This IASB Update highlights preliminary decisions of the International Accounting Standards Board (Board). The Board's final decisions on IFRS® Standards, Amendments and IFRIC® Interpretations are formally balloted as set forth in the Due Process Handbook of the IFRS Foundation and the IFRS Interpretation Committee.
The Board met on Tuesday 20 and Thursday 22 February 2018 at the IFRS Foundation's offices in London.
The topics, in order of discussion, were:
On 20 February 2018 the Board discussed the comments received on the Discussion Paper Disclosure Initiative—Principles of Disclosure.
No decisions were made.
At the March Board meeting, the Board will make decisions about next steps in the project.
The Board met on 20 February 2018 to discuss:
- a clarification of the proposals for management performance measures (MPMs);
- whether we should require separate presentation of the investing cash flows of ‘integral’ and ‘non-integral’ associates and joint ventures in the statement of cash flows.
Clarifying proposals for management performance measures (Agenda Paper 21A)
The Board continued its discussion from the January 2018 Board meeting about proposals for management performance measures. At the meeting the Board asked the staff to develop a simplified approach to management performance measures for a future meeting. No decisions were made.
Management-defined adjusted earnings per share (EPS) (Agenda Paper 21B)
The Board did not discuss this paper pending the discussion of a simplified approach for management performance measures.
Presentation of the cash flows of ‘integral’ and ‘non-integral’ associates and joint ventures (Agenda Paper 21C)
The Board tentatively decided to propose:
- separate presentation of (i) the cash flows that arise between an entity and its ‘integral’ associates and joint ventures and (ii) the cash flows that arise between an entity and its ‘non-integral’ associates and joint ventures. The split between ‘integral’ and ‘non-integral’ associates and joint ventures would be the same for the statement of cash flows as for the statement(s) of financial performance. Eleven Board members agreed and two disagreed with this decision. One Board member was absent.
- the separate presentation of the investing cash flows of ‘integral’ and ‘non-integral’ associates and joint ventures should be within the ‘investing activities’ section of the statement of cash flows. Ten Board members agreed and three disagreed with this decision. One Board member was absent.
The Board will continue its discussions about management performance measures and other topics included in the project scope at a future meeting.
The Board met on 22 February 2018 to discuss the asset profile—one of the core areas of the dynamic risk management accounting model.
The Board was also given a summary of discussions to date (Agenda Paper 4A, which was provided for information only). No decisions were made.
Asset profile (Agenda Paper 4B)
The Board discussed the role of the asset profile within the dynamic risk management model. In particular, the Board discussed the application of qualifying criteria to the asset profile, as well as designation of items within the asset profile and documentation requirements. The Board decided the staff should continue developing the model as follows:
- to set qualifying criteria for items within the asset profile;
- to allow for designation on a portfolio basis;
- to allow for designation of a percentage of a portfolio, provided conditions are met;
- to preclude voluntary de-designation;
- to require de-designation when certain events take place; and
- to require formal documentation.
Some Board members expressed reservations regarding the restrictiveness of some qualifying criteria and the staff acknowledged the need to seek external feedback
Regarding de-designation, some Board members directed the staff to evaluate the implications for amounts recognised in the statement(s) of financial performance arising from de-designation events. Also, the Board requested the staff to consider additional de-designation events to ensure consistency with the above mentioned qualifying criteria.
At a future meeting, the Board will discuss the target profile as described in the model.
The Board met on 22 February 2018 to discuss the Business Combinations under Common Control research project.
The Board tentatively decided to use the acquisition method set out in IFRS 3 Business Combinations as the starting point in its analysis of transactions within the scope of the project. Using that starting point will not determine whether the Board will ultimately propose applying the acquisition method to all, or even to many, transactions within the scope of the project.
All 14 Board members agreed with this decision.
The Board expects to continue its discussion on the methods of accounting for transactions within the scope of the project at future meetings.
The Board met on 22 February 2018 to receive an update on its research programme since the September 2017 meeting. (Information on the Board’s work plan, including its research programme, is available here.)
During the discussion, the Board reviewed its research pipeline. Projects in the pipeline are not on the work plan. However, before the next Agenda Consultation (due in 2021), the Board expects to complete a significant proportion of the research needed for each project, though not necessarily to complete all of them. The Board decided that in the next few months the staff should aim to:
- carry out work on variable and contingent consideration to assess how broad that research project should be.
- complete the remaining research on provisions reasonably soon after the Board issues the Conceptual Framework.
- start work on extractive activities by asking those national standard-setters whose staff contributed to the 2010 Discussion Paper Extractive Activities to make the Board aware of any developments since then.
- start the research on pension benefits that depend on asset returns.
- start the research on SMEs that are subsidiaries.The staff will consider how that research should interact with the next comprehensive review of the IFRS for SMEs® Standard.
Eleven of 14 Board members agreed with this decision and three disagreed.
The other projects in the research pipeline are: the Equity Method; Pollutant Pricing Mechanisms; and High Inflation: Scope of IAS 29. The Board aims to start those projects in 2019 or early 2020, as well as the Post-implementation Reviews of: (a) IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities; and (b) IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
The Board expects to receive the next update on its research programme in around three or four months.
The Board met on 22 February 2018 to receive an update on:
- the first meeting of the Transition Resource Group for IFRS 17 Insurance Contracts (TRG) held on 6 February 2018
- the educational activities on IFRS 17 conducted with investors and analysts from mid-May 2017 to the end of January 2018 on IFRS 17.
The Board was not asked to make any decisions.
The Board will receive an update on the second TRG meeting to be held on 2 May.
The Board met on 22 February to discuss a background paper on discussion papers and exposure drafts. This discussion will inform the Board’s future decisions on whether to publish a discussion paper or exposure draft for the projects on primary financial statements, goodwill and impairment, and rate-regulated activities. No decisions were made.
The Board will decide which documents to publish as it develops the projects.
The Board met on 22 February 2018 to discuss the possible accounting model being developed for activities subject to ‘defined rate regulation’. In particular, the Board discussed:
- the model’s focus on the incremental rights and obligations arising from a regulatory agreement of the type under discussion. The incremental rights and obligations are those created when an entity fulfils regulatory service requirements in a period different from that in which those service requirements are charged to customers through the regulated rate;
- what unit of account would provide the most useful information to users of financial statements about the incremental rights and obligations arising from the regulatory agreement; and
- whether the incremental rights and obligations meet the definitions of an asset and a liability in the forthcoming revised Conceptual Framework for Financial Reporting (Conceptual Framework).
The Board tentatively decided that:
- the accounting model will use as its unit of account the individual timing differences that create the incremental rights and obligations arising from the regulatory agreement. Thirteen Board members agreed and one disagreed with this decision.
- the present regulatory right—to charge a rate increased by an amount as a result of past events—meets the definition of an asset in the Conceptual Framework. All 14 Board members agreed with this decision.
- the present regulatory obligation—to provide goods or services at a rate reduced by an amount as a result of past events—meets the definition of a liability in the Conceptual Framework. All 14 Board members agreed with this decision.
The Board will discuss proposals for the scope and recognition requirements of the model before deciding whether to publish an Exposure Draft or a Discussion Paper as the next consultation document for the project.