IASB Update May 2024

Research and standard-setting

Financial Instruments with Characteristics of Equity (Agenda Paper 5)

The IASB met on 20 May 2024 to discuss a summary of stakeholder feedback on the Exposure Draft Financial Instruments with Characteristics of Equity, which proposed amendments to IAS 32 Financial Instruments: Presentation, IFRS 7 Financial Instruments: Disclosures and IAS 1 Presentation of Financial Statements.

The IASB was not asked to make any decisions.

Next step

The IASB will further analyse the feedback when it redeliberates the proposals in the Exposure Draft.

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

The IASB met on 22 May 2024 to discuss:

• stakeholder feedback on Question 11 (‘Other matters’) of the Request for Information Post-implementation Review of IFRS 15 Revenue from Contracts with Customers (Agenda Paper 6A); and
• an updated academic literature review (Agenda Paper 6B).

Other matters (Agenda Paper 6A)

In response to the feedback, the IASB tentatively decided to take no further action on the matters related to:

1. allocation of the transaction price to performance obligations in a contract; and
2. other aspects of applying IFRS 15 raised by respondents to Question 11 of the Request for Information.

All 14 IASB members agreed with these decisions.

Academic literature review update (Agenda Paper 6B)

The IASB discussed an updated review of the academic literature examining the effects of applying IFRS 15. 

The IASB was not asked to make any decisions.

Next step

The IASB and the Financial Accounting Standards Board will hold an education meeting to share their findings and tentative decisions related to each board’s post-implementation review.

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

The IASB met on 20 May 2024 to discuss:

• stakeholders’ views on, and academic research about, the credit risk disclosure requirements in IFRS 7 Financial Instruments: Disclosures; 
• stakeholders’ views on other matters; and 
• a summary of the IASB’s response to feedback on the Request for Information Post-implementation Review of IFRS 9—Impairment, and its next step.

Credit risk disclosures (Agenda Papers 27A–27B)

The IASB tentatively decided to classify as medium priority the matters related to disclosure requirements in IFRS 7 and to add to its research pipeline a project to make targeted improvements to those requirements.

Thirteen of 14 IASB members agreed with this decision.

Other matters (Agenda Paper 27C)

The IASB tentatively decided to take no action on matters related to:

1. the simplified approach for recognising expected credit losses; and
2. the addition of illustrative examples to IFRS 9 Financial Instruments for some types of financial instruments, such as those between related parties.

Eight of 14 IASB members agreed with this decision.

Summary of the IASB’s response to the PIR feedback and next step (Agenda Paper 27D)

The IASB decided that sufficient work has been completed to conclude the Post-implementation Review of IFRS 9—Impairment and to prepare a project summary and feedback statement.

All 14 IASB members agreed with this decision.

Next step

Subject to approval from the Due Process Oversight Committee, the IASB will publish a project summary and feedback statement on the Post-implementation Review of IFRS 9—Impairment. 

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

The IASB met on 22 May 2024 to redeliberate the proposals in the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard.

Proposed revised Section 23 Revenue from Contracts with Customers—Other matters raised in feedback (Agenda Paper 30A)

The IASB tentatively decided:

1. to change the requirement proposed in paragraph 23.14(a)(ii) of the Exposure Draft to match paragraph 21(a)(ii) of IFRS 15 Revenue from Contracts with Customers;
2. not to add the first sentence of paragraph 19 of IFRS 15 to the revised Section 23 proposed in the Exposure Draft;
3. to specify in the revised Section 23 that an SME accounts for a contract with renewal options based on the contract’s expected term for only the purpose of allocating the transaction price;
4. to change the requirements proposed in paragraph 23.11 of the Exposure Draft to match the last sentence of paragraph 11 of IFRS 15;
5. to change the requirements proposed in paragraph 23.42 of the Exposure Draft to match paragraph 49 of IFRS 15; and
6. to change the requirement proposed in paragraph 23.110 of the Exposure Draft to match the first sentence of paragraph 99 of IFRS 15.

The 13 IASB members present agreed with these decisions. One member was absent.

The IASB also tentatively decided to change the requirements for accounting for refund liabilities proposed in the Exposure Draft to use the same level of confidence (highly probable) used in the requirements for accounting for variable consideration and sale with a right of return.

Nine of 14 IASB members agreed with this decision.

Proposed revised Section 23 Revenue from Contracts with Customers—Length and language (Agenda Paper 30B)

The IASB tentatively decided to add to the revised Section 23 the notion of a transformative relationship, as explained in paragraph BC116K of the Basis for Conclusions on IFRS 15 Revenue from Contracts with Customers.

