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Article on the impact COVID-19 might have on applying IFRSs

28 Oct 2020

IASB Board member Mary Tokar and technical staff member Sid Kumar have released an article that provides an overview of the key financial reporting considerations associated with COVID-19.

The article builds on a panel discussion at the IFRS Foundation Virtual Conference on 28 September 2020, which focused on what entities need to consider when developing assumptions in preparing financial statements in times of heightened uncertainty and what information to disclose about the assumptions used.

Please click to access In Brief: Applying IFRS Standards in 2020 — impact of covid-19 on the IASB website.

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ESMA announces enforcement priorities for 2020 financial statements

28 Oct 2020

The European Securities and Markets Authority (ESMA) has announced the priority issues that the assessment of listed companies' 2020 financial statements will focus on. A special focus is on COVID-related matters.

The common enforcement priorities related to 2020 IFRS financial statements include:

  • the application of IAS 1 Presentation of Financial Statements with a focus on going concern, significant judgements and estimation uncertainty and the presentation of COVID-related items in the financial statements;
  • the application of IAS 36 Impairment of Assets, where the recoverable amount of goodwill, intangible assets and tangible assets may be impacted by the deterioration of the economic outlook of various sectors;
  • the application of IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures, including general considerations relating to risks arising from financial instruments, focusing on liquidity risk, and specific considerations related to the application of IFRS 9 for credit institutions when measuring expected credit losses; and
  • specific issues related to the application of IFRS 16 Leases, including explicit disclosures by lessees which have applied the IASB’s amendment providing relief to lessees when accounting for rent concessions.

ESMA also highlights key non-financial information issues and alternative performance measures with regard to the impact of COVID-19, social and employee matters, business model and value creation, and risks relating to climate change.

ESMA also highlights the importance of disclosures analysing the possible impacts of the decision of the United Kingdom to leave the European Union.

ESMA and European national enforcers will monitor and supervise the application of the IFRS requirements outlined in the priorities, with national authorities incorporating them into their reviews and taking corrective actions where appropriate. ESMA will collect data on how European listed entities have applied the priorities and will publish its findings in a separate report.

Please click for the following documents on the ESMA website:

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EFRAG early-stage analysis of rate regulation proposals — user perspective

28 Oct 2020

The European Financial Reporting Advisory Group (EFRAG) is inviting users to participate in an early-stage analysis of the likely impacts of possible changes to IFRS requirements as a result of the IASB project on the accounting for regulatory assets and regulatory liabilities. The IASB is expected to issue an exposure draft in early 2021.

The EFRAG analysis aims at assessing possible impacts of the new accounting model under consideration based on an understanding of users' current information needs and approaches towards analysing rate-regulated entities.

Please click for more information on the EFRAG website.

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FASB (US Financial Accounting Standards Board) (lt blue) Image

FASB and ASBJ hold biannual meeting

28 Oct 2020

On 26-27 October, the FASB and the Accounting Standards Board of Japan (ASBJ) held a joint virtual meeting. The meeting was the 28th in a series of biannual meetings between the two standard-setters.

The two boards informed each other about their respective activities, including the response to the COVID-19 pandemic’s effects, and exchanged views on technical topics in which they both have an interest, including accounting for goodwill, the equity method of accounting, as well as the FASB’s exposure draft on the elements chapter of its Conceptual Framework.

The next meeting between the FASB and ASBJ is expected to be held in the first half of 2021. For more information about the latest meeting, see the press release on the ASBJ website.

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ECON briefing paper on IFRS 17

27 Oct 2020

A briefing paper prepared for a meeting of the Committee on Economic and Monetary Affairs (ECON) of the European Parliament discussing the current situation as regards adoption of IFRS 17 'Insurance Contracts' is publicly available.

The briefing paper describes the positive draft endorsement advice of the European Financial Reporting Advisory Group (EFRAG) on IFRS 17 that notes that the Board achieved consensus on all issues with the exception of annual cohorts, with nine Board members voting in favour of the cohorts meeting the endorsement criteria and seven members disagreeing. The briefing paper also cites an article by IASB Chair Hans Hoogervorst explaining the reasons supporting the IASB’s recent decision to uphold the annual cohort requirement in IFRS 17 for grouping insurance contracts to measure and recognise profit.

Please click to access the briefing paper on the website of the European Parliament.

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We comment on the comprehensive review of the IFRS for SMEs

23 Oct 2020

We have published our comment letter on the IASB’s Request for Information ‘Comprehensive Review of the IFRS for SMEs Standard’, which was published by the IASB on 28 January 2020.

We support the proposed alignment of the IFRS for SMEs Standard with full IFRS Standards, which includes the alignment of principles and important definitions; however, we suggest the Board should assess which principles and definitions are relevant to the users of the IFRS for SMEs Standard. In addition, we agree with the Board’s proposal to use the principles of relevance, simplification and faithful representation to provide a framework that assists in determining whether and how the IFRS for SMEs and the suggestions by the Board in Part B of the RFI on the specific sections of the IFRS for SMEs Standard that should be aligned with full IFRS Standards except for the proposed alignment with IFRS 16 Leases. Lastly, we note that the IFRS for SMEs Standard does not provide guidance on how SMEs should account for assets held for sale and discontinued operations. We believe that the Board should consider alignment with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations with simplifications, where appropriate.

