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News

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EFRAG and European Commission meet with leading international sustainability reporting standard setters

26 Mar 2021

On 22 March 2021, EFRAG and European Commission representatives met with the IFRS Foundation and CDP/CDSB, GRI, SASB/IIRC, TCFD, UN Global Compact, UN Guiding Principles Reporting Framework, and WICI.

Against the backdrop of the final reports on possible EU non-financial reporting standards, participants discussed their expectations for future cooperation and the need and importance for EU sustainability reporting standards to build on as well as contribute to international standard-setting initiatives.

Please click to access the corresponding press release on the EFRAG website.

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2021 issued and annotated issued IFRS Standards now available

26 Mar 2021

The IFRS Foundation announces that the annual publication formerly known as the 'Red Book' is now available.

The Issued IFRS Standards 2021 publication contains the Standards as approved by the International Accounting Standards Board for issue up to 31 December 2020. These Standards include changes that are not yet required at 1 January 2021. The Annotated Issued IFRS Standards 2021 includes the same content as Issued IFRS Standards 2021, but with additional annotations containing extensive cross-references, explanatory notes and IFRS Interpretations Committee agenda decisions.

The books are available in electronic format for subscribers to eIFRS Professional. Printed copies of the books are available for sale through the IASB's web shop.

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IOSCO statement on going concern and COVID-19

25 Mar 2021

The International Organization of Securities Commissions (IOSCO) has released a statement on the need for high-quality information regarding going concern assessments and disclosures during the COVID-19 pandemic.

The statement stresses that the responsibility for developing and maintaining high-quality standards lies with the IASB and especially welcomes the recent IASB educational material on the topic of going concern disclosures as the topic is likely to be relevant for a larger number of public companies for 2020 and 2021 financial reporting periods in many jurisdictions.

IOSCO highlights that is important for investors to receive high-quality information about the existence of material uncertainties that may cast significant doubt on an entity’s ability to continue as a going concern. IOSCO also notes that it is important for investors to receive complete information about significant judgements that management may have exercised in determining the entity’s ability to continue as a going concern.

In conclusion, IOSCO reminds issuers, audit committees, and external auditors of the important role each plays in providing investors with high-quality, reliable, timely, and transparent financial information, especially in times of heightened uncertainty.

Please click to access the full statement on the IOSCO website.

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IASB publishes proposed amendments to IFRS 13 and IAS 19 and draft guidance for developing and drafting disclosures

25 Mar 2021

The International Accounting Standards Board (IASB) has published an exposure draft 'Disclosure Requirements in IFRS Standards — A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19)' that contains proposed guidance for itself when developing and drafting disclosure requirements in IFRSs in future as well as proposed amendments to IFRS 13 'Fair Value Measurement' and IAS 19 'Employee Benefits' that result from applying the proposed guidance to those standards. Comments are requested by 21 October 2021.

 

Background

The IASB noted constituent concern about the cumulative effect of disclosure requirements introduced by new and revised standards and conducted a research project with the aim of a general review of disclosure requirements.

As a first step, the Board published a discussion paper DP/2017/1 Disclosure Initiative — Principles of Disclosure in March 2017 that contained an appendix with two examples of how existing standards could be re-drafted using the principles described in the DP.

Many respondents to the DP highlighted the ‘checklist’ approach as a significant factor contributing to the disclosure problem and that the Board’s way of developing and drafting disclosure requirements in IFRSs is partly responsible for this as there often are a large number of disclosure requirements without specific disclosure objectives. In addition, disclosure sections are drafted inconsistently.

The Board acknowledged these concerns and decided to pursue a project following a four-step approach:

  • Develop draft guidance for the Board to use when developing and drafting disclosure sections;
  • Select two standards on which to apply the draft guidance;
  • Test the draft guidance by applying it to those standards; and
  • Prepare an ED of amendments to those standards.

The exposure draft published today includes the draft guidance as well as proposed amendments to IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits that result from applying the draft guidance to those standards. 

 

Draft guidance and suggested changes

The exposure draft ED/2021/3 Disclosure Requirements in IFRS Standards — A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19) is made up of three blocks: the draft guidance for the IASB to apply when developing and drafting disclosure requirements in IFRSs in future; proposed amendments to IFRS 13; and proposed amendments to IAS 19.

