IASB and joint IASB–FASB Update November 2020

Work plan overview

Board work plan—Post-implementation Reviews and Agenda Consultation (Agenda Paper 8)

The Board met on 18 November 2020 to further consider the timing of the Post-implementation Reviews (PIRs) of the impairment and hedge accounting requirements in IFRS 9 Financial Instruments and of IFRS 15 Revenue from Contracts with Customers.

The Board decided that explicitly seeking feedback on the start dates of the PIRs in the 2020 Agenda Consultation Request for Information is unnecessary.

Twelve of 13 Board members agreed with the decision.

The Board decided to reconsider the PIRs’ start dates in the second half of 2021.

All 13 Board members agreed with the decision.

Next step

The Board will consider the PIRs’ timing in the second half of 2021.

Research and standard-setting

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

The Board met on 18 November 2020 to discuss matters arising when analysing whether adaptations of the disclosure requirements in the IFRS for SMEs Standard are required, namely:

• Exceptions to the process for adapting disclosure requirements—Agenda Paper 31A;
• When to consider disclosure requirements for new and amended IFRS Standards—Agenda Paper 31B; and
• Omitted topics and specialised activities—Agenda Paper 31C.

Exceptions to the process for adapting disclosure requirements (Agenda Paper 31A)

The Board tentatively decided that, should it propose a reduced-disclosure IFRS Standard for subsidiaries, the proposed Standard would:

1. exclude the disclosure requirements in paragraphs 19D(b) and 19E–19G of IFRS 12 Disclosure of Interests in Other Entities for investment entities. Seven of 13 Board members agreed with this decision.
2. require a reconciliation between the opening and closing balances of liabilities arising from financing activities. Seven of 13 Board members agreed with this decision.
3. require the disclosures recommended in Appendix B of Agenda Paper 31A. Appendix B lists the disclosure requirements introduced in new and amended IFRS Standards with which the IFRS for SMEs Standard is not currently aligned that Board members recommended should be included in the reduced-disclosure IFRS Standard. Nine of 13 Board members agreed with this decision.
4. require subsidiaries to apply paragraph 25 of IFRS 6 Exploration for and Evaluation of Mineral Resources. Ten of 13 Board members agreed with this decision.
5. require subsidiaries to apply paragraphs 20.13(b) and 11.42 of the IFRS for SMEs Standard. The Board also decided that it will consider whether to align the disclosure requirements for all financial liabilities as part of the Second Comprehensive Review of the IFRS for SMEs Standard, rather than as part of the Subsidiaries that are SMEs project. Eleven of 13 Board members agreed with these decisions.
6. include an expanded version of paragraph 28.41(e) of the IFRS for SMEs Standard. Ten of 13 Board members agreed with this decision.
7. exclude disclosure objectives that are in IFRS Standards. Ten of 13 Board members agreed with this decision.
8. for disclosure requirements of the IFRS for SMEs Standard not in IFRS Standards:
   1. exclude paragraphs 28.41(g) and 15.19(d) of the IFRS for SMEs Standard;
   2. require subsidiaries to apply an adapted version of paragraph 20.14 of the IFRS for SMEs Standard;
   3. include the reliefs in paragraphs 17A and 18A of IAS 24 Related Party Disclosures; and
   4. require subsidiaries to apply paragraphs 28.42 and 28.43, and an adapted version of paragraph 3.25 of the IFRS for SMEs Standard.

Seven of 13 Board members agreed with this decision.

When to consider disclosure requirements for new and amended IFRS Standards (Agenda Paper 31B)

The Board tentatively decided that should it propose a reduced-disclosure IFRS Standard for subsidiaries:

1. the cut-off date for the content to be included in the consultation document should include IFRS Standards and IFRIC Interpretations issued as at 1 January 2021 and exposure drafts published as at 1 January 2021, except for the Exposure Draft General Presentation and Disclosures. All 13 Board members agreed with this decision.
2. the Board will consider amendments to the reduced-disclosure IFRS Standard when the Board publishes an exposure draft of a new or amended IFRS Standard. All 13 Board members agreed with this decision.

