IASB Update October 2022

Research and standard-setting

Post-implementation Review of IFRS 9—Classification and Measurement (Agenda Paper 3)

The IASB met on 19 October 2022 to discuss feedback on three aspects of its post-implementation review of IFRS 9 Financial Instruments.

Equity instruments and other comprehensive income (Agenda Paper 3A)

The IASB considered feedback on the requirements in IFRS 9 relating to equity instruments for which an entity has elected to present fair value changes in other comprehensive income (OCI). It decided to make no changes to those requirements. However, the IASB tentatively decided to amend paragraph 11A of IFRS 7 Financial Instruments: Disclosures to require disclosure of:

1. the aggregated fair value of equity investments for which the OCI presentation option is applied at the end of the reporting period; and
2. changes in fair value recognised in OCI during the period.

Ten of 11 IASB members agreed with these decisions.

In addition, the IASB asked the staff to explore whether an illustrative example such as a reconciliation from the opening balance to the closing balance in OCI could be provided in the proposed amendments.

Business model assessment (Agenda Paper 3B)

The IASB considered feedback on the requirements in IFRS 9 relating to an assessment of an entity’s business model. The IASB decided to take no further action on the matters identified in relation to the business model requirements in IFRS 9.

All 11 IASB members agreed with this decision.

Exploring possible narrow-scope amendments for electronic cash transfers (Agenda Paper 3C)

The IASB considered possible standard-setting options to respond to concerns raised about the potential outcomes of applying the derecognition requirements in IFRS 9 to the settlement of a financial asset or a financial liability via electronic cash transfers. The IASB tentatively decided to develop an accounting policy choice to allow an entity to derecognise a financial liability before it delivers cash on the settlement date when specified criteria are met.

Ten of 11 IASB members agreed with this decision.

Next step

The IASB will continue its discussions on the post-implementation review at a future meeting. 

Rate-regulated Activities (Agenda Paper 9)

The IASB met on 18 October 2022 to redeliberate the proposals in its Exposure Draft Regulatory Assets and Regulatory Liabilities relating to:

• the proposed definition of allowable expense and the treatment of allowable expenses based on benchmarks (Agenda Paper 9A); and
• the accounting for regulatory assets and regulatory liabilities arising from differences between the regulatory recovery period and the assets’ useful lives (Agenda Paper 9B). The IASB also discussed advice from the Consultative Group for Rate Regulation on how the IASB might respond to feedback on these proposals (Agenda Paper 9C). The IASB was not asked to make any decisions on Agenda Paper 9C.

Proposed definition of allowable expense and treatment of allowable expenses based on benchmarks (Agenda Paper 9A)

The IASB tentatively decided that the Standard:

1. retain the proposed definition of allowable expense;
2. clarify that a regulatory agreement may determine the amount that compensates an entity for an allowable expense using a basis different from the basis the entity uses to measure the expense in accordance with IFRS Accounting Standards; and
3. clarify the treatment of allowable expenses based on benchmarks and include examples to help entities identify differences in timing in those cases.

All 11 IASB members agreed with these decisions.

Regulatory assets and regulatory liabilities arising from differences between the regulatory recovery period and the assets’ useful lives (Agenda Paper 9B)

The IASB tentatively decided that the Standard:

1. provide guidance to help an entity determine whether its regulatory capital base and its property, plant and equipment have a direct relationship;
2. retain the proposals for an entity to account for regulatory assets or regulatory liabilities arising from differences between the regulatory recovery period and the assets’ useful lives if the entity has concluded that its regulatory capital base and its property, plant and equipment have a direct relationship; and
3. require an entity that has concluded that its regulatory capital base and its property, plant and equipment have no direct relationship to provide disclosures to enable users of financial statements to understand the reasons for its conclusion.

All 11 IASB members agreed with these decisions.

Next step

The IASB will continue to redeliberate the project proposals.

Disclosure Initiative—Targeted Standards-level Review of Disclosures (Agenda Paper 11)

The IASB met on 18 October 2022 to decide what actions to take on the Targeted Standards-level Review of Disclosures project based on the feedback on the Exposure Draft Disclosure Requirements in IFRS Standards—A Pilot Approach.

