The consultation represents the EFRAG’s efforts to meet the European Commission’s Action Plan on Sustainable Finance initiative. Through the use of a questionnaire, the EFRAG will gather views from constituents on possible alternative accounting treatments meeting the following objectives:

• “[P]roperly portray the performance and risks of long-term investment business models, in particular for those equity and equity-type investments that are much needed for achieving the UN Sustainable Development Goals and the goals of the Paris Agreement on Climate Change;”
• “[P]referably enhance investors’ insight in the long-term performance of investments, as opposed to recognising point-in-time market-based value changes in reported profit or loss during the duration of the equity investment.”

Comments on the questionnaire are due by 5 July 2019. Respondents are encouraged to read the accompanying EFRAG Secretariat background paper. For more information, see the press release on the EFRAG’s website.

In an effort to better communicate with its constituents, the IPSASB is testing a new consultation approach. Therefore, the consultation document contains two separate sections:

• A concepts-based discussion in the consultation paper which
  
  • lays out proposed guidance for measurement bases for the assets and liabilities most commonly used by public sector entities when applying IPSAS;
  • proposes the development of a single standard which will provide definitions and guidance on the main measurement bases, while other IPSAS will continue to provide guidance on which particular measurement basis is to be used;and
  • identifies areas where the IPSASB has reached preliminary views; and
• An illustrative exposure draft, which illustrates what a draft IPSAS could look like, given the IPSASB’s preliminary views.

Comments on the consultation paper are requested by 30 September 2019.

Please click for the following information on the IPSASB website:

• Press release
• Access to the consultation paper, an At a Glance overview, and a 25 minute webinar on the proposals

The Board will discuss the following:

• Provisions
• Implementation matters
• Primary financial statements
• Amendments to IFRS 17 Insurance Contracts
• Disclosure initiative — Targeted standards-level review of disclosures
• Management commentary
• Review of the IFRS for SMEs
• Rate-regulated activities
• Goodwill and impairment

The session on amendments to IFRS 17 Insurance Contracts will be rather short (30 minutes on Wednesday afternoon) as the IASB will only discuss sweep issues and the comment period for the forthcoming exposure draft, which the staff, after obtaining permission of the DPOC, proposes to set at 90 days.

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.

For more information, please see our November 2018 story on the EFRAG's DP as well as the press release discussing the comment extension on the EFRAG website.

Background

Interbank offered rates (IBORs) are interest reference rates, such as LIBOR, EURIBOR and TIBOR, that represent the cost of obtaining unsecured funding, in a particular combination of currency and maturity and in a particular interbank term lending market.

Recent market developments have brought into question the long-term viability of those benchmarks. The Board is monitoring further developments in this regard in order to determine whether there are any implications for the existing accounting requirements. The focus of the project is currently on financial instruments although an IBOR reform would later definitely also have impact on any standard dealing with discounting.

The amendments proposed today deal with issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative interest rate and consider the implications for specific hedge accounting requirements in IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, which require forward-looking analysis. 

Suggested changes

The changes proposed in ED/2019/1 Interest Rate Benchmark Reform (Proposed amendments to IFRS 9 and IAS 39)

• modify specific hedge accounting requirements so that entities would apply those hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform;
• require specific disclosures about the extent to which the entities' hedging relationships are affected by the proposed amendments; and
• note that the amendments would be mandatory.

The proposed amendments also note that the Boards proposes to amend the hedge accounting requirements only as specified in the exposure draft and that the proposals are not intended to provide relief from any other consequences arising from interest rate benchmark reform. Moreover, the exposure draft notes that if a hedging relationship no longer meets the requirements for hedge accounting for reasons other than those specified in the exposure draft, then discontinuation of hedge accounting is still required.

Comments on the proposed changes are requested by 17 June 2019.

Effective date

The exposure draft proposes that the amendments would be effective for annual periods beginning on or after 1 January 2020 and would be applied retrospectively. Early application would be permitted.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• Short Snapshot overview of the proposed amendments (link to IASB website)
• Deloitte's IFRS in Focus newsletter explaining the proposed amendments
• Our IAS Plus project page on IBOR reform and the effects on financial reporting, especially on financial instruments

Mr Golden began his speech by acknowledging that comparable global accounting standards help reduce complexity and costs in financial reporting. He stated, however, that “by 2013, [the FASB had] come to realize that the ideal of single set high-quality global accounting standards was just that—an ideal. Different starting points, different cultures, and different legal systems made bilateral convergence impossible to achieve.”

