IASB Update March 2023

Work plan overview

IASB work plan update (Agenda Paper 8)

The IASB met on 20 March 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 an update on its work plan in the next three to four months.

Research and standard-setting

Post-implementation Review of IFRS 15 Revenue from Contracts with Customers (Agenda Paper 6)

The IASB met on 22 March 2023 to discuss findings from Phase 1 of the Post-implementation Review of IFRS 15 Revenue from Contracts with Customers, feedback from stakeholders and a review of academic literature.

The IASB discussed which matters to ask stakeholders about in the request for information it plans to publish to inform the next phase of the Post-implementation Review.

IFRS 15 as a whole and convergence with the US Financial Accounting Standards Board’s Topic 606 (Agenda Paper 6B)

The IASB tentatively decided to ask stakeholders about their views on IFRS 15 as a whole, including:

1. whether IFRS 15 meets its overall objective;
2. the clarity and suitability of the core principle of the Standard and the five-step revenue recognition model for making revenue accounting decisions;
3. their suggestions for specific narrow-scope improvements for the IASB to consider that could improve the understandability of IFRS 15 without causing substantial cost and disruption to entities already applying the Standard;
4. their feedback from the implementation of IFRS 15 for the IASB to consider in improving the understandability and accessibility of future Standards; and
5. the ongoing costs and benefits of applying the requirements in IFRS 15.

The IASB also tentatively decided to ask stakeholders about the importance of retaining convergence between IFRS 15 and the Financial Accounting Standards Board’s Topic 606 Revenue from Contracts with Customers.

All 13 IASB members agreed with these decisions.

The five steps of revenue recognition and related areas (Agenda Papers 6C–6D)

The IASB tentatively decided to ask stakeholders for any fact patterns in relation to which:

1. guidance on identifying performance obligations in a contract:
   1. is applied inconsistently;
   2. leads to outcomes that do not reflect the underlying economic substance; or
   3. leads to significant ongoing costs;
2. guidance on determining the timing of revenue recognition is unclear or may be applied inconsistently—particularly with respect to the criteria for recognising revenue over time;
3. guidance on determining whether an entity is a principal or an agent is unclear or may be applied inconsistently; or
4. guidance on accounting for licensing is unclear or may be applied inconsistently.

All 13 IASB members agreed with these decisions.

The IASB tentatively decided to ask stakeholders about:

1. evidence of diversity in practice in determining the transaction price in a contract, specifically in relation to consideration payable to customers;
2. disclosure requirements, including the costs of meeting those requirements and the benefits of the resulting information to users of financial statements; and
3. transition requirements—specifically:
   1. whether the option to use the modified retrospective method and the practical transition reliefs offered by IFRS 15 were used by preparers of financial statements; and
   2. whether they achieved an appropriate balance between reducing the cost and burden for preparers of financial statements and providing useful information to users of financial statements.

All 13 IASB members agreed with these decisions.

The IASB tentatively decided against asking stakeholders about evidence of diversity in practice in determining the transaction price in a contract in relation to sales-based taxes.

Nine of 13 IASB members agreed with this decision.

Interaction with other IFRS Accounting Standards (Agenda Paper 6E)

The IASB tentatively decided to ask stakeholders about the application of IFRS 15 alongside other IFRS Accounting Standards, focusing on IFRS 3 Business Combinations, IFRS 9 Financial Instruments and IFRS 16 Leases.

Twelve of 13 IASB members agreed with the decisions in relation to IFRS 9 and IFRS 16.
Nine of 13 IASB members agreed with the decision in relation to IFRS 3.

The IASB tentatively decided against asking stakeholders about the application of IFRS 15 alongside IFRS 10 Consolidated Financial Statements but directed the staff to include an explanation of this decision in the request for information.

Twelve of 13 IASB members agreed with this decision.

Next step

The IASB plans to approve the publication of the request for information and set a comment period.

Equity Method (Agenda Paper 13)

The IASB met on 21 March 2023 to continue its discussions on the application questions within the scope of the Equity Method project.

