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News

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IASB issues podcast on latest Board developments (October 2021)

08 Nov 2021

The IASB has released a podcast featuring IASB Chair Andreas Barckow and IASB Vice-Chair Sue Lloyd discussing deliberations at the Ocotber 2021 IASB meeting.

Highlights of the podcast include discussions on:

  • Goodwill and impairment;
  • Primary financial statements;
  • Post-implementation review of IFRS 10, IFRS 11 and IFRS 12;
  • Rate-regulated activities;
  • Second comprehensive review of the IFRS for SMEs;
  • Pension benefits that depend on asset returns;
  • Equity method;
  • Narrow scope amendment to IFRS 17; and
  • Ratification of tentative agenda decisions of the Interpretations Committee.

The podcast can be accessed through the press release on the IASB website.

Please click to view the detailed notes taken by Deloitte observers for the IASB meeting.

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November 2021 IASB meeting agenda posted

05 Nov 2021

The IASB has posted the agenda for its next meeting, which will be held in London on 15–16 and 19 November 2021. There are eight topics on the agenda.

The Board will discuss the following:

  • Rate-regulated activities
  • Dynamic risk management
  • Second comprehensive review of the IFRS for SMEs Standard
  • Goodwill and impairment
  • Primary financial statements
  • Board work plan — Timing of PIRs
  • Post-implementation review of IRS 10–12
  • Third agenda consultation

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.

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Two IOSCO speeches at COP26 focus on new ISSB

05 Nov 2021

The International Organization of Securities Commissions (IOSCO) has released the transcripts of two speeches of the Chair of the IOSCO Board and the Chair IOSCO Sustainable Finance Task Force given at the Green Horizon Summit of COP26 in Glasgow.

The Chair of the IOSCO Sustainable Finance Task Force, Erik Thedéen, noted that IOSCO identified the IFRS Foundation as the vehicle to develop a global baseline for investor-oriented sustainability standards given its well-tested governance structure, its best-in-class reputation in setting international reporting standards and its proven record of transparent and inclusive due process. He stressed:

The ISSB global standards are the right tool to respond to the existing ‘alphabet soup’ of voluntary sustainability disclosures. They can drive much-needed international consistency and comparability in sustainability-related information, laying the groundwork towards high quality mandatory reporting.

Ashley Alder, Chair of the IOSCO Board, gave the keynote speech at the summit. He stressed that the new board under the IFRS Foundation umbrella offers the most credible mechanism for creating a baseline of disclosure standards, enabling a confusing picture to be superseded by a properly aligned global approach. He commented:

Crucially, the ISSB will develop a comprehensive global baseline of corporate climate disclosure standards which meet the information needs of investors. They will enable investors to align their investment strategies with the global transition to net zero and will also mitigate the ever-present risk of greenwashing. [...] The baseline disclosure standard can also cut a clear pathway to the adoption of a mandatory standard if jurisdictions choose to take that route. This is important because, in order to hold corporates properly accountable, the standard should be sufficiently enforceable. It is also crucial that it is an open standard which allows jurisdictions to build on the baseline to accommodate their own sustainability needs and circumstances.

Both speakers also stressed that IOSCO plans to thoroughly assess the ISSB proposals to ensure they meet the needs of investors before deciding whether IOSCO can endorse them. If IOSCO's expectations are met, the IOSCO Board would then endorse the new standards for over 130 market regulators.

Please click to access the two speeches on the IOSCO website:

Earlier, IOSCO also released a statement welcoming the creation of the ISSB.

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IFAC provides digital access to international standards

05 Nov 2021

The International Federation of Accountants (IFAC) has launched the platform eIS, short for e-International Standards.

The new resource provides direct access to the standards developed by the International Audit and Assurance Standards Board (IAASB), the International Ethics Standards Board for Accountants (IESBA), and the International Public Sector Accounting Standards Board (IPSASB).

Please click for more information and access to the platform on the IFAC website.