Draft guidance

As one of the main reasons for the perceived disclosure problem was the 'checklist' mentality, the IASB decided to develop an approach that would shift the focus to the use of judgement and to determining whether the objective behind the disclosures has been met by the entity.

To this end, the the Board proposes to use overall disclosure objectives in future that that describe the overall information needs of users of financial statements and specific disclosure objectives that describe the detailed information needs of users of financial statements. An entity would then need to apply judgement to identify items of information for each specific disclosure objective by considering whether the information is relevant or irrelevant and whether it helps the entity to communicate effectively. For the overall disclosure objectives, the IASB would use more prescriptive language, while for the information needed to meet specific disclosure objectives it would typically use less prescriptive language.

The draft guidance is not a standard. However, once finalised, the Board will apply the guidance in developing and drafting disclosure sections of IFRSs in the future. The Board expects that the broad application of the guidance will have a significant effect on the behaviour of entities, auditors and regulators. Instead of checking whether a specific piece of information required by an IFRS has been provided, auditors and regulators will have to use judgement to assess compliance. Compliance will be achieved if the information provided effectively meets the disclosure objectives in the entity’s case.

Proposed amendments to IFRS 13

In line with the draft guidance, the Board proposes an overall disclosure objective that requires an entity to disclose information that shows

  • the significance of the assets and liabilities measured at fair value;
  • how the fair value measurements have been determined; and
  • how changes in those measurements affect the entity’s financial statements.

Specific disclosure objectives would then regard the fair value hierarchy, measurement uncertainties, possible alternative fair value measurements, and drivers of change in fair value measurements. The proposed amendments also note the kind of information needed to meet the disclosure objectives. In addition, the specific disclosure requirements also cover disclosures regarding assets and liabilities not measured at fair value in the statement of financial position but for which fair value is disclosed in the notes.

Proposed amendments to IAS 19

The overall disclosure objectives proposed for IAS 19 distinguish between defined benefit plans and define contribution plans. For defined benefit plans, the overall disclosure objective requires an entity to disclose information that shows enables users of financial statements to evaluate the uncertainties associated with the entity’s involvement in its defined benefit plans and to assess the effect that the defined benefit plans have on the financial performance, financial position and cash flows of the entity. For defined contribution plans, the overall disclosure objective requires requires an entity to disclose information that enables users of financial statements to understand the effect that defined contribution plans have on the financial performance and cash flows of the entity.

While the Board does not propose specific disclosure objectives for defined contribution plans, the proposed specific disclosure objectives for defined benefit plans include amounts in the primary financial statements relating to defined benefit plans, the nature of, and risks associated with, defined benefit plans, expected future cash flows relating to the defined benefit obligations at the end of the period, future payments to members of defined benefit plans that are closed to new members, measurement uncertainties associated with the defined benefit obligation, and drivers of change in the amounts in the statement of financial position relating to the defined benefit plans. The proposed amendments also note the kind of information needed to meet the disclosure objectives.

In addition, the proposed amendments also touch on  multi-employer plans and defined benefit plans that share risks between entities under common control as well as other types of employee benefit plans.

Comments on the draft guidance and the proposed changes are requested by 21 October 2021.

 

Effective date

The exposure draft does not contain a proposed effective date as the IASB intends to decide on this after exposure. Early application would be permitted.

 

Additional information

Please click for:

 

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March 2021 IASB meeting notes posted

24 Mar 2021

The IASB met on Tuesday 23 and Wednesday 24 March 2021, by video conference. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

Board Work Plan Update: This is a regular update for the Board. The Board decided to increase the comment period 30 days for the ED Regulatory Assets and Regulatory Liabilities, because of ongoing challenges from the pandemic and the volume of consultation documents out for comment. They also decided to have longer consultation periods for two documents due to be released shortly—ED Targeted Standards-level Review of Disclosures from 180 days to 210 days (rather than the 270 days proposed) and the Request for Information on the Third Agenda Consultation from 120 days to 180 days.

Management Commentary: The Board decided that the comment letter period for the forthcoming ED to revise Practice Statement 1 Management Commentary should be set to avoid overlapping with other projects and (possibly) to avoid publication at the same time as the Trustees consultation on sustainability reporting.