Guidance for the Board (Agenda Papers 11A and 11B)

The IASB decided:

1. to use the methods proposed in the Exposure Draft for developing disclosure requirements. Ten of 11 IASB members agreed with this decision.
2. to use a ‘middle-ground’ approach to drafting disclosure requirements. All 11 IASB members agreed with this decision.
3. that the ‘middle-ground’ approach would involve:
   1. providing context-setting, non-prescriptive overall disclosure objectives that describe the overall information needs of users of financial statements. All 11 IASB members agreed with this decision.
   2. not including a cross-reference to paragraph 31 of IAS 1 Presentation of Financial Statements at the beginning of the disclosure section of each IFRS Accounting Standard. Nine of 11 IASB members agreed with this decision.
   3. requiring an entity to comply with specific disclosure objectives that describe the detailed information needs of users of financial statements. All 11 IASB members agreed with this decision.
   4. supporting a specific disclosure objective with explanations of the assessments that users make that rely on information an entity discloses by applying the specific disclosure objective. All 11 IASB members agreed with this decision.
   5. using prescriptive language when referring to items of information that an entity is required to disclose to meet a specific disclosure objective, subject to the requirements of paragraph 31 of IAS 1. All 11 IASB members agreed with this decision.
4. to document the methods for developing disclosure requirements and the approach to drafting them (Guidance for the Board) and publish the document on the IFRS Foundation website. Ten of 11 IASB members agreed with this decision.

Proposed amendments to IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits (Agenda Paper 11C)

The IASB decided not to proceed with any further work on the disclosure requirements in IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits.

All 11 IASB members agreed with this decision.

Next step

The IASB will publish the Guidance for the Board and a project summary.

Equity Method (Agenda Paper 13)

The IASB met on 18 October 2022 to review the progress of its Equity Method research project. The IASB decided to retain the project’s objective and approach.

Eight of 11 IASB members agreed with this decision.

Next step

The IASB will discuss other application questions within the scope of the project at future meetings.

Contractual Cash Flow Characteristics of Financial Assets (Amendments to IFRS 9) (Agenda Paper 16)

The IASB met on 18 October 2022 to discuss proposed amendments to IFRS 7 Financial Instruments: Disclosures and IFRS 9 Financial Instruments.

The proposed amendments to IFRS 7 add disclosure requirements to complement the clarifying amendments the IASB tentatively decided to make to the requirements in IFRS 9 for assessing the contractual cash flow characteristics of financial assets. The IASB tentatively decided to make the clarifying amendments at its September 2022 meeting.

The IASB tentatively decided to propose adding a requirement to IFRS 7 for entities to disclose for each class of financial assets and financial liabilities not measured at fair value:

1. a qualitative description of contractual terms that could change the timing or amount of contractual cash flows, including the nature of any contingent events;
2. quantitative information about the range of changes to contractual cash flows that could result from these contractual terms; and
3. the gross carrying amount of financial assets and amortised cost of financial liabilities subject to these contractual terms.

All 11 IASB members agreed with this decision.

The IASB also tentatively decided to propose that:

1. an entity should apply the clarifying amendments to IFRS 9 retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, except that the entity would not be required to restate comparative information;
2. if, on the initial application of the amendments, an entity changes the classification of a financial asset, the entity should disclose:
   1. the previous measurement category and the carrying amount determined immediately before applying these amendments; and
   2. the new measurement category and the carrying amount determined after applying these amendments.
3. the effective date will be determined after exposure of the proposed amendments; and
4. early application of the amendments is permitted.

All 11 IASB members agreed with this decision.

Next step

The IASB will decide whether to begin the balloting process for the exposure draft.

Goodwill and Impairment (Agenda Paper 18)

The IASB met on 20 October 2022 to discuss aspects of its preliminary views on the subsequent accounting for goodwill, set out in the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment. In particular, it discussed whether to retain the impairment-only model, which was the IASB’s preliminary view, or to explore reintroducing amortisation of goodwill.

The IASB was not asked to make any decisions.

Next step

In the final quarter of 2022 the IASB will be asked to decide whether to retain the impairment-only model.

At future meetings the IASB will be asked to make decisions about:

1. whether to move the project from the research phase to the standard-setting phase;
2. aspects of the disclosure requirements for business combinations; and
3. other topics within the scope of the project.

Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures (Agenda Paper 31)

The IASB met on 19 October 2022 to continue redeliberating its Exposure Draft Subsidiaries without Public Accountability: Disclosures.

 

Objective of the draft IFRS Accounting Standard (Agenda Paper 31A)

The IASB tentatively decided to confirm the proposed objective of the draft IFRS Accounting Standard Subsidiaries without Public Accountability: Disclosures (draft Standard).

All 11 IASB members agreed with this decision.

 

Approach to developing the proposed disclosure requirements (Agenda Paper 31B)

The IASB discussed the feedback on the approach to developing the proposed disclosure requirements of the draft Standard. The IASB tentatively decided to modify its approach to ensure that the language used in the disclosure requirements is the same as the language in full IFRS Accounting Standards.

