IASB and joint FASB-IASB Update September 2023

Work plan overview

IASB work plan update (Agenda Paper 8)

The IASB met on 21 September 2023 to receive an update on its work plan. The IASB was not asked to make any decisions.

Next step

The IASB expects to receive the next update on its work plan in the next three to four months.

Research and standard-setting

Rate-regulated Activities (Agenda Paper 9)

The IASB met on 20 September 2023:

• to redeliberate the proposals in the Exposure Draft Regulatory Assets and Regulatory Liabilities (Exposure Draft) relating to credit and other risks affecting the estimates of future cash flows arising from a regulatory asset or a regulatory liability (Agenda Paper 9A).
• to discuss how to use the responses to a survey on the direct (no direct) relationship concept to develop guidance in the prospective Accounting Standard (Agenda Paper 9B). Agenda Paper 9C includes the survey and the background information accompanying the survey. The IASB was not asked to make any decisions on Agenda Paper 9C.

Measurement—Credit and other risks (Agenda Paper 9A)

The IASB tentatively decided that the prospective Accounting Standard would:

1. retain the requirement proposed in the Exposure Draft that an entity estimating future cash flows arising from a regulatory asset or a regulatory liability:
   1. reflects in the estimates the uncertainty about the amount or timing of future cash flows; and
   2. assesses whether the entity or its customers bear this uncertainty in future cash flows;
2. specify that if an entity bears credit risk, the entity:
   1. estimates uncollectible amounts considering the net cash flows that will arise from the recovery of regulatory assets and the fulfilment of regulatory liabilities; and
   2. allocates the estimates of uncollectible amounts to regulatory assets only;
3. provide no additional guidance on how an entity accounts for:
   1. credit risk if the entity is compensated for this risk; and
   2. demand risk; and
4. retain the requirement proposed in the Exposure Draft that an entity’s estimates of future cash flows arising from a regulatory liability do not reflect the entity’s own non-performance risk.

All 13 IASB members present agreed with these decisions. One member was absent.

The direct (no direct) relationship concept—Report on findings from the survey (Agenda Paper 9B)

The IASB tentatively decided that the prospective Accounting Standard would:

1. include the direct (no direct) relationship concept to help an entity identify differences in timing arising from the regulatory compensation the entity receives on its regulatory capital base;
2. specify that an entity’s ability to trace differences between the regulatory capital base and the property, plant and equipment at an asset level is a strong indicator that they have a direct relationship;
3. specify that, in the case of service concession arrangements, an entity determines whether the regulatory capital base has a direct (no direct) relationship with the intangible asset that arises from the service concession arrangement; and
4. include examples to illustrate how an entity determines the direct (no direct) relationship using specific fact patterns.

All 13 IASB members present agreed with these decisions. One member was absent.

Next step

The IASB will continue to redeliberate the project proposals.

Equity Method (Agenda Paper 13)

The IASB met on 21 September 2023 to continue its discussions on the project.

Towards an exposure draft—Implications of applying the IASB’s tentative decisions to investments in subsidiaries in separate financial statements (Agenda Paper 13A)

The IASB discussed the implications of applying its tentative decisions in the Equity Method project to investments in subsidiaries in separate financial statements. The IASB was not asked to make any decisions.

Towards an exposure draft—Implications of applying the IASB’s tentative decisions to investments in joint ventures (Agenda Paper 13B)

The IASB discussed the implications of applying its tentative decisions in the Equity Method project to investments in joint ventures. The IASB was not asked to make any decisions.

Towards an exposure draft—Possible improvements to disclosure requirements for investments in associates (Agenda Paper 13C)

The IASB tentatively decided to propose amendments to IFRS 12 Disclosure of Interests in Other Entities.

The IASB tentatively decided to propose that an investor disclose the gain or loss from recognising its share of other changes in its associate’s net assets that change its ownership interest, while it retains significant influence.

All 14 IASB members agreed with this decision.

The IASB tentatively decided to propose that an investor that has entered into a contingent consideration arrangement disclose:

1. on obtaining significant influence in an associate:
   1. the amount recognised as part of the cost of the investment.
   2. a description of the arrangement and the basis for determining the amount of the payment.
   3. an estimate of the range of outcomes (undiscounted) or, if a range cannot be estimated, that fact and the reasons why a range cannot be estimated. If the maximum amount of the payment is unlimited, the investor shall disclose that fact.
2. for each subsequent reporting period until the investor collects or settles the contingent consideration or it is cancelled or expires:
   1. any changes in the recognised amounts, including any differences arising upon settlement.
   2. any changes in the range of outcomes (undiscounted) and the reasons for those changes.
   3. the valuation techniques and key model inputs used to measure the contingent consideration.

All 14 IASB members agreed with this decision.