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Papers presented at the eighth IASB Research Forum

04 Nov 2021

The International Accounting Standards Board (IASB) hosted its eighth Research Forum on 3 and 4 November 2021 as a virtual event. The meeting saw the presentation of nine academic papers as well as responses by academics and IASB members.

The first paper Implementation Costs of IFRS 9 for Non-Financial Firms: Evidence from China examined the implementation of the new CAS 22 (equivalent to IFRS 9 Financial Instruments) by Chinese non-financial firms. The authors found that the new accounting standard for financial instruments imposed severe implementation costs on affected firms. They concluded that requirements in the new standard, such as fair value measurement and expected credit loss, present significant implementation challenges for companies and auditors. Overall, the paper concluded that there is evidence that supports the concern that the new accounting standard for financial instruments could be costly for non-financial firms to implement.

The second paper Does IFRS and GRI adoption impact the understandability of corporate reports by Chinese listed companies? examined the level of readability and conciseness of corporate reports and whether IFRS and GRI adoption impacts these aspects of understandability. The authors found that both readability and conciseness of the corporate reports are at a low level and indicate a downward trend over the sample period. They also found that IFRS adoption results in a longer and more readable report, whereas GRI adoption leads to a longer but less readable report.

The third paper Is AASB 6 still fit for purpose? reported on a project completed for the Australian Accounting Standards Board (AASB) as input to the IASB’s project on the extractive industries. The research carried out by the authors showed the primary area of concern related to impairment of exploration and evaluation assets and closure obligations. In addition, the provisioning for site rehabilitation and the difficulties of applying the new leasing standard were noted as accounting challenges. The uncertainty around the future treatment of climate change impacts was also especially noted. Based on the evidence, the paper recommended to proceed with the development of amendments to IFRS 6 Exploration for and Evaluation of Mineral Resources to enhance disclosure requirements.

The fourth paper Do Acquiring Firms Achieve Their Mergers and Acquisitions Objectives?: Evidence from Japan assessed whether acquiring firms achieve the mergers and acquisitions objectives presented in their press releases and financial statements. The study’s findings show that disclosed mergers and acquisitions objectives regarding profitability, efficiency, and growth are usually not realised. The authors also found that describing mergers and acquisitions objectives in financial statements leads to higher short-term stock returns while the stock market adjusts the valuation of firms based on their actual performance in the long run.

The fifth paper The Impact of IFRS Adoption on the Value Relevance of Accounting Information in Saudi Arabia examined the joint and relative value relevance of book value of equity and earnings before and after the mandatory adoption of IFRSs in Saudi Arabia. The study identified a significant and positive change in the relative value relevance of book value of equity after IFRS implementation. The authors also found that profitable firms, firms audited by big4 and large firms exhibit significantly higher joint value relevance compared to their counterparts regardless of the implemented accounting standards.

The sixth paper Decision usefulness of the accounting standard ‘IFRS for SMEs’: Qualitative evidence from Sri Lanka examined the information needs of the users of Sri Lankan small and medium entities' financial statements. The primary users of financial information were identified as banks, the inland revenue department and other government institutions. However, the authors found that the manipulation of financial results, tax orientation, insufficient detail, and out-to-date information mean that the financial statements prepared by Sri Lankan small and medium entities lack decision usefulness. The authors conclude that local standard setters need to pay greater attention to financial reporting by small and medium entities and take steps to make it more credible and relevant to the needs of users.

The seventh paper Is IFRS a “trusted” language for private firm credit decisions? An analysis of country differences in users’ perspectives examined whether creditors trust and use IFRS-based financial statement information for their decision-making in the context of private firm lending. The authors found that (i) IFRS accounting numbers are more trusted than local-GAAP based accounting numbers, (ii) the trust even increases when creditor protection is weak, and (iii) mandatory IFRS adoption in a country influences the trust in the numbers more positively than a voluntary adoption.

The eighth paper What Influences the Implementation of IFRS for SMEs? The Brazilian Case investigated factors influencing the implementation of the IFRS for SMEs in Brazil. The research carried out suggests that inconsistencies and incomprehensibility issues are the main factors preventing implementation. However, further investigation indicated that once participants know the standard, “implementation myths” are mitigated. The authors conclude that regulators should increase the availability of education programs, so accountants feel more secure and boost the standard’s implementation.