Equity Method: The staff updated the Board on the equity method research project. The staff have compiled from various sources 71 application questions for consideration. Using the project scope decided by the Board in October 2020, the staff plan to consider only those issues that can be resolved without fundamentally rewriting IAS 28 or amending other Standards. The staff consider that issues not meeting these criteria should not be considered in this project and that issues should be removed if they are not important or do not affect the consistent application of IAS 28. Board members suggested that the criteria be used as guidelines and not imposed strictly.

Goodwill and Impairment: In March 2020, the Board published Discussion Paper DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment. During the comment period, Board members and the staff attended 94 meetings with outside parties, received feedback from its consultative bodies, recorded two webinars, conducted fieldwork and received 193 comment letters. The Board discussed a high-level summary of the feedback received on the DP but no decisions were made.

Maintenance and Consistent Application: The Board discussed the latest IFRIC Update. No decisions were made.

Primary Financial Statements: The Board discussed detailed feedback on three topics: Subtotals in the statement of profit or loss—operating profit; scope of management performance measures (MPMs); and statement of cash flows. The Board decided to proceed with the proposal to require all entities to present an operating profit subtotal. The operating category would include volatile and unusual income and expenses arising from an entity’s operations. The Board decided to proceed with the proposal to include information about measures meeting the definition of MPMs in the financial statements and explore possible approaches to expand the scope of MPMs to include measures other than subtotals of income and expenses. The Board also decided to proceed with the limited proposals in the ED in relation to cash flows and make no additions to the scope of the work. 

IFRS for SMEs: The Board decided to move the project from its research programme to its standard-setting work plan, treating alignment with IFRS Standards as the starting point, applying the principles of relevance to SMEs, simplicity and faithful representation in determining whether and how that alignment should take place. The next step should be an ED.

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

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2021 IFRS XBRL taxonomy issued

24 Mar 2021

The IFRS Foundation has issued its 2021 IFRS Taxonomy. The IFRS Taxonomy is a translation of IFRS Standards into XBRL (eXtensible Business Reporting Language).

The IFRS Taxonomy 2021 is consistent with IFRSs as issued by the IASB at 1 January 2021, including those issued but not yet effective.

The IFRS Taxonomy 2021 also incorporates the six updates made to the IFRS Taxonomy in 2020 reflecting amended IFRSs and providing new common practice elements.

For more information, see the press release and the IFRS Taxonomy 2021 page on the IASB's website.

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Recording of an investor webinar on the discussion paper on business combinations under common control

22 Mar 2021

In March 2021, the IASB offered a webinar providing an overview of the November 2020 discussion paper DP/2020/2 'Business Combinations under Common Control'. The webinar explained the Board’s preliminary views and focused especially on topics of relevance investors and analysts.

A recording of the webinar (30 minutes) is now available. It can be accessed here on the IASB website.

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IFRS Foundation announces sustainability working group

22 Mar 2021

In order to accelerate convergence in global sustainability reporting standards and to undertake technical preparation for a potential international sustainability reporting standards board under the governance of the IFRS Foundation, the Trustees of the IFRS Foundation have set up a working group.

The working group is intended to provide structured engagement with initiatives focused on enterprise value reporting with a view to facilitating consolidation and reducing fragmentation in sustainability reporting standards. The working group will be chaired by the IFRS Foundation and include participation by the IASB, given the need for connectivity with financial reporting. IOSCO will participate in the group as an observer.

Members of the working group are

  • The Financial Stability Board’s Task Force on Climate related Financial Disclosures (TCFD);
  • the Value Reporting Foundation representing the intended merger of the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB);
  • the Climate Disclosure Standards Board (CDSB); and
  • the World Economic Forum (WEF).

Throughout the process, the working group will also engage closely with the Global Reporting Initiative (GRI) and CDP.

The first meeting of the working group is expected to take place in April 2021.

Please click for more information in the press release on the IASB website.

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IFRS Interpretations Committee holds March 2021 meeting

19 Mar 2021

The IFRS Interpretations Committee met via video conference on 16 March 2021. We have posted Deloitte observer notes for the technical issues discussed during this meeting.

The Committee discussed one comment letter analysis on a tentative agenda decision and two new issues.

