IASB Update October 2017

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 IFRS Foundation and IFRS Interpretation Committee Due Process Handbook

The Board met in public on Tuesday 24 and Wednesday 25 October 2017 at the IFRS Foundation's offices in London, UK.

The topics, in order of discussion, were:

Goodwill and Impairment (Agenda Paper 18)

The Board met on 24 October 2017 to discuss:

  1. whether there are ways to improve the effectiveness of the impairment test in IAS 36 Impairment of Assets;
  2. whether there are ways to simplify that impairment test without reducing the information provided to users of financial statements; and
  3. whether to require additional disclosures about goodwill and impairment that would improve the quality of information provided to users.

The Board was not asked to make any decisions.

Next steps

At a future meeting, the Board will:

  1. discuss possible approaches to subsequent accounting for goodwill; and
  2. decide whether the output of the project should be a discussion paper or an exposure draft.

IFRIC Update (Agenda Paper 12)

The Board received an update on the September 2017 meeting of the IFRS Interpretations Committee. Details of this meeting were published in the IFRIC® Update

Accounting policy changes (Amendments to IAS 8)Due Process Steps (Agenda Paper 12A)

The Board discussed the due process steps for Accounting Policy Changes (Amendments to IAS 8).

The Board tentatively decided that the comment period for the proposed amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors should be at least 120 days. Twelve Board members agreed with this decision and two members were absent. 

Thirteen Board members confirmed they were satisfied that the Board has complied with the applicable due process requirements and that it has undertaken sufficient consultation and analysis to begin the balloting process for the proposed amendments to IAS 8. One Board member was absent.

Twelve Board members indicated they did not intend to dissent from the proposed amendments to IAS 8. Two members were absent.

Next steps

The Board plans to issue an exposure draft in the first quarter of 2018.

Rate-regulated Activities (Agenda Paper 9)

The Board met on 24 October 2017 to receive feedback from the World Standard-setters Conference held on 25–26 September 2017. During the conference, participants discussed a case study that explored whether specific examples of rate adjustments created rights or obligations that could qualify as assets or liabilities, applying the definitions of those terms the Board expects to issue in the forthcoming revised Conceptual Framework for Financial Reporting.

The Board heard that the Consultative Group for Rate Regulation (CGRR) would meet on 26 October 2017.

The Board was not asked to make any decisions.

Next steps

The Board will consider feedback from the CGRR when it next discusses the model’s scope and the recognition and measurement of regulatory assets and regulatory liabilities.

Proposed IFRS Taxonomy Update IFRS 17 Insurance Contracts (Agenda Paper 25)

The Board met on 24 October 2017 to discuss the due process steps taken to develop the IFRS Taxonomy Update for IFRS 17 Insurance Contracts, including the review of feedback on the Proposed IFRS Taxonomy Update.

The Board was not asked to make any decisions.

Next steps

The Board expects to issue the IFRS Taxonomy Update in December 2017.

Definition of a Business (Agenda Paper 13)

Comparison between FASB amendments and the Board’s tentative decisions (Agenda Paper 13A)

The Board met on 24 October 2017 to finalise the amendments to IFRS 3 Business Combinations on the definition of a business.

The Board tentatively decided to:

  1. clarify the description of the screening test as follows:
    1. an entity is permitted, but not required, to carry out the screening test;
    2. if the screening test identifies an asset purchase, no further assessment is needed (although the entity is not prohibited from carrying out such further assessment); and
    3. if the screening test does not identify an asset purchase, the entity must carry out a further assessment. (If the entity elected not to apply the screening test, it must carry out that same assessment.)
  2. remove the proposed Illustrative Example J Acquisition of oil and gas operations.
  3. specify that the gross assets considered in the screening test exclude cash and cash equivalents acquired, and confirm the Board’s tentative decision in April that those gross assets also exclude:
    1. goodwill resulting from the effects of deferred tax liabilities; and
    2. deferred tax assets.
  4. confirm all the other tentative decisions made at its April and June 2017 meetings.

All 14 Board members agreed with these decisions.

Due process steps (Agenda Paper 13C)

The Board considered the due-process steps that it has taken in developing the amendments to IFRS 3 on the definition of a business. The Board concluded that the due-process steps required to issue a narrow-scope amendment have been completed.

The Board tentatively decided:

  1. not to re-expose the amendments to IFRS 3; and
  2. that the amendments to IFRS 3 should apply for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning or after 1 January 2020, with earlier application permitted.

Business Combinations under Common Control (Agenda Paper 23)

The Board met on 25 October 2017 to discuss the scope of the Business Combinations under Common Control (BCUCC) research project.

The Board tentatively decided to clarify that the scope of the BCUCC project includes transactions under common control in which a reporting entity obtains control of one or more businesses, regardless of whether IFRS 3 Business Combinations would identify the reporting entity as the acquirer if IFRS 3 were applied to the transaction.

All 14 Board members agreed with this decision.

Next steps

The Board expects to continue its deliberations on the project in December.

Conceptual Framework (Agenda Paper 10)

The Board met on 25 October 2017 to discuss comments on the pre-ballot draft of the revised Conceptual Framework for Financial Reporting (Conceptual Framework).

Sweep issue—concepts supporting the liability definition (Agenda Paper 10A)

The Board considered concerns raised about the concepts supporting the liability definition. It tentatively decided those concerns can be addressed by improving the drafting, without revisiting earlier Board decisions.

All 14 Board members agreed with this decision.

The drafting improvements will include:

  1. clarifying in the introduction to the ‘definition of a liability’ section of the Conceptual Framework that each of the three criteria listed in that introduction must be satisfied to meet the definition of a liability;
  2. clarifying that an entity does not yet have a present obligation to transfer an economic resource if it has not yet received economic benefits, or taken an action, that will or may require it to transfer that resource—even if it already has no practical ability to avoid receiving those benefits or taking that action in the future;
  3. clarifying that before an entity has received those benefits or taken that action, it may have an executory contract; and
  4. omitting the phrase ‘or simply being in existence’ from the list of actions that could give rise to a present obligation.

Sweep issuea flowchart for Chapter 1 (Agenda Paper 10B)

The Board considered whether to include in Chapter 1 a flowchart that illustrates the link between the objective of general purpose financial reporting and the information needed to meet that objective. The Board tentatively decided that including such a flowchart in Chapter 1 was unnecessary.

Eleven Board members agreed and three disagreed with this decision.

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