IASB Update November 2023

Research and standard-setting

Equity Method (Agenda Paper 13)

The IASB met on 14 November 2023 to continue its discussions on the Equity Method project and decide:

• whether to propose improvements to disclosure requirements for investments in joint ventures and subsidiaries; and
• the transitional requirements for the proposed amendments to IAS 28 Investments in Associates and Joint Ventures.

Towards an exposure draft—Possible improvements to disclosure requirements for investments in joint ventures and subsidiaries (Agenda Paper 13A)

The IASB tentatively decided to propose:

1. the same improvements to the disclosure requirements that it has tentatively decided to propose for investments in associates for investments in joint ventures.
   All of the 13 IASB members present agreed with this decision. One member was absent.
2. that a parent that elects to use the equity method to account for its investments in subsidiaries in separate financial statements would disclose the gains or losses from the parent’s transactions to its subsidiaries.
   Ten of the 13 IASB members present agreed with this decision. One member was absent.

Towards an exposure draft—Transitional provisions (Agenda Paper 13B)

The IASB tentatively decided to propose that an investor or a joint venturer would:

1. retrospectively apply the requirement to recognise the full gain or loss on all transactions with its associates or joint ventures.
   Twelve of the 13 IASB members present agreed with this decision. One member was absent.
2. recognise and measure contingent consideration at fair value at the transition date, and recognise any corresponding adjustment to the carrying amount of its investments in associates or joint ventures.
   All of the 13 IASB members present agreed with this decision. One member was absent.
3. prospectively apply all the other requirements from the transition date.
   All of the 13 IASB members present agreed with this decision. One member was absent.

Next steps

The IASB will consider any outstanding matters and whether it has satisfied the required due process steps to publish an exposure draft of amendments to IAS 28.

Primary Financial Statements (Agenda Paper 21)

The IASB met on 15 November 2023 to discuss sweep issues identified in drafting IFRS 18 Presentation and Disclosure in Financial Statements (draft Standard). The issues relate to subtotals and categories, aggregation and disaggregation, and other topics.

Sweep issues related to subtotals and categories (Agenda Paper 21A)

In previous meetings, the IASB specified the assets for which an entity is required to classify income and expenses in the investing category (specified assets). At this meeting, the IASB tentatively decided to clarify that the income and expenses from the specified assets comprise:

1. the income generated by the specified assets;
2. the income and expenses arising from the initial and subsequent measurement of those assets; and
3. the incremental expenses directly attributable to acquiring and disposing of those assets (for example, transaction costs and costs to sell).

Consequently, to maintain consistency between the investing and financing categories, the IASB tentatively decided to clarify that the income and expenses from liabilities arising from transactions involving only the raising of finance comprise:

1. the income and expenses arising from the initial and subsequent measurement of those liabilities; and
2. the incremental expenses directly attributable to issuing and disposing of those liabilities (for example, transaction costs).

The IASB also tentatively decided to add application guidance with examples of assets that generate returns individually and largely independently of an entity’s other resources, and those that do not. This application guidance replaces the application guidance the IASB, at its July 2022 meeting, tentatively decided to add on income and expenses from financial assets arising from providing financing to customers.

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

The IASB also discussed and confirmed the drafting approaches for minor sweep issues related to subtotals and categories.

Sweep issues related to aggregation and disaggregation and other topics (Agenda Paper 21B)

The IASB tentatively decided:

1. to clarify that an entity need not assess whether the classification requirements determining a primary financial statement’s structure will result in a useful structured summary (because applying those requirements will always result in a useful structured summary).
   All of the 13 IASB members present agreed with this decision. One member was absent.
2. to clarify that an entity need not present separately a specific line item in a primary financial statement if doing so is unnecessary for the statement to provide a useful structured summary—even if other IFRS Accounting Standards contain a list of specific required line items or describe the line items as minimum requirements.
   Ten of the 13 IASB members present agreed with this decision. One member was absent.
3. to remove the proposed application guidance stating that, in general, presenting the list of items set out in the draft Standard in the operating category of the statement of profit or loss would be unlikely to reduce how effective the statement is in providing a useful structured summary.
   Eleven of the 13 IASB members present agreed with this decision. One member was absent.
4. to make consequential revisions to the example in the application guidance in the draft Standard on how to aggregate and disaggregate operating expenses.
   Twelve of the 13 IASB members present agreed with this decision. One member was absent.

The IASB also discussed and confirmed the drafting approaches for minor sweep issues including management-defined performance measures, aggregation and disaggregation.

Next step

The IASB will continue the balloting process for the draft Standard.

Business Combinations under Common Control (Agenda Paper 23)

The IASB met on 14 November 2023 to discuss the direction of its project on Business Combinations under Common Control.

The IASB discussed whether to continue to explore developing requirements for recognition and measurement or to change the project direction, and decided to change the project direction.

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

The IASB discussed whether to explore developing disclosure-only requirements or to discontinue the project, and decided to discontinue the project.

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

Next step

The IFRS Foundation staff will prepare a project summary.