Omitted topics and specialised activities (Agenda Paper 31C)

The Board tentatively decided that should it propose a reduced-disclosure IFRS Standard for subsidiaries:

1. a subsidiary applying the Standard that chooses to disclose earnings per share should be required to apply the disclosure requirements of IAS 33 Earnings per Share. All 13 Board members agreed with this decision.
2. the Standard should include an adapted version of the disclosure requirements in IAS 34 Interim Financial Reporting. All 13 Board members agreed with this decision.
3. the Standard should require a subsidiary to disclose dividends paid in interim financial reports and annual financial statements where there is more than one class of share capital. All 13 Board members agreed with this decision.
4. the Standard should include disclosure requirements derived from applying paragraph BC157 of the IFRS for SMEs Standard for regulatory deferral account balances. All 13 Board members agreed with this decision.

Next step

In December 2020 the Board will continue discussing matters arising from developing the analysis of adaptations to the disclosure requirements.

Management Commentary (Agenda Paper 15)

The Board met on 18 November 2020 to discuss proposals for a revised IFRS Practice Statement 1 Management Commentary (revised Practice Statement). Specifically, the Board discussed:

• application of the revised Practice Statement by entities that do not apply IFRS Standards;
• how to explain ‘freedom from error’ in the revised Practice Statement; and
• objectives for management commentary.

Application of the revised Practice Statement by entities that do not apply IFRS Standards

The Board tentatively decided that an entity that complies with the revised Practice Statement should be permitted to state that fact even if the entity does not prepare its financial statements in accordance with IFRS Standards. Nine of 13 Board members agreed with this decision.

The Board tentatively decided that an entity that states compliance with the revised Practice Statement should be required to state in its management commentary the basis on which its financial statements are prepared, if it does not prepare them in accordance with IFRS Standards. Twelve of 13 Board members agreed with this decision.

Freedom from error

The Board tentatively decided that the revised Practice Statement:

1. use ‘accuracy’ to describe freedom from error, noting that both qualitative and quantitative information can be accurate.
2. explain that information need not be perfectly accurate in all respects—the degree of accuracy and precision that is needed and is attainable varies depending on the nature of the information.
3. explain that the factors that make information accurate depend on the type of information. For example, accuracy requires that:
   1. factual information is free from material errors;
   2. descriptions are precise;
   3. estimates, approximations and forecasts are clearly identified as such, and are developed by correctly applying an appropriate process, using reasonable and supportable inputs;
   4. assertions are based on reasonable and supportable information; and
   5. information about management’s judgements about the future precisely describes the judgements and how they have been reached.

Ten of 13 Board members agreed with these decisions.

Disclosure objectives

The Board discussed suggestions for refining both the overall objective of management commentary and the disclosure objectives for areas of content in management commentary. The Board was not asked to make any decisions..

Next step

The Board has started the process of preparing an exposure draft for balloting. It expects to publish the exposure draft in April 2021.

Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 (Agenda Paper 7)

The Board met on 18 November 2020 to review the due process steps taken in establishing the scope of the Post-implementation Review and developing the draft Request for Information.

All 13 Board members confirmed they were satisfied the Board has complied with the due process requirements to establish the scope of the review.

The Board decided to publish the Request for Information with a comment period of 150 days. Eleven of 13 Board members agreed with this decision.

Next step

The Board expects to publish the Request for Information in December 2020.

Maintenance and consistent application

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) (Agenda Paper 12A)

The Board discussed the effective date for the amendments to IAS 12 Income Taxes. The Board also discussed due process, including permission to begin the balloting process.

The amendments narrow the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 so that it would not apply to transactions that give rise to equal and offsetting temporary differences.

Effective date

The Board tentatively decided that entities should apply the amendments for annual periods beginning on or after 1 January 2023, with earlier application permitted.

All 13 Board members agreed with this decision.

Due process

The Board agreed that the amendments do not require re-exposure.

All 13 Board members agreed with this decision.

All 13 Board members confirmed they were satisfied the Board has complied with the applicable due process requirements and has undertaken sufficient consultation and analysis to begin the process for balloting the amendments.

No Board member indicated an intention to dissent from the issuance of the amendments.

Next step

The Board expects to issue the amendments in the second quarter of 2021.

Projects discussed at the joint IASB–FASB meeting

Discussion points

The Board and the Financial Accounting Standards Board (the boards) met on 19 November 2020 for an educational session to discuss:

1. Goodwill and Impairment / FASB project on Identifiable Intangible Assets and the Subsequent Accounting for Goodwill—Agenda Paper 18;
2. Leases—Agenda Paper 12;
3. responding to the covid-19 crisis—Agenda Paper 32; and
4. Supply Chain Financing—Agenda Paper 27.

The boards were not asked to make any decisions.