IASB Update May 2021

Research and standard-setting

Dynamic Risk Management (Agenda Paper 4)

The Board met on 27 May 2021 to discuss the Dynamic Risk Management project plan. The Board discussed a timetable for considering the main challenges identified during outreach.

The Board was not asked to make any decisions.

Next step

At future meetings, the Board will consider whether it can solve the main challenges identified during outreach, starting with how risk limits and the target profile relate to each other. 

Financial Instruments with Characteristics of Equity (Agenda Paper 5)

The Board met on 26 May 2021 to continue discussing potential refinements to its proposals for the disclosure of information about priority on liquidation. The Board discussed proposals to require two new types of disclosures. (The requirements would, if finalised, be incorporated into IFRS 7 Financial Instruments: Disclosures.) 

Disclosure of the nature and priority of claims against an entity 

The Board tentatively decided to require: 

1. an entity to disclose and categorise in the notes its claims that are financial instruments in a way that reflects differences in their nature and priority, and at a minimum, to distinguish between: 
   1. secured and unsecured financial instruments; 
   2. contractually subordinated and unsubordinated financial instruments; and 
   3. those issued or owed by the parent and those issued or owed by subsidiaries; and 
2. the disclosures to be made for all financial liabilities and equity instruments that are within the scope of IAS 32 Financial Instruments: Presentation. 

All 12 Board members present agreed with this decision. One member was absent. 

Disclosure of terms and conditions about priority on liquidation for particular financial instruments 

The Board tentatively decided to require: 

1. an entity to disclose in the notes:  
   1. terms and conditions that indicate priority on liquidation; 
   2. terms and conditions that could lead to changes in priority on liquidation; 
   3. that a particular type of financial instrument has more than one level of contractual subordination, if applicable (for example, if some subordinated liabilities are contractually subordinated to other subordinated liabilities); 
   4. narrative information when an entity is aware of significant uncertainty about the application of relevant laws or regulations that could affect how priority will be determined on liquidation; and 
   5. details of intra-group arrangements such as guarantees that may affect their priority on liquidation (for example, which entities are providing and receiving guarantees); and 
2. the disclosures to be made for all financial instruments with characteristics of both debt and equity, including compound instruments, but excluding stand-alone derivative instruments. 

An entity would be required to make the disclosures described in (a) as part of the disclosures about terms and conditions on which the Board tentatively agreed at its April 2021 meeting. 

All 12 Board members present agreed with this decision. One member was absent. 

Next step

The Board will continue its discussions on other topics included in the project plan discussed at its October 2019 meeting.

Goodwill and Impairment (Agenda Paper 18)

The Board met on 26 May 2021 to discuss feedback on its Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment relating to:

• the effectiveness of the impairment test of cash-generating units containing goodwill;
• subsequent accounting for goodwill; 
• simplifications to the impairment test of cash-generating units containing goodwill; and
• other topics in the Discussion Paper.

The Board also discussed a review of academic literature on the topics in the Discussion Paper.

On 27 May 2021 the Board discussed its plan to redeliberate the preliminary views it expressed in the Discussion Paper. 

The Board was not asked to make any decisions.

Next step

The Board will begin redeliberating the preliminary views in the Discussion Paper at a future meeting. 

Primary Financial Statements (Agenda Paper 21)

The Board met on 27 May 2021 to redeliberate some of the proposals in the Exposure Draft General Presentation and Disclosures relating to subtotals and categories in the statement of profit or loss. 

Subtotals and categories—financing category (Agenda Paper 21A) 

The Board tentatively decided: 

1. not to proceed with the proposed addition to the definition of ‘financing activities’ in IAS 7 Statement of Cash Flows. Twelve of 13 Board members agreed with this decision. 
2. to explore further an approach that would require an entity to classify in the financing category of the statement of profit or loss: 
   1. all income and expenses from liabilities that arise from transactions that involve only raising finance; and 
   2. interest income and expenses from other liabilities. 
      

                Eleven of 13 Board members agreed with this decision. 

Subtotals and categories—profit before financing and income tax (Agenda Paper 21B) 

The Board tentatively decided to: 

1. retain the proposal to introduce separate investing and financing categories in the statement of profit or loss. All 13 Board members agreed with this decision. 
2. retain the proposal to define the ‘profit before financing and income tax’ subtotal and require it to be presented in the statement of profit or loss. Twelve of 13 Board members agreed with this decision. 
3. require an entity to classify income and expenses from cash and cash equivalents in the investing category rather than the financing category. All 13 Board members agreed with this decision. 

Next step

The Board will continue to redeliberate the project proposals at future meetings.