The IASB tentatively decided to propose that an investor disclose its gains or losses on transactions to its associates.

Twelve of 14 IASB members agreed with this decision.

The IASB tentatively decided to propose a disclosure objective requiring an investor to disclose information that enables users of its financial statements to evaluate the changes in the amounts in the financial statements arising from investments in associates.

Eleven of 14 IASB members agreed with this decision.

The IASB tentatively decided to propose that an investor disclose a reconciliation between the opening and closing carrying amount of its investments in associates, to meet the new disclosure objective.

All 14 IASB members agreed with this decision.

The IASB tentatively decided not to propose amendments to IFRS 12 to require an investor to disclose the gains or losses on transactions from its associates.

Eleven of 14 IASB members agreed with this decision.

Towards an exposure draft—Project scope (Agenda Paper 13D)

The IASB decided to retain the project’s scope.

All 14 IASB members agreed with this decision.

The IASB decided not to ask in the invitation to comment whether the IASB should seek views in its next agenda consultation on adding to its work plan a project on assessing the rights that currently give an investor access to returns when applying IAS 28 Investments in Associates and Joint Ventures.

Twelve of 14 IASB members agreed with this decision.

Next step

The IASB asked the staff to prepare a paper for decision-making on applying its tentative decisions in the Equity Method project to investments in subsidiaries in separate financial statements and investments in joint ventures.

Business Combinations—Disclosures, Goodwill and Impairment (Agenda Paper 18)

The IASB met on 19 September 2023 to discuss its project on Business Combinations—Disclosures, Goodwill and Impairment. The IASB discussed:

• transition requirements for the proposed changes to IFRS 3 Business Combinations and IAS 36 Impairment of Assets; and
• due process steps—including permission to begin the balloting process—for the Exposure Draft Business Combinations—Disclosures, Goodwill and Impairment (Exposure Draft).

Transition and first-time adopters (Agenda Paper 18B)

The IASB tentatively decided:

1. to require an entity to apply the proposed amendments to the disclosure requirements in IFRS 3 to business combinations for which the acquisition date is on or after the effective date of the amendments, with earlier application permitted;
2. not to provide first-time adopters with a specific exemption from applying the proposed amendments to IAS 36; and
3. to require eligible subsidiaries to apply the proposed amendments to the prospective IFRS Accounting Standard Subsidiaries without Public Accountability: Disclosures, without restating comparative information, from the effective date of those proposed amendments, with earlier application permitted.

All 14 IASB members agreed with these decisions.

The IASB also tentatively decided:

1. to require an entity to apply the proposed amendments to IAS 36 to impairment tests on or after the effective date of the proposed amendments, with earlier application permitted; and
2. not to provide first-time adopters with a specific exemption from applying the proposed amendments to IFRS 3.

Thirteen of 14 IASB members agreed with these decisions.

Due process and permission to begin the balloting process (Agenda Paper 18C)

The IASB decided to set a comment period of 120 days for the Exposure Draft.

All 14 IASB members agreed with this decision.

No IASB member indicated an intention to dissent from the proposals in the Exposure Draft.

All 14 IASB members confirmed they were satisfied the IASB has complied with the applicable due process requirements and has undertaken sufficient consultation and analysis to begin the process for balloting the Exposure Draft.

Next step

The staff will prepare the Exposure Draft for balloting.

Joint Session: Business Combinations—Disclosures, Goodwill and Impairment (Agenda Paper 18A) and Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures (Agenda Paper 31)

The IASB met on 19 September 2023:

• to consider whether to propose amendments to the new Standard in the Business Combinations—Disclosures, Goodwill and Impairment project; and
  
• to discuss the details of the agreed approach to maintaining the prospective IFRS Accounting Standard Subsidiaries without Public Accountability: Disclosures (new Standard).

Maintenance of the new Standard in relation to the Business Combinations—Disclosures, Goodwill and Impairment project (Agenda Paper 18A)

The IASB tentatively decided to propose amending the new Standard to require an eligible subsidiary to disclose:

1. the strategic rationale for undertaking a business combination; and
2. whether the discount rate used in calculating value in use is pre-tax or post-tax.

All 14 IASB members agreed with these decisions.

The IASB tentatively decided to ensure the wording of the disclosure requirement in the new Standard in relation to paragraph B64(i) of IFRS 3 aligns with the proposals made by the IASB in the project on Business Combinations—Disclosures, Goodwill and Impairment.

All 14 IASB members agreed with this decision.

The IASB tentatively decided to propose amending the new Standard to require an eligible subsidiary to disclose information about the contribution of the acquired business.

Ten of 14 IASB members agreed with this decision.

Approach to maintenance (Agenda Paper 31)

The IASB discussed a summary of its approach to making amendments to the new Standard resulting from changes to the disclosure requirements in new or amended IFRS Accounting Standards.

