The purpose of the TRG is to seek feedback on potential issues related to implementation of IFRS 17 Insurance Contracts. Specifically, the TRG discussed the following two papers:

• Investment components within an insurance contract
• Reporting on other questions submitted

The meeting summary and audio recordings of each session are available on the TRG meeting page on the IASB’s website. For more information, see Deloitte's related IFRS in Focus newsletter. The IASB's discussion on amendments to IFRS 17 on 9 April also considered the TRG findings.

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The Investor Update newsletter is available on the IASB’s website.

The Board discussed the following topics and questions:

• Sweep issues. The Board discussed additional stakeholder concerns relating to IFRS 17 (and IFRS 9) that have arisen in the project on the amendments to IFRS 17. On the effective date of the proposed amendments to IFRS 17, the staff recommended that the effective date is aligned with that of IFRS 17. On all other issues, the staff recommended that the Board not undertake any further action. The Board agreed unanimously with the staff recommendations.
• Annual improvements.
  • The Board discussed a number of minor changes the staff have become aware of through the ongoing implementation activities on IFRS 17 that would fall within the scope of the annual improvements process. There were some questions by the Board and additional clarifications will be added to the wording proposed by the staff. The Board agreed unanimously to include these changes in the forthcoming exposure draft.
  • The Board also agreed to include the minor changes to IFRS 17 identified as candidates for the annual improvements process in June 2018 in the forthcoming exposure draft.
• Overview of the amendments to IFRS 17. The Board was provided with an overview of all the amendments to IFRS 17 that the Board has tentatively decided to propose, the likely effects of the proposed amendments to IFRS 17, and a cost-benefit analysis for all amendments. This part of the session was educational in nature, and no vote was taken.
• Due process steps and permission for balloting.
  • The Board was asked to confirm its tentative decisions from the November 2018 meeting relating to the mandatory effective date of IFRS 17 and the fixed expiry date for the temporary exemption in IFRS 4 from applying IFRS 9. The Board confirmed that it wants to propose deferring the effective dates (unanimous vote).
  • The Board was asked to confirm that it wishes to proceed with an exposure draft to amend IFRS 17. The Board confirmed that it is satisfied that it has complied with the applicable due process steps and that it should begin the balloting process for the exposure draft (unanimous vote).
  • No Board member indicated a planned dissent at this stage.

The staff will now begin drafting the exposure draft, which it expects to issue by the end of June 2019. The comment period will be discussed at the May 2019 Board Meeting after obtaining permission from the Due Process Oversights Committee for a reduced comment period.

The Board will consider the package of amendments to IFRS 17 Insurance Contracts it has been considering since June 2018. The staff conclude that none of the amendments either unduly disrupts implementation, or where there could be disruption, that the potential disruption is justified. In June 2018 the Board decided to propose some minor changes that it planned to include in the next Annual Improvements cycle. These will instead be included with the Exposure Draft for the package of IFRS 17 amendments. The staff also recommend that the effective date of IFRS 17 and of the proposed amendments be for annual periods beginning on or after 1 January 2022 (with earlier application permitted). The staff will be seeking clearance from the Due Process Oversight Committee to have a shorter than normal comment period.

The Board will consider the feedback it received on the Exposure Draft Accounting Policies and Accounting Estimates (Amendments to IAS 8). The staff’s preliminary view is that the Board should proceed with the project.

The project looking at goodwill and impairment returns to the Board. The staff recommend that the acquirer of a business be required to provide information to help a user of the financial statements assess whether a business combination was a good investment decision and whether that business is performing as expected. The paper sets out the recommended disclosures.

In Dynamic Risk Management the staff recommend that negative balances within the target profile should not be permitted within the DRM model; the changes to the risk management strategy and the target profile must occur infrequently; and the risk management strategy must be clearly documented within a specified time horizon and cannot be defined in a way that is contingent. They also recommend that separate line items in the primary financial statements should not be required for derivatives designated in the DRM model from other derivatives or for accumulated changes in fair value of designated derivatives. That information would be provided in the notes to the financial statements. Also, net interest margin should include the aligned portion but not the misaligned portion.