After he highlighted the success of the joint FASB-IASB projects on business combinations, noncontrolling interests, fair value measurements, borrowing costs, segment reporting, stock compensation, and nonmonetary exchanges, Mr Golden reflected on the diverging strategies for the Boards’ projects on revenue recognition, leases, credit losses, and insurance. He closely examined the reasons for divergence, which were usually due to cost and complexity for US stakeholders.

Mr Golden discussed how the FASB is working to “[forge] a new model for how we support the goal of more comparable, high-quality accounting standards worldwide,” which includes:

• Development of high-quality GAAP — Mr Golden noted that considering opportunities to align with IFRS when possible is ‘embedded’ in the FASB’s process. He said the FASB is in ‘constant contact’ with the IASB about the IASB’s projects and that the Boards share research activities to “continue progress toward improved, aligned solutions.”
• Active participation in the Accounting Standards Advisory Forum (ASAF) — Mr Golden described the FASB’s commitment to the ASAF, which advises the IASB as it develops IFRS. He called the FASB’s involvement “an important opportunity to represent U.S. interests in the IASB’s standard-setting process” and noted that the ASAF provides a “valuable opportunity to work together with other standard setters on issues of common interest.”
• Enhancing relationships with other national standard setters — Mr Golden mentioned that the FASB meets individually with standard setters from many countries to “exchange ideas on improving our respective standards. This process also helped promote the broader flow of information and ideas that mutually inform our thinking. And to contribute to an environment that will foster greater alignment of standards across the globe.”

He made clear in his speech that the FASB will continue to work closely with the IASB to improve accounting standards worldwide. He also briefly provided his own opinion on sustainability reporting:

I think we should follow the IASB’s lead and remain focused on improving the financial statement. And leave sustainability reporting and other performance metrics—however important they may be—to other experts.

The full text of Mr Golden’s speech is available on the FASB's website.   

The research paper, originally published in December 2018, contains several updates and guides directors, preparers and auditors when preparing and auditing financial statements. Even though the guidance is not mandatory, it represents the IASB’s best practice interpretation of materiality.

Please click to access the updated research paper on the AASB website.

On IFRS IC agenda decisions, the Handbook continues to note that agenda decisions do not have the status of IFRSs and cannot add or change requirements in the standards, however, it now also states that in many cases an agenda decision includes explanatory material that explains how principles and requirements in IFRSs apply to the transaction or fact pattern described in the agenda decision. As these explanations provide "new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained", the Handbook states that entities might determine that they need to change an accounting policy as a result of an agenda decision.

The newly proposed Board agenda decisions are intended to support the consistent application of IFRSs by also providing explanatory material. The Board would publish agenda decisions when it has decided not to add a project to the standard-setting agenda but still concludes that consistency of application of the standards would be improved by providing material that explains how the applicable principles and requirements in the standards apply to a particular transaction or fact pattern. Again, the Handbook notes that agenda decisions do not have the same status as IFRSs, but that entities might nonetheless feel the need to change an accounting policy as a result of a Board agenda decision.

In addition to the proposed amendments on agenda decisions, the Trustees also propose to update Handbook regarding the procedures relating to the use of effects analysis to ensure that they are consistent with current activities.

Less prominent proposed updates regard the categories of education material produced by the IFRS Foundation, the consultation requirements for adding major projects to the Board’s work plan, the role of the IFRS Advisory Council, and the processes for approving amendments to the IFRS Taxonomy and the DPOC’s role in overseeing the IFRS Taxonomy due process.

Comments on the proposed updates are due by 29 July 2019. Please see the IASB website for the press release and the consultation document. The IFRS Foundation has also released a YouTube video with a short introduction of the consultation.

The feedback statement describes the thirteen comments received by EFRAG in response to its draft comment letter on the IASB's December 2018 ED, and how these comments were considered by EFRAG in finalising its comment letter to the IASB.

For more information, see the press release and feedback statement on the EFRAG website.

This publication includes reports from the EFRAG President Jean-Paul Gauzès and the outgoing TEG Chairman and CEO Andrew Watchman. It also features EFRAG's continued work on IFRS 17 Insurance Contracts including case studies and user outreach culminating in the IASB’s re-deliberations of IFRS 17; EFRAG’s work on the EC requests relating to the potential effect on long-term investment of IFRS 9’s requirements on accounting for equity instruments; and EFRAG’s position on the IASB project Financial Instruments with Characteristics of Equity with inputs resulting from a wide outreach programme as well as an early stage analysis.

The annual review is available on the EFRAG website.