The IASB noted that potential amendments to the new Standard arising from a new or amended IFRS Accounting Standard will be considered:

1. individually based on the principles for reducing disclosures; and
2. as a group to ensure that the effect of making the amendments is proportionate and preserves the goal of maintaining the usefulness of financial statements of eligible subsidiaries with reduced disclosure requirements.

The IASB was not asked to make any decisions.

Business Combinations under Common Control (Agenda Paper 23)

The IASB met on 19 September 2023 to discuss the direction of its project on Business Combinations under Common Control. The IASB discussed feedback on the project direction including from public meetings with the IASB consultative groups and meetings with other stakeholders. The IASB also discussed the staff's analysis of that feedback and initial views on:

1. whether to change the project direction; and
2. if so, whether to develop disclosure-only requirements or discontinue the project.

The IASB was not asked to make any decisions.

Next step

The IASB will continue discussions on the project direction.

Extractive Activities (Agenda Paper 19)

The IASB met on 20 September 2023 to discuss the project's direction.

Analysis of disclosure suggestions (Agenda Paper 19A)

The IASB tentatively decided:

1. not to develop requirements or guidance to disclose information to help users of financial statements:
   1. understand how an entity accounts for exploration and evaluation expenditure;
   2. compare entities with varying accounting policies for exploration and evaluation expenditure; and
   3. understand the risks and uncertainties of an entity’s exploration and evaluation activities; and
2. not to pursue other suggestions to improve disclosure requirements related to exploration and evaluation expenditure and activities.

Twelve of 13 IASB members present agreed with these decisions. One member was absent.

Removing the temporary status of IFRS 6 Exploration for and Evaluation of Mineral Resources (Agenda Paper 19B)

The IASB tentatively decided:

1. to confirm that the work done in publishing the Discussion Paper Extractive Activities in April 2010 and in this Extractive Activities research project completes the comprehensive review of the accounting for extractive activities envisaged by the IASB when issuing IFRS 6 Exploration for and Evaluation of Mineral Resources;
2. to remove, as part of its next volume of Annual Improvements to IFRS Accounting Standards, the temporary nature of the exemption in IFRS 6 from the application of paragraphs 11–12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; and
3. to retain paragraphs 13–14 of IFRS 6, which set out the circumstances when an entity may change its accounting policies for exploration and evaluation expenditure.

All 13 IASB members present agreed with these decisions. One member was absent.

The IASB discussed the staff’s proposal to publish a project summary for the project.

The IASB was not asked to make any decisions.

Project direction

As a consequence of the tentative decisions made in the project, the IASB decided:

1. to stop the project; and
2. to add to the maintenance project pipeline a project to remove, as part of its next volume of Annual Improvements to IFRS Accounting Standards, the temporary nature of the exemption in IFRS 6 from the application of paragraphs 11–12 of IAS 8.

All 13 IASB members present agreed with this decision. One member was absent.

Next step

The IASB will publish a project summary on the project.

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

The IASB met on 21 September 2023 to discuss the project plan and other topics in its Second Comprehensive Review of the IFRS for SMEs Accounting Standard.

Project plan (Agenda Paper 30A)

The IASB discussed the project plan for the third phase of the second comprehensive review in the light of feedback on the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard (Exposure Draft). The IASB tentatively decided:

1. to confirm the scope of the review and alignment approach as set out in the Exposure Draft. This approach treats alignment with IFRS Accounting Standards as the starting point, and applies the principles of relevance to SMEs, simplicity and faithful representation, including the assessment of costs and benefits, in determining whether and how that alignment should take place.
2. to continue to develop amendments to the IFRS for SMEs Accounting Standard by applying the alignment approach to IFRS Accounting Standards.

All 14 IASB members agreed with these decisions.

Characteristics of SMEs (Agenda Paper 30B)

The IASB discussed research on the characteristics of SMEs to provide context for the IASB’s redeliberations of the proposals in the Exposure Draft.

The IASB was not asked to make any decisions.

Approach to providing educational material on the Standard (Agenda Paper 30C)

The IASB decided to either update the IFRS for SMEs educational modules that support the second edition of the Standard, or provide similar comprehensive educational material on the third edition. All 14 IASB members agreed with this decision.

The IASB also discussed factors to use as a guide when deciding which guidance to include in the third edition of the IFRS for SMEs Accounting Standard and which to include in educational material.

Proposed revised Section 23 Revenue from Contracts with Customers—Fieldwork (Agenda Papers 30D–30E)

The IASB discussed the findings from the fieldwork undertaken with accounting practitioners on the revised Section 23 Revenue from Contracts with Customers proposed in the Exposure Draft.

The IASB was not asked to make any decisions.