For the Disclosure Initiative the Board will be asked for clearance to proceed with an Exposure Draft to propose adding two examples to the Materiality Practice Statement related to accounting policies.

The Board will consider the potential to explore a form of predecessor approach for some business combinations under common control.  

In the Primary Financial Statements project the staff recommend that the Board clarify that MPMs (management performance measures) are subject to the general requirement that information included in the financial statements must provide a faithful representation. They also recommend that entities can only identify a measure as an MPM if they use the same measure in their public communications. The staff also have recommendations to clarify presentation issues related an entity’s “main business activities.”

There are also updates on Implementation Matters, the Research Programme and (orally) Management Commentary.  

More information

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

The video series contains two videos on the whole event as well as nine short interviews with participates. For more information, see the press release on the EFRAG’s website and the EFRAG’s YouTube channel.

Mr Hoogervorst admitted that he had been sceptical about climate change in the past, but changed his mind over the years. During his speech, he criticized public policies that have enabled climate change; he called climate change “a massive example of such market failure.” He highlighted (1) the importance of sustainability reporting, (2) how it relates to financial reporting, and (3) the role of the IASB. Mr Hoogervorst was clear:

I do not think the IASB is equipped to enter the field of sustainability reporting directly. Setting sustainability reporting standards requires expertise that we simply do not have. Moreover, there are already more than enough standard-setters active in this field.

He went on to discuss how sustainability issues will become more visible in financial statements as the effects of climate change become more prominent. He noted, “[M]any sustainability issues may only emerge in the long run. In such cases they will tend to escape the financial statements, which are essentially backward-looking.”

He then explained how the IASB is working to improve ‘broader financial reporting’. Mr Hoogervorst discussed the IASB’s management commentary project — a renewal of its 2010 Management Commentary Practice Statement. He mentioned that the updated Practice Statement will focus more on intangibles and require companies to report on sustainability issues — including climate change — if those issues impact their businesses in a material way.

Mr Hoogervorst closed his speech by reflecting on the plethora of sustainability standards and initiatives. He praised the Corporate Reporting Dialogue, which is working to align the frameworks of various standards. He also cautioned against expecting too much from sustainability reporting as an agent for change: “[W]e should not expect sustainability reporting to be very effective in inducing companies to prioritise planet over profit.” He explained that financial incentives are crucial in combatting climate change and stated:

I strongly believe that the most promising strand of sustainability reporting comprises those standards that focus on the investor and on the impact of sustainability issues on the future returns of the company. This is the type of sustainability reporting which will fit well with our Management Commentary Practice Statement, rather than the reporting that focuses primarily on a company’s contribution to the public good.

For more information, see the transcript of the speech on the IASB’s website.

The next meeting of the IFRS Interpretations Committee will take place on 11-12 June 2019.

For his detailed analysis, Mr Sampers drew on the summary report of the EU and on further analysis of individual responses to the consultation that were made public by the EU. The focus of his research was on the IFRS-related questions in the consultation.

Mr Sampers noted that stakeholders from 23 Member States and 25 third countries submitted 338 responses with 82% of the responses being from organisations and companies, 9% from public authorities and international organisations and 9% from private individuals. In this context, Mr Sampers especially noted the high number of responses from private individual that would show that stakeholders were really concerned about developments. He also noted the high number of responses from Germany.

In discussing the responses to individual questions, Mr Sampers noted the confusing design of certain elements of the consultation document that led to some false positives and contradictory answers and that only allowed additional comments in case of support for what seemed to be the EC Commission's preliminary view. He summarised the following insights:

• Regarding the question of whether the EU should be able modify the content of IFRSs on adoptions, the majority of respondents was clearly against "carve-ins", however, clear regional differences became obvious with 75% of respondents in France supporting the possibility of carve-ins against only 15% in Germany, the UK and the Netherlands doing so.
• A clear majority of respondents (68%) is convinced that the EU endorsement process is appropriate to ensure that IFRS do not pose an obstacle to broader EU policy objectives such as sustainability and long-term investments. This correlates with the answers to the question of how the EU could ensure that IFRS do not pose an obstacle to sustainability and long-term investments, where only 11% of respondents believed the possibility of modifications to IFRS was needed to ensure this.
• On the question of whether an EU conceptual framework should underpin the IFRS endorsement process, the answer was clearly negative, however, a surprising number (not a majority, though) supported adopting the IASB's Conceptual Framework for use in the EU. (Discussing this point, participants made clear that adopting a pronouncement that is not binding for the IASB would lead to a legally difficult situation, especially since some of the IASB's standards are not aligned with the Conceptual Framework. Therefore, outright adoption would not seem to be an option.)