Click to view the comment letter.

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Pre-meeting summaries for the October IASB meeting

23 Oct 2020

The IASB will meet via video conference on 27–29 October 2020 for its regular meeting. We have posted our pre-meeting summaries for the meetings that allow you to follow the IASB’s decision making more closely. For each topic to be discussed, we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

Board work plan update: This is the first periodical update of the work plan, replacing the research update. The staff have been reviewing the timing of consultation documents and recommend some changes to the timing of consultations (such as delaying the management commentary ED until May 2021) and extending some comment periods (such as for the DP on BCUCC). The work plan on the IFRS Foundation website will be updated after the meeting.

2020 Agenda Consultation: The IASB is preparing to issue a Request for Information (RFI) in the first quarter of 2021, as part of the public consultation on its work plan that it is required to undertake every five years. The staff has completed its work and recommend that the RFI describe 27 potential projects identified from outreach undertaken.

Maintenance and Consistent Application—Deferred Tax related to Assets and Liabilities arising from a Single Transaction: In July 2019, the Board published an ED proposing amendments to IAS 12. The staff recommend that the Board confirm the proposal to narrow the scope of the recognition exemption so that it would not apply to transactions that give rise to equal amounts of taxable and deductible temporary differences. The papers include recommendations about the capping proposal, the extent of application guidance and illustrative examples and transition.

Management Commentary: This is the last decision-making meeting for the ED. The staff are asking for permission to begin the formal drafting and balloting processes. The staff papers include the working draft of their guidance on the provision of information about matters that could affect an entity’s long-term prospects, intangible resources and relationships, and ESG matters, but this is to elicit feedback rather than seeking any formal decisions. The ED is expected to be published in May 2021, if the IASB approves the revised work plan.

Extractive activities: The staff will present findings on the diversity of accounting policies applied to exploration and evaluation expenditure within the scope of IFRS 6. The staff’s research indicates that diversity is primarily due to the extent to which an entity recognises exploration and evaluation expenditure incurred during the reporting period as an asset and the unit of account that an entity decides to apply to its exploration and evaluation expenditure asset. Most of the entities in the sample use ‘area of interest’ accounting.  The ‘full cost’ and ‘successful efforts’ methods are the most common accounting policies for oil and gas companies not applying ‘area of interest’ accounting. The Board is not being asked to make any decisions.

Equity Method: Work on reviewing aspects of IAS 28 began in May. The staff recommend that the objective of this review be to assess whether application problems with the equity method for associates and joint ventures can be addressed by identifying and explaining the principles of IAS 28. They recommend that the Board not consider whether the equity method is a one-line consolidation method or a measurement method, whether it should be replaced by one of the measurement bases in the Conceptual Framework or whether significant influence should be the basis for when to apply the equity method.

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 IASB will discuss whether the compliance statement required by IAS 1 should differentiate the entities that have applied the reduced disclosure requirements and whether the disclosure requirements of IAS 8 should be applied by these entities.

Oral Updates: The staff will give oral updates on Dynamic Risk Management and the IFRS Taxonomy.

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.

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23 Oct 2020

The thirty-seventh session of the United Nations Conference on Trade and Development (UNCTAD) Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) will be held in a hybrid format (allowing participation in Geneva in person as well as remotely) on 2 - 6 November 2020.

The two main topics for the meeting will be:

  • Practical implementation, including measurement, of core indicators for entity reporting on the contribution towards the attainment of the Sustainable Development Goals: Review of case studies
  • Climate-related financial disclosures in mainstream entity reporting: good practices and key challenges

The background papers for these two topics are available in Arabic, Chinese, English, French, Spanish, and Russian and can be accessed here. The programme for the event can be accessed here. The keynote address on the second topic will be given by Erkki Liikanen, Chair of the IFRS Foundation Trustees.

The workshop before the ISAR meeting this year (30 October 2020) will focus on "Assurance on sustainability reports: current practices and challenges“. Please click for more information here.

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IASB issues podcast on being an IASB Board member

22 Oct 2020

The IASB has issued a podcast which features a discussion between former Board member Darrel Scott and newly appointed member Bruce Mackenzie as they share their experiences as members of the IASB Board.

Mr Scott provides his perspective from ten years in the position, while Mr Mackenzie discusses his expectations in his first term.

For more information, see the press release and podcast on the IASB’s website.

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Agenda for the November 2020 IFRS Advisory Council meeting

22 Oct 2020

An agenda has been released for the upcoming meeting of the IFRS Advisory Council which will be held by remote participation on 3–4 November 2020.

A summary of the agenda is set out below:

Tuesday 3 November 2020 (12:00-15:45)

  • Updates on Trustees and Board’s Ac­tiv­i­ties
  • Feedback from previous Adisory Council meetings
  • Sustainability

Wednesday 4 November 2020 (12:00-14:45)

  • Sustainability
  • Chair’s summary

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

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