Participants and panellists were welcomed to the well-attended event by Paolo Gnes (President of the OIC Supervisory Board) and Jean-Paul Gauzès (EFRAG Board President) which then featured a keynote speech on the future focus of financial reporting by IASB member Françoise Flores as well as two roundtables on impact analysis (facilitated by Angelo Casò (Chairman of the OIC)) and on better communication through reporting (facilitated by Andreas Barckow (Vice-President of the EFRAG Board)).

The 17 page summary of the event is available on the EFRAG website.

The new Board members are Rosa Bruguera (banking sector, Spanish), Luca Cencioni (industrial and trading companies, Italian), and Enrique Ortega (ICAC Board member, Spain). The new members will begin their three-year terms on 1 November 2017. They replace Patrice Marteau, Alphonse Kugeler, and Chris De Noose.

In addition, an observer seat has be created to represent European private investor organisations and will be filled by Jean Medernach.

For more information, see the press release on the EFRAG’s Web site.

On Tuesday 24 October 2017, the meeting started with an education session on goodwill and impairment. As an education session the staff did not ask for decisions from the Board. The Board has been considering how to make the goodwill impairment test more effective but less costly to perform. At this meeting the staff sought feedback on three issues. The first is whether there should be a single model for measuring the recoverable amount of the CGU (fair value less costs to sell or value in use) and whether to factor “dynamic headroom” into the impairment assessment. The second is whether to provide relief from the mandatory annual impairment testing of goodwill and whether to change how value in use is estimated. The third is the adequacy of the information disclosed about goodwill.  Several Board members expressed concerns about the expanding scope of the project and that this was intended to be a narrow scope project responding the post-implementation review. Accordingly, the next step is likely to be an exposure draft and not a discussion paper.

In September the Board tentatively decided to propose amending IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to lower the impracticability threshold for retrospective application of voluntary changes in accounting policies that result from agenda decisions. The Board decided to proceed with the proposal with a 120-day comment period. They expect to issue the proposal in the first quarter of 2018.

The session on rate-regulated activities focused on feedback from the World Standard-Setters Conference held in late September 2017. Although the group was generally supportive, several specific concerns were raised. The project consultative group meets on 26 October.

The Board approved the finalisation of the update to the IFRS Taxonomy for IFRS 17 Insurance Contracts. However, the lack of any formal comment letters was noted.

The day concluded with a discussion of the definition of a business. The staff have been analysing six differences between the proposed IASB definition and the FASB’s revised definition (which has already been finalised).  The Board decided to finalise the amendments which are expected to be published in the first half of 2018, for business combinations that are in an annual reporting period on or after 1 January 2020.

On Wednesday 25 October 2017, the Board supported the staff recommendation to include within the scope of the project on business combinations under common control group restructurings that are not business combinations.

The last agenda item was Conceptual Framework. The current draft underwent a fatal flaw review and the staff have been bringing issues to the Board from that review. There were two issues being discussed at this meeting. The first relates to the definition of a liability and concerns that the words “no practical ability to avoid as a going concern” captures future costs. The Board agreed with the staff analysis that they are from drafting issues rather than a flaw in the Board’s decisions. The second issue is the lack of clarity of the link between stewardship and the objective of financial reporting. The Board rejected the staff recommendation to include a flowchart in Chapter 1 of the revised Conceptual Framework to illustrate the link between the objective of general purpose financial reporting and the information needed to meet that objective.

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

The World Business Council for Sustainable Development (WBCSD) has released the 2017 edition of Reporting matters. This year’s report also provides insight into the TCFD recommendations, the expanding universe of disclosure requirements and updates on the status of human rights and SDG reporting. The press release on the WBCSD website offers a summary of the key findings and access to the full report.

A survey conducted by the CFA Institute in May 2017 reveals that nearly three-quarters of investment professionals worldwide (73 percent) take ESG factors into consideration in the investment process. The press release on the website of the CFA Institute offers a summary of the key findings and access to the full report.

The Carbon Disclosure Project (CDP) has released to national editions of its 2017 Climate Changge report analysing data disclosed by companies in India and Japan. Both reports can be downloaded from the CDP website. The 2017 report for India is available in the English language; the 2017 report for Japan is in Japanese.