Overall, Mr Samper's presentation showed that it can be concluded that there is little support for changes to the current endorsement process and for the introduction of an ability for Europe to modify the content of IFRS. This is in line with the overall summary in the EC Commission's summary of responses which stated that the EU framework overall brings added value, is effective and relevant for achieving its objectives and is coherent.

Mr Sampers kindly gave us permission to make his presentation slides available on IAS Plus. They can be accessed here.

The Board will discuss the following:

• Amendments to IFRS 17 Insurance Contracts:
  • Overview
  • Due process steps and permission for balloting
  • Sweep issues
  • Annual improvements
• Business combinations under common control:
  • Update on the staff’s approach
  • Update on lenders and other creditors in BCUCC
• Accounting policies and accounting estimates (Amendments to IAS 8):
  • Analysis of feedback — definition of accounting estimates
  • Analysis of feedback — other aspects
  • Project direction
• Implementation matters
• Disclosure Initiative:
  • Accounting policies — proposed amendments to IAS 1 and IFRS Practice Statement 2: due process steps and permission to begin the balloting process
• Research programme update
• Management commentary
• Primary financial statements:
  • Amending proposals for management performance measures (MPMs)
  • Outstanding issues for financial entities
• Goodwill and impairment:
  • Interconnecting issues
  • Better disclosures for business combinations
  • Better disclosures — feedback from consultative groups
• Dynamic risk management:
  • Summary of decisions to date
  • Presentation
  • Determination of the target profile

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.

In his presentation, Mr Scott first discussed where the project on possible amendments currently is, the envisioned timeline for the project and next steps:

• The IASB expects to issue an exposure draft of proposed amendments to IFRS 17 by the end of June 2019.
• A shortened comment period is likely in order to speed up the process.
• The IASB expects the finalisation of the amendments in early to mid 2020.
• The comparative period would begin in 2021.
• The amended standard would become effective in 2022 (Mr Scott reminded IFASS members that the postponed effective date is still only an amendment to the standard the IASB intends to propose).

Mr Scott then went on to explain the amendments the IASB intends to propose. These comprise 12 amendments that fall into 7 broad areas:

• Effective date;
• Acquisition cash flows for renewals;
• Profit allocation for some contracts;
• Reinsurance contracts held;
• Balance sheet presentation;
• Transition; and
• Loans that transfer insurance risks.

There will also be minor amendments to IFRS 17 that will be proposed as part of the annual improvements.

At its April 2019 meeting, the Board plans to consider the package of amendments tentatively decided by the Board as a whole. The following agenda papers were made available on the IASB website:

• AP2: Cover note
• AP2A: Overview of the amendments to IFRS 17
  
  • considering the proposed amendments as a whole;
  • evaluating each of the proposed amendments against the criteria the Board set in October2018; and
  • considering the likely effects of the proposed amendments to IFRS 17
• AP2B: Due process steps and permission for balloting
  
  • asking the Board to confirm its tentative decisions from the November 2018 meeting relating to the mandatory effective date of IFRS 17;
  • considering the due process steps undertaken by the Board in completing the narrow-scope project on the amendments to IFRS 17 and asking the Board to confirm that it wishes to proceed with an exposure draft; and
  • asking if there are any planned dissents at this stage
• AP2C: Sweep issues
  
  • discussing additional stakeholder concerns relating to IFRS 17 that have arisen in the project on the amendments to IFRS 17; and
  • recommending that the effective date of proposed amendments should be aligned with the effective date of IFRS 17
• AP2D: Annual improvements
  
  • including recommendations for other minor changes that would fall within the scope of the annual improvements process but could also be addressed in the exposure draft of proposed amendments to IFRS 17