The last paper Fixing diluted earnings per share: recognising the dilutive effects of employee stock options proposed changes to the calculation of diluted earnings per share arguing that the existing IAS 33 approach was flawed as it ignores the time value of options and treats equity-settled options differently to cash-settled options. The authors derived an alternative method and then compared this with the IAS 33 calculation using examples based on a simple firm. The authors conclude that their method best describes the change in economic value of the current shareholders and provides a similar result at a diluted earnings per share level for both cash- and equity-settled options. It could also easily be extended to deal with other dilutive instruments.

Participants praised the valuable exchange and the evidence from research provided that is highly relevant to the IASB's current agenda. The evidence on the application of standards also covered geographical areas not usually covered by research or otherwise easily accessible or was of a granularity that normally goes beyond the means of the IASB to gather.

The presented papers as well as recordings of the presentations and contributions by the discussants will shortly be available on the IFRS Foundation website.

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IPSASB guidance on borrowing costs

04 Nov 2021

The International Public Sector Accounting Standards Board (IPSASB) has released non-authoritative guidance on borrowing costs.

Amendments to IPSAS 5 'Borrowing Costs' – Non-Authoritative Guidance adds non-authoritative guidance to IPSAS 5 Borrowing Costs that consists of implementation guidance and illustrative examples to clarify how the existing principles for when borrowing costs can be capitalised should be applied in various regularly encountered public sector contexts. The authoritative guidance in IPSAS 5 is not amended.

Please click to access the following additional information on the IPSASB website:

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IFRS Foundation creates new sustainability standards board

03 Nov 2021

The IFRS Foundation has announced the creation of its new International Sustainability Standards Board (ISSB) that will develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.

In two separate consultations, the IFRS Foundation Trustees consulted on the demand for global sustainability standards and what role the Foundation might play in the development of such standards (September 2020) and on proposed amendments to the IFRS Foundation Constitution that would enable the creation of a new sustainability standards board under the governance of the Foundation (April 2021).

Responses to the consultations showed strong support for the IFRS Foundation's initiative and the Trustees have today published a revised constitution and corresponding feedback statement and have announced the creation of the new ISSB.

International Sustainability Standards Board (ISSB)
Governance and structure The ISSB will sit alongside the IASB and will be overseen by the Trustees. The ISSB’s work will follow the IFRS Foundation’s established due process. Technical advice to the ISSB will be provided by a new Sustainability Consultative Committee; strategic advice will be provided by the IFRS Advisory Council, whose remit and expertise will be extended accordingly; and engagement with jurisdictional and regional initiatives will be provided through a working group already set up by the Trustees.
Mission The ISSB will develop global standards and disclosure requirements to facilitate consistent and comparable reporting by companies across jurisdictions to help to direct capital to long-term, resilient business in the transition to a low-carbon economy.
Name of the standards The name of the standards to be developed by the ISSB will be "IFRS Sustainability Disclosure Standards".
Composition of the ISSB The ISSB will normally comprise 14 members, some of which can be part-time members. The main qualifications for membership of the ISSB are professional competence and relevant professional experience. The board will comprise three members from the Asia-Oceania region, three members from Europe, three members from the Americas, one member from Africa, and four members appointed from any area. The search for members will commence shortly.
Chair and Vice Chair(s) The ISSB will have one Chair and at least one Vice Chair. They are still to be announced.
Seat The main seat of the ISSB will be in Frankfurt, but all regions - the Americas, Asia-Oceania and Europe/Middle East/Africa - will be covered by regional hubs.

The press release also notes that leading investor-focused sustainability disclosure organisations have committed to consolidate into the new board. The Trustees expect to complete the consolidation of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) into the ISSB by June 2022.