Impairment of financial assets (Agenda Paper 30F)

The IASB discussed the feedback on the proposals in the Exposure Draft for recognising and measuring impairment of financial assets and provided direction to the staff on possible alternatives for addressing that feedback.

The IASB tentatively decided that the problem it addressed in introducing the expected credit loss model in IFRS 9 does not meet its principle of relevance to SMEs because the population of entities eligible to apply the IFRS for SMEs Accounting Standard that have significant exposure to credit risk is expected to be small.

Seven of 14 IASB members agreed with this decision. The Chair used his additional casting vote, making the vote eight–seven in favour of the decision.

IASB members acknowledged that a small sub-group of SMEs, such as non-bank lenders, might have significant exposure to credit risk. The IASB asked the staff to research alternatives that would seek to recognise expected credit losses for this sub-group of entities.

Next step

The IASB will continue to redeliberate the proposals in the Exposure Draft as set out in the project plan.

Maintenance and consistent application

Climate-related Risks in the Financial Statements (renamed Climate-related and Other Uncertainties in the Financial Statements) (Agenda Paper 14)

The IASB met on 20 September 2023 to discuss its project on Climate-related Risks in the Financial Statements. The IASB discussed:

• whether to generalise the project objective to cover the reporting of financial information about the effects of other uncertainties in addition to those related to climate in the financial statements (Agenda Paper 14A);
• the results of research on the nature and causes of stakeholders’ concerns about reporting the effects of climate-related risks in the financial statements (Agenda Paper 14B); and
• the potential actions the IASB could take to respond to these concerns (Agenda Paper 14C).

Project objective (Agenda Paper 14A)

The IASB decided that the objective of this project is to explore whether and, if so, how targeted actions could improve the reporting of financial information about climate-related and other uncertainties in the financial statements.

Nine of 13 IASB members present agreed with this decision. One member was absent.

Because of this decision, the project name is now changed to ‘Climate-related and Other Uncertainties in the Financial Statements’.

Results of work on the nature and causes of concern (Agenda Paper 14B)

The IASB discussed a summary of the results of research on the nature and causes of stakeholders’ concerns about reporting the effects of climate-related risks in the financial statements.

The IASB was not asked to make any decisions.

Potential actions (Agenda Paper 14C)

The IASB discussed potential actions it could take to respond to stakeholders’ concerns about reporting the effects of climate-related risks in the financial statements. The IASB decided:

1. to explore whether to create examples to illustrate how to apply requirements in IFRS Accounting Standards to reporting the effects of climate-related and other uncertainties.
   Thirteen of 13 IASB members present agreed with this decision. One member was absent.
2. to explore clarifying or enhancing requirements in IFRS Accounting Standards in relation to disclosure of information about estimates.
   Eight of 13 IASB members present agreed with this decision. One member was absent.
3. to refer to the IFRS Interpretations Committee a question about the circumstances in which an entity recognises a liability when applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets to climate-related commitments.
   Thirteen of 13 IASB members present agreed with this decision. One member was absent.
4. to consult with the IFRS Interpretations Committee on questions related to the application of IAS 36 Impairment of Assets to measure value in use when an asset is subject to highly variable future cash flows over an extended period.
   Nine of 13 IASB members present agreed with this decision. One member was absent.

The IASB decided not to explore clarifying or enhancing requirements in IFRS Accounting Standards in relation to:

1. connections between items of information in the financial statements and between the financial statements and other general purpose financial reports.
   Seven of 13 IASB members present agreed with this decision. One member was absent.
2. assessing whether information is material.
   Ten of 13 IASB members present agreed with this decision. One member was absent.
3. the ‘catch-all’ disclosure requirement in paragraph 31 of IAS 1 Presentation of Financial Statements.
   Eleven of 13 IASB members present agreed with this decision. One member was absent.

However, the IASB will continue to monitor developments in climate-related and other uncertainties to determine whether to take further action.

Next step

The IASB will continue its discussions on the project.  

Amendments to the Classification and Measurement of Financial Instruments (Agenda Paper 16)

The IASB met on 21 September 2023 to discuss stakeholder feedback on the Exposure Draft Amendments to the Classification and Measurement of Financial Instruments, which proposes amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures.

The IASB was not asked to make any decisions.

Next step

The IASB will further discuss responses to the feedback.

Projects discussed at the joint IASB–FASB meeting

Discussion points

The IASB held an education meeting with the Financial Accounting Standards Board (FASB) on 29 September 2023. The two boards discussed:

• power purchase agreements;
• rate-regulated activities;
• international tax reform—Pillar Two model rules;
• equity method;
• climate-related risks in the financial statements;
• classification and measurement of financial instruments: ESG-linked financial instruments;
• business combinations—disclosures, goodwill and impairment;
• disaggregation and performance measures; and
• each board’s work plan.

The boards were not asked to make any decisions.