Purchase of an additional interest in an associate while retaining significant influence (Agenda Paper 13A)

The IASB tentatively decided to propose that, when applying IAS 28 Investments in Associates and Joint Ventures, an investor purchasing an additional interest in an associate while retaining significant influence would recognise any difference between the cost of the additional interest and its additional share in the net fair value of the associate’s identifiable assets and liabilities either as goodwill, or as a gain from a bargain purchase.

All 13 IASB members agreed with this decision.

Perceived conflict between IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (Agenda Papers 13B and 13C)

The IASB tentatively decided:

1. to propose that an investor, in applying IAS 28, would recognise the full gain or loss on all transactions with its associate.
2. to propose improvements for the disclosure requirements when an investor recognises the full gain or loss on transactions with its associate.

Eleven of 13 IASB members agreed with these decisions.

Next step

The IASB will continue its discussions on the application questions within the scope of the project.

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

The IASB met on 23 March 2023 to discuss its project on Business Combinations—Disclosures, Goodwill and Impairment. In particular, the IASB discussed:

• some potential changes to IAS 36 Impairment of Assets to reduce the cost and complexity of the impairment test of cash-generating units containing goodwill; and
• the potential removal of some disclosure requirements from IFRS 3 Business Combinations.

Estimating value in use (Agenda Paper 18A)

On IAS 36, the IASB tentatively decided to propose:

1. to remove a constraint on cash flows used to estimate value in use. An entity would no longer be prohibited from including cash flows: 
   1. arising from future restructuring to which the entity is not yet committed; or 
   2. from improving or enhancing an asset’s performance.
2. to retain the requirement to assess assets or cash-generating units in their current condition.
3. to add no additional constraints on the inclusion of those cash flows beyond those already in IAS 36.

Eleven of 13 IASB members agreed with these decisions.

The IASB also tentatively decided to propose:

1. to remove from IAS 36 the requirement to use pre-tax cash flows and pre-tax discount rates in estimating value in use;
2. to require an entity to use internally consistent assumptions for cash flows and discount rates regardless of whether value in use is estimated on a pre-tax or post-tax basis;
3. to retain the requirement to disclose the discount rates used;
4. to remove the requirement that the discount rate disclosed be a pre-tax rate; and
5. to require an entity to disclose whether a pre-tax or a post-tax discount rate was used in estimating value in use.

All 13 IASB members agreed with these decisions.

Other suggestions to reduce cost and complexity (Agenda Paper 18B)

The IASB tentatively decided:

1. not to add more guidance to IAS 36 about the difference between:
   1. value in use; and
   2. fair value less costs of disposal; and
2. not to mandate a single method for measuring recoverable amount.

All 13 IASB members agreed with these decisions.

The IASB also tentatively decided:

1. not to provide additional guidance on performing the impairment test for entities in the financial services sector; and
2. not to provide additional guidance to clarify the interaction between IAS 36 and either IFRS 13 Fair Value Measurement or IAS 21 The Effects of Changes in Foreign Exchange Rates.

All 13 IASB members agreed with these decisions.

Deleting disclosure requirements (Agenda Paper 18C)

The IASB tentatively decided to remove from IFRS 3 requirements to disclose:

1. information about acquired receivables (paragraph B64(h));
2. in the reconciliation between opening and closing goodwill balances, adjustments resulting from the subsequent recognition of deferred tax assets (paragraph B67(d)(iii)); and
3. the amount and an explanation of any material gain or loss recognised in the current reporting period that relates to the identifiable assets acquired or liabilities assumed in a business combination that was effected in the current or previous reporting period (paragraph B67(e)).

Twelve of 13 IASB members agreed with these decisions.

The IASB tentatively decided to make no changes to the requirements to disclose:

1. the amount of goodwill expected to be deductible for tax purposes (paragraph B64(k) of IFRS 3);
2. information about acquisition-related costs (paragraph B64(m) of IFRS 3);
3. information about business combinations completed after the end of the reporting period (paragraph B66 of IFRS 3); and
4. in interim financial statements, information about business combinations (paragraph 16A(i) of IAS 34 Interim Financial Reporting).