In addition to announcing the creation of the ISSB, the Trustees are also providing an update on the work of the Technical Readiness Working Group (TRWG). The TRWG was created in March 2021 to facilitate a running start of the ISSB. It was designed to integrate and build on the work of relevant initiatives focused on meeting investors’ information needs, with the purpose of providing technical recommendations for consideration by the ISSB. The following two documents that resulted from the TRWG's work were published today:

  • Climate-related Disclosures Prototype (please see a summary of the prototype here) and
  • General Requirements for Disclosure of Sustainability-related Financial Information Prototype (please see a summary of the prototype here)

The two prototypes are accompanied by an overview of the work programme of the TRWG, explaining the technical preparatory work done so far and still to be completed so that a final set of recommendations can be handed over to the ISSB once it begins its work.

Please click for the following additional information on the IFRS Foundation website:

The International Organization of Securities Commissions (IOSCO) and the Board of the International Federation of Accountants (IFAC) have issued statements welcoming the creation of the ISSB and and pledging ongoing support for the ISSB:

In addition, see Deloitte's Purpose-driven Business Reporting in Focus — IFRS Foundation creates new board to set sustainability standards newsletter.

Note: On 3 November 2021 14:30 GMT, the ISSB was introduced in a live webcast from COP26. A recording of the event is available on YouTube.

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Climate-related disclosures prototype

03 Nov 2021

The IFRS Foundation has released a climate-related disclosures prototype that is the proposal of the Technical Readiness Working Group (TRWG) for the first thematic standard of the ISSB.

The TRWG was created in March 2021 to facilitate a running start of the ISSB. It was designed to integrate and build on the work of relevant initiatives focused on meeting investors’ information needs, with the purpose of providing technical recommendations for consideration by the ISSB. The climate-related disclosures prototype published today is structured around the four TCFD pillars of governance, strategy, risk management, and metrics and targets:

  • Objective: The recommended objective of the prototype is to require an entity to disclose information about its exposure to climate-related risks and opportunities.
  • Scope: The prototype would apply to climate-related risks that the entity is exposed to, climate-related opportunities available to and considered by the entity.
  • Governance: Under the prototype, an entity would disclose information that enables users of general purpose financial reporting to understand the governance processes, controls and procedures used to monitor and manage climate-related risks and opportunities.
  • Strategy: An entity would disclose information that enables users of general purpose financial reporting to understand the strategy for addressing climate-related risks and opportunities as well as the climate-related risks and opportunities that would affect the strategy and the impact of climate-related risks and opportunities on the strategy.
  • Risk management: An entity would disclose information that enables users of general purpose financial reporting to understand how climate-related risks are identified, assessed, managed and mitigated.
  • Metrics and targets: An entity would disclose information that enables users of general purpose financial reporting to understand the entity’s performance in managing climate-related risks and opportunities.

There are two appendices to the climate prototype. Appendix A contains the defined terms used; Appendix B sets out industry-based disclosure requirements, organised by sector and industry. Supplementary technical protocols for disclosure requirements describe industry requirements for climate-related metrics.

The climate-related prototype and the supplementary technical protocols for disclosure requirements can be accessed on the IFRS Foundation website.

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General requirements for disclosure of sustainability-related financial information prototype

03 Nov 2021

The IFRS Foundation has released a general requirements prototype that is the proposal of the Technical Readiness Working Group (TRWG) for a general presentation standard of the ISSB.

The TRWG was created in March 2021 to facilitate a running start of the ISSB. It was designed to integrate and build on the work of relevant initiatives focused on meeting investors’ information needs, with the purpose of providing technical recommendations for consideration by the ISSB. The general requirements for disclosure of sustainability-related financial information prototype published today is inspired by IAS 1 Presentation of Financial Statements and sets out the overall requirements for sustainability-related disclosures to investors:

