IASB and joint IASB–FASB Update June 2024

Work plan overview

IASB work plan update (Agenda Paper 8)

The IASB met on 20 June 2024 to receive an update on its work plan. The IASB was not asked to make any decisions.

Next step

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

Research and standard-setting

Dynamic Risk Management (Agenda Paper 4)

The IASB met on 19 June 2024 to continue its discussions on the Dynamic Risk Management (DRM) model. The IASB was also provided with a summary of its tentative decisions and a list of defined terms related to the project.

Capacity assessment (Agenda Paper 4A)

The IASB discussed potential requirements related to the capacity assessment. This assessment would require an entity to evaluate whether its current net open risk position at the end of the DRM assessment period could realise the expected benefits represented by the DRM adjustment.

The IASB tentatively decided that:

1. an entity be required to measure the maximum future economic benefit of its current net open risk position at the reporting date based on the present value of that position.
2. an entity that has recognised a capacity shortfall in the DRM adjustment in profit or loss be required to recognise the unwinding of that shortfall in future periods on either a straight-line basis or on another systematic and rational basis over the risk-management time horizon.
3. an entity not be permitted to reverse any capacity shortfalls it has previously recognised in profit or loss.

All 14 IASB members agreed with these decisions.

Presentation requirements (Agenda Paper 4B)

The IASB discussed the presentation requirements of the DRM model. The IASB tentatively decided that an entity be required:

1. to present the unwinding of the DRM adjustment recognised during the reporting period as a net amount in a separate line item in the statement of profit or loss;
2. to present any misalignment (between the net gains or losses from designated derivatives and the DRM adjustment) recognised during the reporting period together with the fair value gains or losses from other derivatives; and
3. to present the DRM adjustment as a net amount in a separate line item in the statement of financial position at the end of the reporting period.

All 14 IASB members agreed with these decisions.

Disclosure requirements (Agenda Paper 4C)

The IASB discussed the information needs of users of financial statements and an initial analysis of the potential disclosure requirements of the DRM model.

The IASB was not asked to make any decisions.

Next step

The IASB will continue its discussion on the topics identified in the project plan.

Post-implementation Review of IFRS 16 Leases (Agenda Paper 7)

The IASB met on 19 June 2024 to discuss the objective, activities and expected time line for the first phase of the Post-implementation Review of IFRS 16 Leases.

The IASB was not asked to make any decisions.

Next steps

The IASB plans to conduct outreach with consultative groups and other stakeholders to inform a request for information, which the IASB expects to publish in the first half of 2025.

Pollutant Pricing Mechanisms (Agenda Paper 10)

The IASB met on 20 June 2024 to discuss information gathered to help it decide whether to prioritise a project on pollutant pricing mechanisms.

The IASB was not asked to make any decisions.

Next step

The IASB will decide whether to prioritise a project on pollutant pricing mechanisms.

Equity Method (Agenda Paper 13)

The IASB met on 19 June 2024 to discuss sweep issues identified while drafting the exposure draft Equity Method of Accounting—IAS 28 Investments in Associates and Joint Ventures (revised 202X).

The IASB tentatively decided:

1. to propose that if a parent entity applies the equity method to its investment in a subsidiary in its separate financial statements, then loses control of that subsidiary and the former subsidiary becomes an associate, and the parent entity continues to apply the equity method, the parent entity would apply paragraph 24 of IAS 28.
   
   Thirteen of 14 IASB members agreed with this decision.
   
   
2. to delete from paragraph 32 of IAS 28 ‘included as income in the determination of the entity’s share of the associate or joint venture’s profit or loss’, thereby not specifying the line item in the statement of profit or loss in which an investor includes income and expenses that arise when applying the equity method.
   
   Thirteen of 14 IASB members agreed with this decision.
   
   
3. to propose that an investor or joint venturer would provide the same disclosures about contingent consideration for purchasing an additional interest in an associate or joint venture as provided on obtaining significant influence or joint control.
   
   All 14 IASB members agreed with this decision.
   
   
4. to propose that, if an investor or joint venturer has recognised contingent consideration as an equity instrument and measured that equity instrument at fair value at the date the investor obtained significant influence or the joint venturer obtained joint control, the investor would not remeasure that contingent consideration. This requirement would also apply if an investor or joint venturer has purchased an additional interest.
   
