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IOSCO statement on the application of accounting standards during the COVID-19 outbreak

04 Apr 2020

The International Organization of Securities Commissions (IOSCO) has released a statement on consistent application and enforcement of high-quality accounting standards which are of critical importance to the proper functioning of the capital markets — especially in times of uncertainty.

The statement notes that the responsibility for developing and maintaining high quality standards resides with the IASB and welcomes the IASB's recent educational material that addresses the application of accounting for expected credit losses in accordance with IFRS 9 Financial Instruments during the period of economic uncertainty arising from the COVID-19 outbreak. IOSCO also notes that the related financial instruments principles-based disclosure requirements in IFRSs (i.e. IFRS 7, IAS 1) should result in disclosure that considers the impact of the important emerging issues.

Please click to access the statement on the IOSCO website.

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EC consultation on the revision of the NFRD — Deadline extended

03 Apr 2020

In February 2020, the European Commission launched an initiative to review the European Non-Financial Reporting Directive. The deadline for comments has now been extended to 11 June 2020.

The consultation page can be accessed here. Please note that you need to register in order to access the public consultation.

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ESMA publishes 24th enforcement decisions report

03 Apr 2020

The European Securities and Markets Authority (ESMA) has published further extracts from its confidential database of enforcement decisions taken by European national enforcers. This batch deals with decisions in relation to IFRS 15 (three decisions), IFRS 7, IFRS 9/IAS 12, IFRS 10, IAS 34, and IFRS 15/IFRS 16.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from May 2018 to October 2019, include:

Standard Topic
IFRS 15 — Revenue from Contracts with Customers Identification of performance obligation
IFRS 7 — Financial Instruments: Disclosure Liquidity risk of notes with early redemption option
IFRS 9 — Financial Instruments
IAS 12Income Taxes
Deferred tax assets (DTAs) related to a change of accounting policy due to first application of IFRS 9
IFRS 10 — Consolidated Financial Statements Assessment of De-facto control
IFRS 15 — Revenue from Contracts with Customers Disaggregation of revenue
IAS 34 — Interim Financial Reporting Presentation of condensed interim income statement
IFRS 15Revenue from Contracts with Customers Accounting for a framework agreement
IFRS 15 — Revenue from Contracts with Customers
IFRS 16Leases
Identifying components in lease contracts

Click for access to the full report (link to ESMA website). The ESMA has also published an updated overview of all enforcement decisions ever published.

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ESMA publishes report on the activities of accounting enforcers and their findings within the EU in 2019

02 Apr 2020

The report provides an overview of the activities of the European Securities and Markets Authority (ESMA) and the accounting enforcers in the European Union (EU) when examining compliance of financial information provided by issuers listed on regulated markets with the applicable financial reporting framework in 2019.

European enforcers examined the financial statements of about 950 issuers representing an average examination rate of 17% of all IFRS issuers with securities listed on regulated markets. These examinations resulted in 299 actions taken to address material departures from IFRS.

Enforcers also assessed the non-financial information related to ESG for 937 issuers, covering approximately 35% of the total estimated number of issuers required to publish a non-financial statement, resulting in 95 enforcement measures.

In addition, 712 management reports were reviewed for evaluating compliance with ESMA’s guidelines on alternative performance measures, covering around 13% of all IFRS listed issuers in Europe against which were taken 109 corrective actions.

Please click to access the full report on the ESMA website.

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IFRS Foundation appoints and reappoints ITCG members

01 Apr 2020

The IFRS Foundation has announced the appointment of five new membership organisations and four new representatives of existing membership organisations to the IFRS Taxonomy Consultative Group (ITCG). It has also reappointed six members. All appointments and reappointments take effect from 1 April 2020 for varying term lengths.

A full list of appointees is available on the IASB's website.

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EFRAG, EFFAS, ABAF/BVFA, and IASB to host joint outreach event on general presentation and disclosures in financial statements

01 Apr 2020

The European Financial Reporting Advisory Group (EFRAG), the European Federation of Financial Analysts Societies (EFFAS), the Association Belge des Analystes Financiers (ABAF/BVFA), and the IASB will host a joint outreach event composed of two webinars on 19 and 26 of May 2020 on the IASB’s Exposure Draft ‘General Presentation and Disclosures’.

On 17 December 2019, the IASB published the exposure draft of a new standard General Presentation and Disclosures that is intended to replace IAS 1 Presentation of Financial Statements.

If circumstances permit, EFRAG will host the joint outreach event in person in its offices in Brussels on 19 May 2020.

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

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EFRAG publishes pre-consultation document on IBOR ED

31 Mar 2020

The IASB expects to​​ issue an exposure draft on its project on the IBOR reform Phase 2 during April 2020 with a comment period of 45 days.​​ In order to maximise the period during which its constituents can comment on its draft comment, the European Financial Reporting Advisory Group (EFRAG) has now published pre-consultation document on the exposure draft.