  • Objective and scope: The recommended objective of sustainability-related financial disclosures is described as providing information about the significant sustainability-related risks and opportunities to which the reporting entity is exposed that is useful to primary users of general purpose financial reporting in deciding whether to provide resources to the entity. The recommended standard would apply when an entity prepares and discloses sustainability-related financial information in accordance with IFRS Sustainability Disclosure Standards.
  • Materiality: An entity would disclose all information on sustainability matters that is material for investors and other providers of capital in respect of a reporting entity. Sustainability-related financial information is described as material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that the primary users of general purpose financial reports make on the basis of those reports.
  • Reporting entity boundary and connectivity: The reporting entity's boundary for its general purpose financial reporting is recommended to be the same for its financial statements and sustainability-related financial disclosures. The disclosures provided must enable users to understand the connections, dependencies and trade-offs between sustainability-related financial disclosures and other information in general purpose financial reporting.
  • General features: Applying the general requirements prototype an entity would disclose information that focuses on matters critical to the way an entity operates following the four pillars of governance, strategy, risk management, and metrics and targets. The prototype sets out objectives for each of these pillars and disclosure requirements to achieve these objectives.
  • Comparative information and frequency of reporting: Under the prototype, an entity would present comparative information regarding the previous period for all amounts including metrics and key performance indicators reported in the current period. An entity would report at least every 12 months and at the same time as its financial statements.
  • Reporting channel: Sustainability-related disclosures to investors would be disclosed as part of a reporting entity's general purpose financial reporting that is targeted at investors and other providers of capital and encompasses financial statements and sustainability-related financial information.
  • Identifying the related financial statements: Sustainability-related financial disclosures would identify the financial statements to which they relate. If the related financial statements are not prepared in accordance with IFRSs, the sustainability-related financial disclosures would disclose the basis on which the financial statements are prepared.
  • Using financial data and assumptions: When sustainability-related financial disclosures incorporates financial data and assumptions, such financial data and assumptions would be consistent with the corresponding financial data and assumptions incorporated in the entity’s financial statements.
  • Fair presentation: A complete set of sustainability-related financial disclosures would present fairly the sustainability-related risks and opportunities to which the entity is exposed. A fair presentation requires an entity to disclose information that is relevant, reliable, comparable and understandable and would include additional disclosures when the information provided is insufficient to enable users to understand the impact or potential impact of significant sustainability-related risks and opportunities on the entity’s enterprise value.
  • Sources of estimation uncertainty: When sustainability-related financial disclosures cannot be directly quantified and can only be estimated, the use of reasonable estimates is an essential part of preparing sustainability-related financial disclosure and does not undermine the usefulness of the information if the estimates are clearly and accurately described and explained.
  • Errors: The general requirements prototype describes prior period errors as omissions from, and misstatements in, the entity’s sustainability-related financial disclosures for one or more prior periods. Unless impracticable, an entity would correct material prior period errors retrospectively in the first general purpose financial reporting authorised for issue after their discovery.
  • Statement of compliance: An entity whose sustainability-related financial disclosures comply with all of the relevant requirements of IFRS Sustainability Disclosure Standards would include an explicit and unqualified statement of compliance.

There are four appendices to the general requirements prototype. Appendix A explains the defined terms used in the general requirements prototype; Appendix B sets out a general-purpose financial report that includes sustainability-related financial information and financial statement information; Appendix C provides an application guidance on materiality; and Appendix D describes qualitative characteristics of useful sustainability-related financial information.

The general requirements prototype can be accessed on the IFRS Foundation website.

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Agenda for the November 2021 GPF meeting

02 Nov 2021

Representatives from the International Accounting Standards Board (IASB) will meet with the Global Preparers Forum (GPF) by video conference on 12 November 2021. The agenda for the meeting has been released.

The full agenda for the meeting is summarised below:

Friday, 12 November 2021 (11:00-16:00)

  • Welcome and introduction of new members, farewell to departing member
  • Goodwill and impairment
    • Disclosures for business combinations
    • Amortisation of goodwill
  • Equity method
    • Application questions
  • Subsidiaries without public accountability
    • Overview of the Board’s proposals in the exposure draft
  • Primary financial statements
    • Project status and next steps
  • Other IASB update session
  • IFRS Interpretations Committee update session
  • Concluding remarks

Agenda papers for this meeting are available on the IASB website.

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