   All 14 IASB members agreed with this decision.

The IASB tentatively decided not to add to the scope of the project the application question ‘in which order does an investor or joint venturer that has previously reduced the carrying amount of the investment to nil, recognise its share of the associate’s or joint ventures comprehensive profits that exceed its share of losses not recognised?’.

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.

Next step

The IASB expects to publish the exposure draft in the third quarter of 2024.

Management Commentary (Agenda Paper 15)

The IASB met on 19 June 2024 to discuss the direction of the project.

The IASB decided to finalise the project by making targeted refinements to the proposals in the Exposure Draft Management Commentary.

All 14 IASB members agreed with this decision.

Next step

The IASB will redeliberate the proposals in the Exposure Draft.

Maintenance and consistent application

Provisions—Targeted Improvements (Agenda Paper 22) 

The IASB met on 20 June 2024 to discuss proposed amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, including:

• sweep issues arising from its previous tentative decisions (Agenda Paper 22A); and
• proposed transition requirements (Agenda Paper 22B).

The IASB also discussed an analysis of the costs and benefits (effects) of the proposed amendments and a review of the due process the IASB followed to develop those amendments (Agenda Paper 22C).

Sweep issues (Agenda Paper 22A)

The IASB tentatively decided to propose in an exposure draft:

1. to retain the scope of IAS 37, instead of widening it to include levies whose timing and amount are certain;
2. to add to IFRS 19 Subsidiaries without Public Accountability: Disclosures a requirement for an entity to disclose the discount rate(s) used in measuring a provision, but not to add to IFRS 19 a requirement for an entity to disclose the approach used to determine the rate(s); and
3. to delete paragraphs 21A–21C from IFRS 3 Business Combinations, thereby removing the exception to the recognition principle in IFRS 3 that would become redundant as a result of the proposed amendments to IAS 37.

All 14 IASB members agreed with these decisions.

Transition requirements (Agenda Paper 22B)

The IASB tentatively decided to propose in the exposure draft that an entity apply the proposed amendments retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, with two exceptions.

The first exception would apply to the proposed amendment to the discount rate requirements affecting provisions for asset decommissioning, restoration or similar costs that are added to the cost of the related asset. The exception would permit an entity to apply a simplified retrospective approach, whereby in the year of transition the entity would:

1. apply the amended requirements in IAS 37 to restate the provision at the start of the first period for which it provides comparative information; and
2. apportion the amount by which it adjusts the provision at that date between the related asset and retained earnings:
   1. assuming the current discount rate(s) and estimates of cash flows used in measuring the provision have not changed since the provision was first recognised; and
   2. using current estimates of the useful life of the related asset.

The second exception would apply to the proposed amendment specifying the costs an entity would include in measuring a provision. The exception would require an entity to apply the proposed amendment:

1. only to obligations that exist on, or arise after, the beginning of the annual reporting period in which the entity first applies that amendment.
2. without restating comparative information. Instead, the entity would recognise the cumulative effect of applying the amendment as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application.

Nine of 14 IASB members agreed with this decision.

The IASB tentatively decided to propose in the exposure draft to make no amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards as a result of the amendments proposed in this project.

All 14 IASB members agreed with this decision.

Effects analysis and review of due process (Agenda Paper 22C)

The IASB set a 120-day comment period for the exposure draft.

All 14 IASB members agreed with this decision.

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.

No IASB member indicated an intention to dissent from the proposals in the exposure draft.

Next step

The IASB will begin the process for balloting the exposure draft.

Projects discussed at the joint IASB–FASB meeting

Post-implementation reviews of revenue standards (Agenda Paper 6) and leases standards (Agenda Paper 7)

The IASB held an education meeting with the FASB on 21 June 2024. The two boards discussed their post-implementation reviews of:

• revenue standards—IFRS 15 Revenue from Contracts with Customers and FASB ASC Topic 606, Revenue from Contracts with Customers; and
• leases standards—IFRS 16 Leases and FASB ASC Topic 842, Leases.

The boards were not asked to make any decisions.