Second Comprehensive Review of the IFRS for SMEs Standard (Agenda Paper 30)

The Board met on 26 May 2021 to receive a summary of interviews with SME preparers and discuss whether and how to propose amendments to Sections 2 and 11 of the IFRS for SMEs Standard.

Towards an exposure draft—2018 Conceptual Framework (Agenda Paper 30B)

The Board tentatively decided to propose retaining Section 2 Concepts and Pervasive Principles as part of the IFRS for SMEs Standard. Ten of the 12 Board members present agreed with this decision. One member was absent.

The Board tentatively decided to propose:

1. aligning Section 2 with the 2018 Conceptual Framework and to emphasise that the requirements in the other sections of the IFRS for SMEs Standard take precedence over what Section 2 would otherwise require;
2. undertaking a review for potential inconsistencies between a revised Section 2 and other sections of the IFRS for SMEs Standard when the Board has completed its deliberations on proposed amendments to the IFRS for SMEs Standard; and
3. retaining the concept of ‘undue cost or effort’.

All 12 Board members present agreed with these decisions. One member was absent.

Towards an exposure draft—IFRS 9 Financial Instruments (classification and measurement of financial assets) (Agenda Paper 30C)

The Board tentatively decided to propose an amendment to the IFRS for SMEs Standard, subject to the wording of the amendment, to supplement the examples in Section 11 Basic Financial Instruments with a principle for classifying financial assets based on their contractual cash flow characteristics.

All 12 Board members present agreed with this decision. One member was absent.

Next step

The Board will continue to deliberate the project proposals at a future meeting.

Disclosure Initiative—Subsidiaries that are SMEs (Agenda Paper 31)

The Board met on 24 May 2021 to discuss sweep issues identified in drafting the Exposure Draft Subsidiaries without Public Accountability: Disclosures. 

The Board tentatively decided to propose an entity disclose its material accounting policy information rather than its significant accounting policies. This proposal is consistent with amendments to IAS 1 Presentation of Financial Statements issued in February 2021, which include related amendments to paragraph 21 of IFRS 7 Financial Instruments: Disclosures. 

Twelve of 13 Board members agreed with this decision. 

The Board tentatively decided to propose an entity disclose changes to its risk management strategy that result from its transition to alternative benchmark rates, consistent with paragraph 24J(c) of IFRS 7. 

Twelve of 13 Board members agreed with this decision. 

The Board tentatively decided to include in the Exposure Draft an appendix listing all disclosure requirements in IFRS Standards from which an entity applying the reduced-disclosure Standard is exempt. 

Ten of 13 Board members agreed with this decision. 

Next step

The Board expects to publish the Exposure Draft in the third quarter of 2021.

Maintenance and consistent application

IFRS 17 Insurance Contracts (Agenda Paper 2)

The Board met on 27 May 2021 to discuss feedback about one-time accounting mismatches and classification inconsistencies that may arise in the comparative information that insurance entities present on initial application of IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments.

The Board was not asked to make any decisions.

Next step

At a future meeting, the Board will discuss whether to propose a narrow-scope amendment to IFRS 17 that would enable insurance entities to reduce such mismatches and inconsistencies.

Maintenance and consistent application (Agenda Paper 12)

The Board met on 24 May 2021 to consider matters discussed at the April IFRS Interpretations Committee (Committee) meeting and other maintenance and consistent application matters. 

Attributing Benefit to Periods of Service (IAS 19): Finalisation of Agenda Decision (Agenda Paper 12A) 

The Board discussed whether any Board member objects to the Committee’s decision to publish Agenda Decision Attributing Benefit to Periods of Service (IAS 19 Employee Benefits). 

No Board member objected to the agenda decision. The agenda decision will therefore be published in May 2021 in an addendum to IFRIC Update April 2021.  

Hedging Variability due to Real Interest Rates (IFRS 9): Finalisation of Agenda Decision (Agenda Paper 12B)

The Board discussed whether any Board member objects to the Committee’s decision to publish Agenda Decision Hedging Variability due to Real Interest Rates (IFRS 9 Financial Instruments).  

No Board member objected to the agenda decision. The agenda decision will therefore be published in May 2021 in an addendum to IFRIC Update April 2021. 

Lease Liability in a Sale and Leaseback: Feedback Summary (Agenda Papers 12C–12E) 

The Board discussed a summary of feedback on its Exposure Draft Lease Liability in a Sale and Leaseback.  

The Board was not asked to make any decisions.    

IFRIC Update (Agenda Paper 12F)

The Board received an update on the Committee’s April 2021 meeting. Details of this meeting were published in IFRIC Update April 2021. 

The Board was not asked to make any decisions.

Next step

The Board will consider the project direction at a future meeting.