The views in the document are based on the IASB tentative decisions available on 31 March 2020. They will form the basis for EFRAG’s draft comment letter that will be published as quickly as possible once the IASB has published its exposure draft.

In the document, EFRAG welcomes the tentative decisions taken by the IASB during its deliberations on the second phase of its project on the IBOR reform. In particular, EFRAG supports providing a practical expedient allowing an entity to apply paragraph B.5.4.5 of IFRS 9 Financial Instruments to account for mod​ifications related to IBOR reform; supports the tentative decisions taken on hedge accounting; and observes that the proposed disclosures will assist users of financial statements in understanding the effects of IBOR reform on an entity.​

Please click for more information on the EFRAG website:

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Updated IPSAS-IFRS alignment dashboard

31 Mar 2020

The International Public Sector Accounting Standards Board (IPSASB), which develops the International Public Sector Accounting Standards (IPSAS) for financial reporting by governments and other public sector entities, has released an updated IPSAS-IFRS alignment dashboard showing how far individual IPSAS are aligned with corresponding IFRSs.

Please click to access the updated alignment dashboard prepared for the March 2020 IPSASB meeting on the IPSASB website.

In this context, please also so our 2020 edition of IPSAS in your pocket published in January.

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Seventh IASB research forum — Call for papers extended

30 Mar 2020

The International Accounting Standards Board (IASB) will host its seventh Research Forum on 2–3 November 2020 in Oxford. The deadline for submitting papers has now been extended to 28 May 2020.

Decisions on submitted papers will be made by 20 July 2020. Please click for the press release and more information on the research forum on the IASB website.

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CARES Act would provide optional temporary relief from CECL accounting

30 Mar 2020

On 27 March 2020, US President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which provides relief from certain accounting and financial reporting requirements under U.S. GAAP. However, until actions are taken by the SEC or the FASB, the provisions of the CARES Act are not amendments to US GAAP.

Section 4014 of the CARES Act offers optional temporary relief from applying the FASB’s current expected credit losses (CECL) standard (ASU 2016-13) for certain entities. Any guidance developed by the SEC or FASB to address the CARES Act’s impact on US GAAP would most likely take into account both the scope and length of any optional deferral, will likely take into account whether any deferral should apply to all entities that were otherwise required to adopt the CECL, and would more clearly define the date of adoption if an entity chose the deferral. For more information, see Deloitte's related Heads Up newsletter as well as the CARES Act, which is available on the US Senate's website.

Other than US Senate and Congress, the IASB has concluded that the existing requirements within IFRS 9 Financial Instruments (including the IASB's CECL model) need not be changed, removed nor added to. On Friday, the IASB only released a statement to support the consistent application of requirements in IFRS 9.

The IASB's position is supported by several other communications on the application of IFRS 9 during the COVID-19 crisis.

  • The Office of the Superintendent of Financial Institutions (OSFI) in Canada has released a statement that includes guidance on Applying IFRS 9 in extraordinary circumstances that will allow companies to remain compliant with IFRS as issued by the IASB;
  • the Prudential Regulation Authority (PRA) of the Bank of England has released a statement Covid-19: IFRS 9, capital requirements and loan covenants that offers an annex with guidance consistent with IFRS 9 to assist firms in making well-balanced and more consistent ECL estimates and in determining how to treat payment holidays and similar schemes for accounting and regulatory purposes;
  • the French Autorité des Marchés Financiers (AMF) has released guidance (in the French language only) noting that the general measures implemented allowing, among other things, payment suspensions or deferrals or the granting of additional appropriations do not mechanically constitute an indicator of a significant increase in the credit risk of the financial assets concerned;
  • the German Institut der Wirtschaftsprüfer (IDW) has released comprehensive guidance on IFRS 9 that is also available in an (abridged) English language translation; and
  • the Malaysian Accounting Standards Board (MASB) has countered calls for a temporary exemption from MFRS 9 (the Malaysian equivalent of IFRS 9) with a statement reassuring its constituents "that the principle-based nature of the Malaysian Financial Reporting Standards (MFRS) Framework requires and allows for judgement in addressing the accounting challenges arising from COVID-19".

All statements agree that IFRS 9 is principles-based and requires the use of experienced credit judgement and that the current situation does not lead to an undifferentiated, automatic transfer of financial instruments from Level 1 to Level 2 or even Level 3.

Earlier last week, ESMA hat already concluded that the principles-based nature of IFRS 9 includes sufficient flexibility to faithfully reflect the specific circumstances of the COVID-19 outbreak and the associated public policy measures.

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