Post-implementation Review of IFRS 9—Impairment (Agenda Paper 27)

The IASB met on 14 November 2023 to discuss:

1. a summary of the feedback to the Request for Information Post-Implementation Review of IFRS 9 Financial Instruments—Impairment; and
2. a plan for the next phase of the project.

 

The IASB was not asked to make any decisions.

Next steps

The IASB will discuss detailed feedback on the Request for Information. The IASB expects to complete these discussions by the second quarter of 2024. At the end of this post-implementation review, the IASB will publish a project report and a feedback statement.

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

The IASB met on 14 November 2023 to redeliberate the proposals in the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard.

Proposed amendments to Section 15 Investments in Joint Ventures (to be renamed Joint Arrangements) (Agenda Paper 30A)

The IASB tentatively decided:

1. to align the definition of ‘joint control’ in Section 15 of the IFRS for SMEs Accounting Standard (Standard) with the definition in IFRS 11 Joint Arrangements.
   All of the 13 IASB members present agreed with this decision. One member was absent.
2. to retain the classification and measurement requirements for jointly controlled assets, jointly controlled operations and jointly controlled entities in Section 15 of the Standard.
   Twelve of the 13 IASB members present agreed with this decision. One member was absent.
3. to align Section 15 of the Standard with the requirements of paragraph 23 of IFRS 11, so that a party to a jointly controlled operation or a jointly controlled asset that does not have joint control of those arrangements would account for its interest according to the classification of that jointly controlled operation or jointly controlled asset.
   All of the 13 IASB members present agreed with this decision. One member was absent.

Simplification in paragraph 28.19 (Agenda Paper 30B)

The IASB tentatively decided:

1. to retain paragraph 28.19 of the Standard.
   All of the 13 IASB members present agreed with this decision. One member was absent.
2. to clarify that an entity applying paragraph 28.19 measures its obligation from the defined benefit plan at the current termination amount, assuming all the entity’s employees terminate their employment at the reporting date.
   All of the 13 IASB members present agreed with this decision. One member was absent.
3. to specify that an entity applying paragraph 28.19 measures the current termination amount of its obligation from the defined benefit plan on an undiscounted basis.
   All of the 13 IASB members present agreed with this decision. One member was absent.
4. to require that an entity applying paragraph 28.19 discloses its basis for determining the current termination amount of its obligation from the defined benefit plan.
   Eleven of the 13 IASB members present agreed with this decision. One member was absent.

Next step

The IASB will continue to redeliberate the proposals in the Exposure Draft.

Maintenance and consistent application

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

The IASB met on 13 November 2023 to discuss feedback on the Exposure Draft Amendments to the Classification and Measurement of Financial Instruments, which proposed amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures.

The IASB discussed its proposals relating to:

• derecognition of financial liabilities through electronic transfer (Agenda Paper 16A); and
• equity instruments and other comprehensive income (Agenda Paper 16B).

Derecognition of financial liabilities through electronic transfer (Agenda Paper 16A)

The IASB tentatively decided to finalise the proposed amendments in the Exposure Draft, subject to:

1. deleting the reference to ‘settlement date accounting’ in paragraph B3.1.2A of the Exposure Draft and replacing it with ‘settlement date’ and an explanation that ‘settlement date’ refers to the date on which the right to receive or obligation to pay cash (or another financial asset) is established or extinguished; and
2. aligning the requirements in paragraphs B3.3.8(a) and B3.3.8(b) of the Exposure Draft so that both refer to ‘practical ability’.

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

Equity instruments and other comprehensive income (Agenda Paper 16B)

The IASB tentatively decided to finalise the proposed amendments in the Exposure Draft, subject to:

1. amending the introductory sentence in paragraph 11A of IFRS 7 to require an entity to apply the disclosure requirement in that paragraph per class of equity investment; and
2. including in paragraph 11B of IFRS 7 a disclosure requirement similar to that in paragraph 11A(e) of IFRS 7.  

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

Next step

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

Provisions—Targeted Improvements (Agenda Paper 22)

The IASB met on 15 November 2023 to discuss possible amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

The IASB tentatively decided to propose amendments to IAS 37:

1. to specify the basis on which an entity calculates the discount rate it uses when measuring a provision. 
   All of the 13 IASB members present agreed with this decision. One member was absent.
2. to specify that an entity uses a rate that reflects the time value of money—represented by a risk-free rate—with no adjustment for non-performance risk.
   Twelve of the 13 IASB members present agreed with this decision. One member was absent.

Next step

The IASB will continue its discussions on possible amendments to IAS 37 and related guidance.

Updating the Subsidiaries without Public Accountability: Disclosures Standard (Agenda Paper 32)

The IASB met on 15 November 2023 to receive an update on its plan for publishing a ‘catch-up’ exposure draft after it issues the prospective Standard Subsidiaries without Public Accountability: Disclosures. 

With the ‘catch-up’ exposure draft, the IASB will consult stakeholders on requirements arising from IFRS Accounting Standards that have been issued or amended since the IASB published the Exposure Draft Subsidiaries without Public Accountability: Disclosures in July 2021. 

The IASB was not asked to make any decisions.

Next step

The IASB will discuss the content of the 'catch-up' exposure draft in early 2024.