IASB Update April 2021

Research and standard-setting

Financial Instruments with Characteristics of Equity (Agenda Paper 5)

The Board met on 28 April 2021 to continue its discussions on potential refinements to disclosure proposals explored in its 2018 Discussion Paper Financial Instruments with Characteristics of Equity—namely, proposals for disclosure of information about terms and conditions, priority on liquidation and potential dilution. These disclosure proposals relate to financial instruments an entity issues and, if finalised, would be incorporated into IFRS 7 Financial Instruments: Disclosures. 

Disclosures: terms and conditions (Agenda Paper 5A) 

The Board tentatively decided that, for financial instruments with characteristics of both financial liabilities and equity instruments (except for stand-alone derivatives), an entity would be required to disclose in the notes information about:

1. ‘debt-like features’ in financial instruments that are classified as equity instruments; 
2. ‘equity-like features’ in financial instruments that are classified as financial liabilities; and  
3. debt-like and equity-like features that determine the classification of such financial instruments as financial liabilities, equity instruments or compound financial instruments. 

All 13 Board members agreed with this decision.  

Disclosures: priority on liquidation (Agenda Paper 5B) 

The Board discussed proposals to require an entity to disclose information on its capital structure and terms and conditions that indicate the priority on liquidation of some types of financial instruments.  

The Board did not make any decisions but sought clarification on some of the proposals.  

Disclosures: potential dilution (Agenda Paper 5C) 

The Board tentatively decided to require an entity to disclose information about the maximum dilution of ordinary shares in the notes, including: 

1. the maximum number of additional ordinary shares that an entity could be required to deliver for each type of potential ordinary share outstanding at the reporting date. An entity would:
   1. include the total number of share options outstanding (as required to be disclosed by IFRS 2 Share-based Payment) and the number of unvested shares, if known; and
   2. indicate the possibility for unknown dilution where the maximum number of additional ordinary shares that could be delivered is not yet known.  
2. the minimum number of ordinary shares required to be repurchased. 
3. sources of any significant changes in (a) and (b) from the prior reporting period and how these sources contributed to those changes. 
4. terms and conditions relevant to understanding the likelihood of maximum dilution, including a cross-reference to disclosures required by IFRS 2 for a description of share-based payment arrangements. 
5. a description of any share buy-back programmes or other arrangements that may reduce the number of shares outstanding.   

Twelve of 13 Board members agreed with this decision.  

Next step

The Board will continue to discuss disclosures for information about priority on liquidation and other topics included in the project plan discussed at the October 2019 Board meeting.

Goodwill and Impairment (Agenda Paper 18)

The Board met on 27 April 2021 to discuss feedback on its Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment, specifically feedback from users of financial statements and feedback on improvements to the disclosure requirements in IFRS 3 Business Combinations. 

The Board was not asked to make any decisions. 

Next step

The Board will continue discussing feedback on the Discussion Paper at its next meeting.

Primary Financial Statements (Agenda Paper 21)

The Board met on 27 April 2021 to redeliberate the proposals in the Exposure Draft General Presentation and Disclosures relating to principles of aggregation and disaggregation and roles of the primary financial statements and the notes.

Principles of aggregation and disaggregation and roles of the primary financial statements and the notes (Agenda Paper 21A)

The Board tentatively decided:

1. in relation to the principles of aggregation and disaggregation to:
   1. state the purpose of disaggregation more clearly—items shall be disaggregated if the resulting disaggregated information is material. All 13 Board members agreed with this decision. 
   2. strengthen the application of that principle by emphasising that a single dissimilar (non-shared) characteristic between items would be sufficient to require an entity to disaggregate information about those items if that information were material. All 13 Board members agreed with this decision.
   3. explore developing guidance for entities on how to use characteristics to identify when to aggregate or disaggregate items. All 13 Board members agreed with this decision.
2. in relation to the roles of the primary financial statements to:
   1. not reinstate paragraph 29 of IAS 1 Presentation of Financial Statements in the new IFRS Standard because it is not possible to require an entity to present complete disaggregation of material information in the primary financial statements. All 13 Board members agreed with this decision.
   2. include a reference to understandability in the description of the role of the primary financial statements. All 13 Board members agreed with this decision.

The drafting resulting from the decisions in paragraph (b) will clarify that the objective of paragraph 29 of IAS 1 continues to apply, in that entities will be required to disaggregate material information. However, the requirement for presentation in the primary financial statements will refer to information that results in an understandable summary of an entity’s assets, liabilities, equity, income and expenses.

The Board also discussed the implications of digital reporting for the requirements in the new Standard. The Board was not asked to make any decisions.

Next step

The Board will continue to redeliberate the project proposals at a future meeting.

Maintenance and consistent application

Maintenance and consistent application (Agenda Paper 12)

The Board met on 27 April 2021 to consider matters discussed at the March IFRS Interpretations Committee (Committee) meeting. 

Configuration or Customisation Costs in a Cloud Computing Arrangement (IAS 38): Finalisation of Agenda Decision (Agenda Paper 12A)

The Board discussed whether any Board member objects to the Committee’s decision to publish Agenda Decision Configuration or Customisation Costs in a Cloud Computing Arrangement (IAS 38 Intangible Assets). 

No Board member objected to the agenda decision. The agenda decision will therefore be published in April 2021 in an addendum to IFRIC Update March 2021. 

IFRIC Update (Agenda Paper 12B)

The Board received an update on the Committee’s March 2021 meeting. Details of this meeting were published in IFRIC Update March 2021.

The Board was not asked to make any decisions.