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We comment on seven IFRS Interpretations Committee tentative agenda decisions

20 Aug 2019

We have published our comment letters on IFRS Interpretations Committee tentative agenda decisions related to IAS 1, IAS 7, IAS 41, IFRS 9, IFRS 15, and IFRS 16, as published in the June 2019 IFRIC Update.

More information about the issues is set out below:

Issue Agenda decision supported? More information
IAS 1 — Presentation of liabilities or assets related to uncertain tax treatments Yes
IAS 7 — Disclosure of changes in liabilities arising from financing activities Yes
IAS 41 — Subsequent expenditure on biological assets Yes
IFRS 9 — Fair value hedge of foreign currency risk on non-financial assets Yes, we agree with the IFRS Interpretations Committee’s decision not to add this item onto its agenda for the reasons set out in the tentative agenda decision. However, we have some concerns with the articulation of the agenda decision in the case where an entity is intending to consume the non-financial item.
IFRS 15 — Compensation for delays or cancellations Yes
IFRS 16 — Lease term and useful life of leasehold improvements No, we disagree with the Committee decision not to take the issue of how to determine the lease term of a cancellable lease or a renewable lease onto its standard-setting agenda. This issue highlights a key difficulty that entities and their auditors face in the application of IFRS 16 which is the assessment of whether a contract continues to be enforceable if both parties have termination rights but at least one of the parties would suffer a more than insignificant penalty if they were to exercise their right (i.e., whether economic disincentive to the exercise of a termination right is relevant to the assessment of whether a lease contract continues to be enforceable).
IFRS 16 — Lessee’s incremental borrowing rate No, we do not agree with the Committee’s conclusion that a lessee is not required to determine an incremental borrowing rate that reflects the interest rate in a loan with a similar payment profile to the lease payments. We do not believe that it is appropriate to infer that the reference to “a similar term” should be read as simply meaning over the “lease term” as defined in Appendix A.

Click to access all our comment letters to the IASB, IFRS Foundation, and IFRS Interpretations Committee. 

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Additional IASB meeting on IBOR

20 Aug 2019

The IASB, which normally does not meet in August, will hold an additional meeting on 28 August to discuss feedback received on ED/2019/1 'Interest Rate Benchmark Reform (Proposed amendments to IFRS 9 and IAS 39)'. The agenda and the papers for the meeting are now available.

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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We comment on two IASB exposure drafts

20 Aug 2019

We have responded to the IASB’s exposure drafts ED/2019/2 'Annual Improvements to IFRS Standards 2018–2020' and ED/2019/3 'Reference to the Conceptual Framework (Proposed amendments to IFRS 3)'.

As regards the proposed annual improvements, we agree with the proposed amendments to IFRS 9, IFRS 16, and IAS 41, however, we do not believe that the proposed amendment to IFRS 1 should be a requirement - we believe it should be an option. Our full comment letter is available here.

As regards the proposed amendments to IFRS 3, we agree with the proposed amendments to IFRS 3 to replace a reference to an old version of the Conceptual Framework. We also agree with the proposed addition of an exception for the recognition principles in IFRS 3 with respect to liabilities and contingent liabilities in the scope of IAS 37 and of IFRIC 21 and of the clarification of the IFRS 3 requirements for contingent assets. However, we believe that an exception to the recognition principles in IFRS 3 is also required with respect to uncertain current tax positions within the scope of IFRIC 23. Our full comment letter is available here.

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IASB adds second phase of IBOR reform project to its work plan

15 Aug 2019

Recent market developments have brought into question the long-term viability of Interbank offered rates (IBORs) and the IASB is currently looking into the potential effects of financial reporting.

The first phase of the project deals with pre-replacement issues (issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark). It was added to the standard-setting agenda of the IASB in December 2018 and saw the publication of an exposure draft of propoed amendments in May 2019. The IASB is currently working towards the finalisation of the amenments with an additional Board meeting scheduled for 28 August 2019.

The second phase of the project now added to the work plan deals with replacement issues (issues that might affect financial reporting when an existing interest rate benchmark is replaced). Deliberations have not begun yet and are currently expected to be taken up in Q3 2019.

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Summary of the July 2019 ASAF meeting now available

12 Aug 2019

The IASB staff have published a summary of the Accounting Standards Advisory Forum (ASAF) meeting held in London on 11 and 12 July 2019.