All 13 IASB members agreed with these decisions.

Next steps

The IASB will make tentative decisions on matters including:

1. reducing the cost and complexity of the impairment test in IAS 36;
2. improving the effectiveness of the impairment test of cash-generating units containing goodwill; and
3. clarifying other aspects of the package of disclosure requirements for business combinations.

Once the IASB has made tentative decisions on all aspects of the project, it will consider whether the package of decisions meets the project objective and whether it will publish an exposure draft setting out its proposals.

Primary Financial Statements (Agenda Paper 21)

The IASB met on 21 and 22 March 2023 to redeliberate the proposals in its Exposure Draft General Presentation and Disclosures relating to: 

• disclosure of operating expenses by nature (Agenda Paper 21A);
• management performance measures (Agenda Papers 21B–21D);
• categories in the statement of profit or loss (Agenda Paper 21E); and
• entities with specified main business activities (Agenda Paper 21F).

Disclosure of operating expenses by nature in the notes (Agenda Paper 21A) 

The IASB tentatively decided:

1. to change the specific disclosure requirement for operating expenses by nature proposed in the Exposure Draft to require an entity to disclose the amounts of depreciation, amortisation, employee benefits, impairments and write-downs of inventory included in each function line item in the statement of profit or loss.
   All 13 IASB members agreed with this decision.
2. to confirm the proposal in the Exposure Draft that an entity would disclose the information described in (a) in a single note.
   All 13 IASB members agreed with this decision.
3. to provide application guidance clarifying that the amounts described in (a) are not required to be expense amounts.
   All 13 IASB members agreed with this decision.
4. to require an entity to provide a qualitative explanation if part of the amount disclosed has been included in the carrying amount of assets. The explanation would include identifying in which assets the amounts have been included.
   All 13 IASB members agreed with this decision.
5. to expand the scope of the proposed exemption from the general requirement to disaggregate material information that the IASB tentatively decided on in January 2023. As a result, an entity would be exempt from disclosing:
   1. in relation to function line items in the statement of profit or loss, the amounts of nature expenses included therein (beyond those specifically required); and
   2. in relation to nature expenses that are required to be disclosed by an IFRS Accounting Standard, the amounts included in each function line item in the statement of profit or loss.
      

Twelve of 13 IASB members agreed with this decision.

Management performance measures—rebuttable presumption (Agenda Paper 21B) 

The IASB previously tentatively decided to introduce a rebuttable presumption that a subtotal of income and expenses included in an entity’s public communications outside the financial statements represents management’s view of an aspect of the entity’s financial performance. The IASB also previously tentatively decided to add application guidance about what reasonable and supportable information the entity would need to rebut the presumption.

The IASB tentatively decided to develop further the application guidance to explain that reasonable and supportable information for rebutting the presumption would include management communicating or using a subtotal in a way that is consistent with the assertion that the subtotal does not communicate management’s view. The IASB also tentatively decided to include some examples of when this could be the case.

All 13 IASB members agreed with these decisions.

Management performance measures—Relationship with the requirements of other IFRS Accounting Standards (Agenda Paper 21C) 

In relation to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the IASB tentatively decided:

1. to confirm the proposal that if an entity changes the calculation of its management performance measures, introduces a new management performance measure or removes a previously disclosed management performance measure from its financial statements, it would be required:
   1. to disclose sufficient explanation for users of financial statements to understand the change, addition or removal and its effects; and
   2. to disclose the reasons for the change, addition or removal (see paragraphs 108(a) and 108(b) of the Exposure Draft).
2. to amend the proposed disclosure requirement in paragraph 108(c) of the Exposure Draft to say that an entity need not provide comparative information when the entity changes a management performance measure or introduces a new one, if it is impracticable to do so.
3. to add a requirement that if an entity does not provide comparative information about a new or changed management performance measure because it is impracticable to do so, the entity shall disclose that fact.
4. to clarify that the choice of a management performance measure, including how the measure is calculated, is not an accounting policy as defined in IAS 8.