About two months remain until the beginning of 2018 when all public companies reporting on a US GAAP and International Financial Reporting Standards (IFRS) basis adopt the revised revenue recognition requirements. The paper examines reporting patterns that have begun to crystallise in the transition to full adoption although it notes:

Notably, many companies seem to be crawling to the starting line. Very few companies have been early adopters. At the same time, insightful numerical information on anticipated impacts from those that are yet to adopt is limited.

The paper also reviews selected critical judgments that could affect reported revenue.

Please click to access the full paper on the CFA Institute website.

Some standard-setters are strictly against including any non-IFRS information in financial statements. Canada's AcSB argues that non-IFRS information "could undermine other information in the financial statements that conforms with IFRS Standards" and could "further reduce the relevance of financial statements". Similarly, the Austrian standard-setter AFRAC argues that "the content and quality is what makes [financial staements] valuable". Mexico's CINIF ("we do not believe there are situations where 'non-IFRS information' is warranted") and Korea's KASB (including non-IFRS information "would impair the credibility of the financial statements") argue along the same lines.

Some standard-setters argue in favour of allowing information that is not IFRS information in financial statements. The UK FRC notes that it "does not support a principle which prohibits information". The HKICPA from Hong Kong warns that prohibiting non-IFRS information "may limit [preparers'] ability to provide information that is relevant to users". And the AOSSG adds that "the IASB should not prohibit the inclusion of any types of additional information in the financial statements if it is necessary for users understanding the financial statements" which is seconded by New Zealand's NZASB noting that prohibiting the inclusion "could prevent an entity from telling its story.". Italy's OIC also argues in favour of including non-IFRS information but adds that the issue is complex.

Many standard-setters draw a line between non-IFRS information and information that is not consistent with IFRSs (with some of them again pointing out that it would be difficult to distinguish between the two types of information). Among these are France's ANC, Malaysia's MASB, Singapore's ASC, and India's ICAI. The FRSC from South Africa stresses that "a clearer definition of 'inconsistent with IFRS' will need to be developed in order to prohibit such information from being presented".

Other standard-setters again simply acknowledge that prohibiting non-IFRS information is impractical. The Chinese CASC notes that this "is difficult to execute in both standard-setting and practice" and Norway's NRS stresses "a prohibition for non-IFRS information is not operational".

The middle ground is held by standard-setters who see pros and cons and weigh them carefully but who also stress two points: (i) in some jurisdictions there are legal requirements to include certain non-IFRS information in financial statements and (ii) IAS 1 already requires "to provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance". Thus, EFRAG notes that "some information that is (or could be viewed as) non-IFRS is provided in accordance with laws or regulations" and Germany's ASCG concurs and adds that "IAS 1 guidance already includes tools an entity may use if it considers that the application of IFRS recognition and measurement guidance would not result in a fair presentation". The Japanese ASBJ notes that given the IAS 1 requirements "the IASB cannot explicitly define information that should (or should not) be provided within financial statements as it attempted to do in the DP".

All comment letters cited or referred to are available on the IASB website. The questions regarding non-IFRS information and information that is inconsistent with or contradicts IFRS information are questions 6 and 7. Our IAS Plus summary of the DP is available here.

The amendments address the concerns about how IFRS 9 Financial Instruments classifies particular prepayable financial assets. They become effective for annual periods beginning on or after 1 January 2019, with earlier application permitted.

In order to allow European preparers enough time to implement the amendments before their effective date and possibly together with IFRS 9 (which has an effective date of 1 January 2018), the EFRAG moved uncommonly fast in order to allow sufficient time for (i) feedback, (ii) final EFRAG endorsement advice (expected in the fourth quarter of 2017), (iii) the ARC vote (expected in 2018), and (iv) final endorsement (aimed for in 2018).

EFRAG's overall preliminary assessment is that the amendments satisfy the criteria for endorsement for use in the EU and therefore recommends its endorsement. The draft endorsement advice can be found here and the invitation to comment here (both links to the EFRAG website). Comments on the draft endorsement advice are expected by 2 November 2017.

Please click here for an updated EFRAG status report.

There are seven topics on the agenda.