The topics covered during the meeting were the following (numbers in brackets are ref­er­ences to the cor­re­spond­ing para­graphs of the summary):

  • Business combination under common control (1–12): The ASAF provided views related to the application of alternative approaches as well as how to apply a current value approach and predecessor approach.
  • Man­age­ment com­men­tary (13–26): The ASAF provided views on the staff’s proposals related to the notion of narrative coherence and identifying and reporting matters that could affect the entity’s long-term success.
  • IBOR reform (27–43): The ASAF provided information on the current state of interest rate benchmark reform in their jurisdictions and discussed their views on financial reporting issues discovered. The members also discussed how they should address the issues in phase II of the project.
  • Better communication — Primary financial statements (44–59):  The ASAF commented on possible approaches to structuring the new requirements. In addition, the members planned outreach events during the comment period.
  • Variable and contingent consideration (60–65) — The ASAF discussed the FRC’s project on the conceptual basis for transactions involving variable and contingent consideration.
  • Business reporting of intangibles: realistic proposals (66–70): The ASAF provided views on the FRC’s discussion paper and gave suggestions for developing FRC’s analysis on intangible assets.
  • Discussion Paper Accounting for Pensions Plans with an Asset-return Promise (71–73): The ASAF commented on the EFRAG’s discussion paper where they had mix views on the three accounting alternatives.
  • Updated and agenda plan (74–76): The ASAF discussed items to be added to the proposed agenda for the October 2019 ASAF meeting.

A full summary of the meeting is available on the IASB's website.

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Interviews with new IASB members

08 Aug 2019

The IASB has released two short interviews introducing Tadeu Cendon and Rika Suzuki. Mr Cendon and Ms Suzuki were appointed to the IASB board by the Trustees of the IFRS Foundation in March 2019 for terms which began on 1 July 2019.

For more information, see the interviews with Mr Cendon and Ms Suzuki on the IASB website.

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IASB seeks candidates for IFRS Taxonomy Consultative Group

08 Aug 2019

The IASB is seeking candidates for membership to its IFRS Taxonomy Consultative Group. The group provides an advisory and review forum for members to actively assist the IASB in the maintenance and development of the IFRS Taxonomy and related activities.

The Board is keen to appoint members with professional experience as preparers or users of electronic financial reports prepared using the IFRS Taxonomy. Technical knowledge of XBRL is desirable, but not required. Applications are requested by 7 October 2019. For more information, see the press release on the IASB website.

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IVSC Financial Instruments Board consults on future agenda

08 Aug 2019

The International Valuation Standards Council (IVSC) has published a consultation document seeking feedback regarding the approach its newly established Financial Instruments Board should take, and the prioritisation of that work.

The Standards Review Board of the IVSC recognised the need to develop guidance for the valuation of financial instruments and created IVS 500 as a holding chapter on financial instruments, which was initially released as part of IVS 2017.

In December 2018, the IVSC Financial Instruments Board was formed and met for the first time in April 2019. At that meeting, the Board agreed to significantly modify and enhance the existing financial instrument standard IVS 500 and, as a first step, to publish a consultation document to obtain feedback from stakeholders on how to modify and enhance the existing standard.

The consultation document now released solicits feedback about the valuation topics the IVSC and its newly established Board for financial instruments should address as part of its current agenda and additional financial instruments valuation topics that stakeholders feel should be prioritised or added to IVSC’s agenda.

Please click to access the consultation document through the press release on the IVSC website. Comments are requested by 19 September 2019.

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SME Implementation Group publishes draft Q&A for comment

07 Aug 2019

The SME Implementation Group (SMEIG) has published a draft question and answer (Q&A) on the IFRS for SMEs.

The Q&A addresses the application of the undue cost or effort exemption for investment property on the date of transition to the IFRS for SMEs. The draft Q&A concludes that additional cost or effort due to the elapse of time between the date of transition and the date of preparing the first IFRS for SMEs financial statements is not considered.

Comments are requested by 7 October 2019. The draft is available on the IASB website.

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Study into the uptake of integrated reporting

06 Aug 2019

The International Integrated Reporting Council (IIRC) has posted to its website a study 'Integrated Reporting and the Capitals’ Diffusion'. The study quantitatively analyses integrated reporting to determine the extent of diffusion of integrated reporting, the depth of integrated reporting adoption, and the extent and nature of the disclosure of multiple capitals.

The study was sponsored by the Autorité des Normes Comptables (ANC), the French standard setter, and was presented at the 8th Symposium on Accounting Research 2018 in Paris (a recording of the research forum is available here).

The project behind the study sought answers to the questions:

  • Where and by whom has integrated reporting been adopted?
  • To what extent has the International <IR> Framework been followed (‘depth’ of adoption)?
  • How are organisations reporting on the capitals?
  • Are integrated reporters using the GRI Standards too?

The research reveals that integrated reporting has matured into fast-paced diffusion around the world, but it also offers some interesting insights such as the fact that more developed countries are lagging in adoption, some companies developed integrated reports even before the International <IR> Framework was published, and the title ‘integrated report’ is not necessarily used - some integrated reports are labeled 'annual report' or 'sustainability report'.

Please click for the press release on the IIRC website, which offers a brief summary and access to the full report.

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