investigation:

• collaborative arrangements outside the scope of IFRS 11;
• classification of joint arrangements; and
• accounting requirements for joint operations.

IFRS 12 Disclosure of Interests in Other Entities combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. There were relatively few comments on IFRS 12 requirements and feedback was mixed. Therefore, the RFI aims to establish to what extent the requirements assist an entity to meet the objective of the standard.

After the comment period ends, the IASB will consider the comments received along with information gathered through other consultation activities. The final conclusions of the IASB will be presented in a report and a feedback statement which will also set out the steps the IASB believes should be taken as a result of the review. The Board could decide to add a standard-setting project to its agenda, consider one or more matters further as part of its research programme, or both. The Board could also decide to take no action.

Comments on the RFI are requested by 10 May 2021. The request for information and a corresponding press release are available on the IASB website. Deloitte has released an IFRS in Focus newsletter outlining the contents of the RFI.