All 14 IASB members agreed with this decision.

Section 9 Consolidated and Separate Financial Statements—Other matter raised in feedback (Agenda Paper 30C)

The IASB tentatively decided to confirm its proposed amendment in the Exposure Draft that would require an SME to disclose the portion of the gain or loss resulting from the measurement of any investment retained in a former subsidiary at its fair value at the date when control is lost. 

All 14 IASB members agreed with this decision.

Disclosure requirements—IFRS for SMEs Accounting Standard and IFRS 19 Subsidiaries without Public Accountability: Disclosures (Agenda Paper 30D)

The IASB tentatively decided:

1. to add a requirement to Section 11 Financial Instruments for an SME to disclose a maturity analysis for financial liabilities (based on paragraph 39 of IFRS 7 Financial Instruments: Disclosures);
2. to withdraw paragraph 6.3A of the Exposure Draft, which proposed to require an SME to disclose dividends paid (in aggregate or per share) separately for ordinary shares and other shares;  
3. to add a requirement for an SME to disclose (based on paragraph 137 of IAS 1 Presentation of Financial Statements):
   1. the amount of dividends proposed or declared before the financial statements were authorised for issue, but not recognised as a distribution to owners during the period, and the related amount per share; and 
   2. the amount of any cumulative preference dividends not recognised; and
4. to add a requirement to Section 28 Employee Benefits for an SME to disclose expected contributions to a defined benefit plan for the next annual reporting period (based on paragraph 147(b) of IAS 19 Employee Benefits).  

Nine of 14 IASB members agreed with these decisions.

Transition to the Third edition of the IFRS for SMEs Accounting Standard (Agenda Paper 30E)

The IASB tentatively decided:

1. to proceed with the transition requirements proposed in the Exposure Draft.
2. to add a relief from retrospective application for SMEs applying the amended paragraph 28.19 in Section 28 Employee Benefits. An SME applying the relief would not be required to adjust the carrying amount of assets covered by other sections of the Standard for changes in employee benefit costs that were included in the carrying amount before the date of initial application.

All 14 IASB members agreed with these decisions.

Next steps

The IASB will discuss the findings from its fieldwork on the potential effects of requiring SMEs that provide financing to customers as one of their primary businesses to use an expected credit loss model. The IASB will then discuss the proposals for impairment of financial assets and accounting for issued financial guarantee contracts, including the related proposed disclosure and transition requirements.

Maintenance and consistent application

Rate-regulated Activities (Agenda Paper 9)

The IASB met on 22 May 2024 to redeliberate:

• the proposed guidance on the interaction between the proposals in the Exposure Draft Regulatory Assets and Regulatory Liabilities (Exposure Draft) and IAS 12 Income Taxes (Agenda Paper 9A); and
• the proposed amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors in the Exposure Draft (Agenda Paper 9B).

The IASB also considered comments about other IFRS Accounting Standards for which no amendments are proposed in the Exposure Draft (Agenda Paper 9B).

Interaction with IAS 12 (Agenda Paper 9A)

Regarding the prospective IFRS Accounting Standard on rate-regulated activities, the IASB tentatively decided to clarify that:

1. the income tax consequences of a regulatory asset or regulatory liability might give rise to a separate regulatory asset or regulatory liability; and
2. an entity would determine the tax base of a regulatory asset or regulatory liability by applying the requirements in IAS 12.

All 14 IASB members agreed with these decisions.

Amendments to IAS 8 and suggested amendments to other IFRS Accounting Standards (Agenda Paper 9B)

The IASB tentatively decided to retain the proposal in the Exposure Draft to delete the temporary exception in paragraph 54G of IAS 8. This exception requires an entity developing an accounting policy for regulatory account balances to refer to the Framework for the Preparation and Presentation of Financial Statements instead of the Conceptual Framework for Financial Reporting issued in 2018.

All 14 IASB members agreed with this decision.

Next step

The IASB will continue to redeliberate the project proposals.

Taxonomy

Proposed IFRS Accounting Taxonomy Update—Contracts for Renewable Electricity (oral update)

The IASB met on 22 May 2024 to discuss the staff’s recommendation to develop a proposed IFRS Taxonomy update based on the Exposure Draft Contracts for Renewable Electricity, which proposes amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures.

The Due Process Oversight Committee’s (DPOC) permission is required to publish a proposed IFRS Taxonomy update based on an exposure draft, before the related Standard or amended Standard is issued.

The IASB agreed with the staff’s recommendation to the DPOC. 

Next step

The IASB will continue developing the proposed IFRS Taxonomy update, subject to the DPOC’s permission.