Comment letter analysis

IAS 38 Intangible Assets—Configuration or Customisation Costs in a Cloud Computing Arrangement: In December 2020, the Committee discussed the accounting for a customer's costs of configuring or customising the supplier's application in a ‘Software as a Service’ (SaaS) arrangement. The staff concluded that no intangible asset is recognised in the fact pattern described and the customer should refer to requirements in IFRS 15 for the identification of services and timing of recognition. The Committee members generally agreed with the analysis but they raised some comments on the analysis of services rendered by a third-party supplier. The Committee decided to finalise the agenda decision with some edits to address the concerns raised.  

New issues

IFRS 16 Leases—Non-refundable VAT on Lease Payments: The Committee members generally agreed that non-refundable value-added tax (VAT) is not part of lease payments and there was little diversity in practice with regard to the accounting treatment. However, they recommended that the staff should wait for feedback from comment letters before reaching the conclusion that such matter is not material or widespread. The Committee decided not to add the matter to the Committee’s standard-setting agenda and publish a tentative agenda decision.

IAS 32 Financial Instruments: Presentation—Accounting for Warrants that are Initially Classified as Liabilities: All Committee members agreed that the matter described, in isolation, is too narrow for the Committee to address in an efficient manner. The Committee decided not adding a standard-setting project for the matter submitted and instead publish a tentative agenda decision to explain this. Also, the Committee members supported that the reclassification of financial instruments is a broader issue and that there is diversity in practice which should be addressed as part of the FICE project.

More In­for­ma­tion

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

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Pre-meeting summaries for the March 2021 IASB meeting

18 Mar 2021

The IASB is meeting on Tuesday 23 and Wednesday 24 March 2021, by video conference. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. We summarised 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 a regular update for the Board. The staff are recommending that the comment period be increased by 30 days for the ED Regulatory Assets and Regulatory Liabilities, because of ongoing challenges from the pandemic and the volume of consultation documents out for comment. They also recommend longer consultation periods for two documents due to be released shortly—ED Targeted Standards-level Review of Disclosures from 180 days to 270 days and the Request for Information on the Third Agenda Consultation from 120 days to 180 days.

Management Commentary: The Board will decide on the comment letter period for the forthcoming ED to revise Practice Statement 1 Management Commentary. The staff state that having a comment period longer than the normal 120 days could delay urgently needed revisions to the Practice Statement and ask the Board to set the comment period.

Equity method: The purpose of this paper is to update the Board on the equity method research project. The staff have compiled from various sources 71 application questions for consideration. Using the project scope decided by the Board in October 2020, the staff plan to consider only those issues that can be resolved without fundamentally rewriting IAS 28 or amending other Standards. Any issues not meeting these criteria will not be considered in this project. The staff will also remove issues that are not important or do not affect the consistent application of IAS 28.

Goodwill and impairment: In March 2020, the Board published Discussion Paper DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment. During the comment period, Board members and the staff attended 94 meetings with outside parties, received feedback from its consultative bodies, recorded two webinars, conducted fieldwork and received 193 comment letters. At this meeting the Board will discuss a high-level summary of the feedback received on the DP. The Board will not be asked to make any decisions.

Maintenance and consistent application: The staff will present the latest IFRIC Update. The Board will not be asked to make any decisions.

Primary Financial Statements: The Board will discuss detailed feedback on three topics: Subtotals in the statement of profit or loss—operating profit; scope of management performance measures (MPMs); and statement of cash flows. The staff recommend that the Board proceed with the proposal to require all entities to present an operating profit subtotal. The operating category would include volatile and unusual income and expenses arising from an entity’s operations. The staff recommend that the Board proceed with the proposal to include information about measures meeting the definition of MPMs in the financial statements and explore possible approaches to expand the scope of MPMs to include measures other than subtotals of income and expenses. The staff also recommend that the Board proceed with the limited proposals in the ED in relation to cash flows and make no additions to the scope of the work. 

IFRS for SMEs: The staff recommend that the Board move the project from its research programme to its standard-setting work plan, treating alignment with IFRS Standards as the starting point, applying the principles of relevance to SMEs, simplicity and faithful representation in determining whether and how that alignment should take place. The next step should be an ED.

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

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