Tuesday 24 October

The meeting starts with an education session on goodwill and impairment. As an education session the staff are not asking for decisions from the Board. The Board has been considering how to make the goodwill impairment test more effective but less costly to perform. At this meeting the staff are seeking feedback on three issues. The first is whether there should be a single model for measuring the recoverable amount of the CGU (fair value less costs to sell or value in use) and whether to factor “dynamic headroom” into the impairment assessment. The second is whether to provide relief from the mandatory annual impairment testing of goodwill and whether to change how value in use is estimated. The third is the adequacy of the information disclosed about goodwill. 

In September the Board tentatively decided to propose amending IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to lower the impracticability threshold for retrospective application of voluntary changes in accounting policies that result from agenda decisions. The staff are recommending that the Board proceed with the proposal with a 120-day comment period. They expect to issue the proposal in the first quarter of 2018.

The session on rate-regulated activities focuses on feedback from the World Standard-Setters Conference held in late September 2017. Although the group was generally supportive, several specific concerns were raised. The project consultative group meets on 26 October.

The staff will present a paper seeking approval to finalise the update to the IFRS Taxonomy for IFRS 17 Insurance Contracts.

The day concludes with a discussion of the definition of a business. The staff have been analysing six differences between the proposed IASB definition and the FASB’s revised definition (which has already been finalised).  With one exception, the staff are recommending that the IASB finalise its amendments. If the Board agrees the staff will prepare the final amendments for publication in the first half of 2018, for business combinations that are in an annual reporting period on or after 1 January 2020.

Wednesday 25 October

The Board will discuss the staff recommendation to include within the scope of the project on business combinations under common control group restructurings that are not business combinations.

The last agenda item is Conceptual Framework. The current draft underwent a fatal flaw review and the staff have been bringing issues to the Board from that review. There are two issues being discussed at this meeting. The first relates to the definition of a liability and concerns that the words “no practical ability to avoid as a going concern” captures future costs. The staff accept the concerns but think they are from drafting issues rather than a flaw in the Board’s decisions. The second issue is the lack of clarity of the link between stewardship and the objective of financial reporting. The staff are recommending including a flowchart in Chapter 1 of the revised Conceptual Framework to illustrate the link between the objective of general purpose financial reporting and the information needed to meet that objective.

More information

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

The Board will discuss the following:

• Goodwill and impairment (education session)
• IFRS implementation issues
• Rate-regulated activities
• IFRS Taxonomy Update — IFRS 17
• Definition of a business
• Business combinations under common control
• Conceptual framework

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 Advisory Council is the formal advisory body to the Trustees and the IASB. It advises the IFRS Foundation on its strategic direction, technical work plan and priorities.

The new and reappointed members of the Advisory Council are:

• Vania Borgerth - Brazilian Development Bank (BNDES)
• Kristian Koktvedgaard - Business Europe
• Sibel Ulusoy Tokgöz - Capital Markets Board of Turkey (CMB)
• Laura Ramírez - Comisión Nacional Bancaria y de Valores (CNBV)
• Professor Ann Jorissen - European Accounting Association (EAA)
• Javier de Frutos - European Federation of Financial Analysts Societies (EFFAS)
• Jean-Paul Gauzès - European Financial Reporting Advisory Group (EFRAG)
• Ken Warren - External Reporting Board (XRB), New Zealand
• Ron Edmonds - Financial Executives International (FEI)
• Garth Coppin - Financial Reporting Standards Council of South Africa
• Ian Burger - International Corporate Governance Network (ICGN)
• Ton Meershoek - International Organization of Securities Commissions (IOSCO)
• Areewan Aimdilokwong - International Organization of Securities Commissions (IOSCO)
• Clive Brown - Investment Company Institute (ICI)
• Henry Daubeney - PwC
• Pam O'Connell - World Bank

In addition, the Trustees noted that the following members are stepping down from the Council at the end of 2017:

• Rudolf A Bless - FEI
• Prasan Chuaphanich - Federation of Accounting Professions, Thailand
• Paul Fitzsimon - PwC
• Robert Koethner - European Round Table of Industrialists/EuropeanIssuers
• Anne Molyneux - ICGN
• Gregory M Smith - ICI
• Uğur Yaylaönü - CMB

The press release announcing the new appointments can be found on the IASB's website.