All 13 IASB members agreed with these decisions.

In relation to IAS 34 Interim Financial Reporting, the IASB tentatively decided:

1. to confirm the proposal to amend IAS 34 to require the disclosure in interim financial reports of the management performance measures set out in paragraph 106 of the Exposure Draft.
2. to expand the proposed amendment to IAS 34 to include the requirements that apply to changes in an entity’s management performance measures (see paragraph 108 of the Exposure Draft) in the list of ‘other disclosures’ required by paragraph 16A of IAS 34.

All 13 IASB members agreed with these decisions.

Management performance measures—tax disclosure (Agenda Paper 21D) 

The IASB continued a discussion begun at its May 2022 meeting on the requirement to disclose the tax effect of reconciling items, and tentatively decided:

1. to retain the option of calculating the tax effects of the reconciling items at the statutory tax rate(s) applicable to the underlying transaction(s) in the relevant jurisdiction(s); 
2. to replace the alternative option of adding an allocation of other income tax effects to the tax effects described in (a), with options:
   1. to calculate the tax effects of the reconciling items on the basis of a reasonable pro rata allocation of the current and deferred tax of the entity in the tax jurisdiction(s) concerned; or
   2. to calculate the tax effects of the reconciling items by another method that achieves a more appropriate allocation in the circumstances;
3. to confirm the requirement in paragraph 106(d) of the Exposure Draft for an entity to disclose how it has determined the income tax effects for items reconciling a management performance measure to the most directly comparable subtotal or total specified by IFRS Accounting Standards;
4. to provide application guidance requiring the disclosure in (c) for each reconciling item if more than one method is used to calculate the tax effect; and
5. to revise the requirements in paragraph 108 of the Exposure Draft for disclosures relating to changes in management performance measures so that they apply to changes to the calculation of the tax effects of reconciling items.

All 13 IASB members agreed with these decisions.

Issues for categories in the statement of profit or loss (Agenda Paper 21E)

The IASB tentatively decided:

1. to require an entity to use its judgement to determine in which category in the statement of profit or loss to classify foreign exchange differences on a liability that arises from a transaction that involves operating activities in addition to the raising of finance. All 13 IASB members agreed with this decision.
2. to require an entity to classify in the financing category of the statement of profit or loss all income and expenses arising after initial recognition from hybrid contracts:
   1. with host liabilities that arise from transactions that do not involve only the raising of finance; and
   2. that are measured at amortised cost in their entirety.

Twelve of 13 IASB members agreed with this decision.

Issues related to the proposals for entities with specified main business activities (Agenda Paper 21F)

The IASB tentatively decided:

1. to confirm the accounting policy choice proposed in paragraph 51 of the Exposure Draft for the classification of income and expenses arising from cash and cash equivalents for entities that provide financing to customers as a main business activity; and
2. to clarify that the requirement in paragraph 52(a) of the Exposure Draft applying to an entity that invests in financial assets as a main business activity would apply regardless of whether the entity has any other specified main business activity.

All 13 IASB members agreed with these decisions.

Next step

The IASB will continue to redeliberate the project proposals. 

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

The IASB met on 20 March 2023 to clarify the relationship between the Exposure Draft Subsidiaries without Public Accountability: Disclosures and the IFRS for SMEs Accounting Standard.

The IASB decided that, in developing reduced disclosure requirements, it will assess separately the costs and benefits for subsidiaries applying the IFRS Accounting Standard Subsidiaries without Public Accountability: Disclosures and the costs and benefits for SMEs applying the IFRS for SMEs Accounting Standard.

All 13 IASB members agreed with this decision. 

Next step

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

Maintenance and consistent application

Climate-related Risks in the Financial Statements (Agenda Paper 14)

On 20 March 2023 the IASB met to commence its narrow-scope maintenance project on Climate-related Risks in the Financial Statements and to discuss the initial work it will do.

The IASB was not asked to make any decisions.

Next step

The IASB will discuss the feedback from its consultative activities, the available courses of action and a tentative project plan.