The IASB also tentatively decided to explain in the Basis for Conclusions on the IFRS Accounting Standard:

1. why the disclosure requirements in the IFRS for SMEs Accounting Standard are the appropriate starting point;
2. how ‘cost–benefit’ is considered; and
3. the reason for the exceptions made to the approach to developing the proposed disclosure requirements.

All 11 IASB members agreed with this decision.

Addressing comments on the proposed disclosure requirements (Agenda Paper 31C)

The IASB decided staff should analyse the comments received on the proposed disclosure requirements in the draft Standard in three steps:

1. Step 1—stratify the comments on the proposed disclosure requirements based on how the proposed disclosure requirements were developed;
2. Step 2—assess the comments received against a set of factors: the principles on users’ information needs of non-publicly accountable entities’ financial statements, cost and benefit, distribution of the comments received, overall usefulness of information and previous IASB discussions and decisions on the disclosure requirement; and
3. Step 3—recommend any changes to the proposed disclosure requirements to the IASB.

All 11 IASB members agreed with this decision.

Structure of the draft Standard (Agenda Paper 31D)

The IASB tentatively decided to:

1. omit Appendix A proposed in the draft Standard.
   Seven of 11 IASB members agreed with this decision.
2. replace the footnotes with cross-references to disclosure requirements that remain applicable in other IFRS Accounting Standards, under each IFRS Accounting Standard subheading.
   All 11 IASB members agreed with this decision.

Next step

The IASB will continue discussing the feedback on the Exposure Draft.

Maintenance and consistent application

Maintenance and consistent application (Agenda Paper 12)

The IASB met on 19 October 2022:

• to discuss discount rates used in measuring provisions within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and
• to consider agenda decisions discussed at the September 2022 meeting of the IFRS Interpretations Committee (Committee).

Provisions—Targeted Improvements: Discount rates—Non-performance risk (Agenda Paper 12A)

The IASB is considering developing proposals to specify in IAS 37 whether the rate an entity uses to discount a provision should reflect non-performance risk—that is, the risk that the entity will not fulfil its obligation.

The IASB discussed (a) findings on the topic to date; and (b) a preliminary analysis of factors that could affect its decision.

The IASB was not asked to make any decisions.

Next step

The IASB will seek views from some of its advisory groups before making a tentative decision at a future meeting. Advisory groups to be consulted include the Capital Markets Advisory Committee, the Global Preparers Forum and the Accounting Standards Advisory Forum.

Multi-currency Groups of Insurance Contracts (IFRS 17 and IAS 21): Finalisation of agenda decision (Agenda Paper 12B)

The IASB was asked whether it objected to the Agenda Decision Multi-currency Groups of Insurance Contracts (IFRS 17 Insurance Contracts and IAS 21 The Effects of Changes in Foreign Exchange Rates).

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in October 2022 in an addendum to IFRIC Update September 2022.

Special Purpose Acquisition Companies (SPAC): Accounting for Warrants at Acquisition: Finalisation of agenda decision (Agenda Paper 12C)

The IASB was asked whether it objected to the Agenda Decision Special Purpose Acquisition Companies (SPAC): Accounting for Warrants at Acquisition.

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in October 2022 in an addendum to IFRIC Update September 2022.

Lessor Forgiveness of Lease Payments (IFRS 9 and IFRS 16): Finalisation of agenda decision (Agenda Paper 12D)

The IASB was asked whether it objected to the Agenda Decision Lessor Forgiveness of Lease Payments (IFRS 9 Financial Instruments and IFRS 16 Leases).

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in October 2022 in an addendum to IFRIC Update September 2022.

IFRIC Update September 2022 (Agenda Paper 12E)

The IASB received an update on the Committee’s September 2022 meeting. Details of this meeting were published in IFRIC Update September 2022.

The IASB was not asked to make any decisions.

Taxonomy

IFRS Accounting Taxonomy Update—Amendments to IAS 1 and IFRS 16 (Agenda Paper 25)

The IASB met on 18 October 2022 to discuss the comment period for the forthcoming proposed IFRS Accounting Taxonomy update.

The IASB decided to shorten the comment period from 60 days to 30 days.

All 11 IASB members agreed with this decision.

Next step

The IASB expects to begin the balloting process and issue the proposed IFRS Accounting Taxonomy update towards the end of 2022.

Strategy and governance

ISSB Update

The IASB received and discussed an update from the ISSB chair.