IASB Update April 2022

Research and standard-setting

Post-implementation Review of IFRS 9—Classification and Measurement (Agenda Paper 3)

The IASB met on 25 April 2022 to analyse feedback on the requirements for assessing a financial asset’s contractual cash flow characteristics.

Main feedback topics

The IASB discussed the two main topics raised in the feedback—contractually linked instruments and financial assets with ESG-linked features. The IASB was not asked to make any decisions.

At the May 2022 meeting, the IASB will continue its discussion and decide whether to take action in response to the feedback on these two topics.

Other feedback topics

The IASB also considered six application questions raised in the feedback:

• Question A—whether a financial asset has non-recourse features (ie features that limit an entity’s claim to specified assets of the debtor), and under what circumstances an entity is required to assess the cash flows from the specified assets;
• Question B—whether an entity needs to consider cash flows arising from bail-in legislation when the relevant legal requirements are reproduced or referred to in a contract;
• Question C—whether interest rates that are contractually adjusted for inflation introduce leverage;
• Question D—whether interest rates that include a government-imposed leverage factor are regulated interest rates as described in IFRS 9;
• Question E—whether a prepayment feature includes reasonable compensation for early termination of a contract; and
• Question F—whether particular types of interest rates include a modified time value of money element.

The IASB decided to:

• consider Question A with its analysis of contractually linked instruments;
• consider Question B after its Financial Instruments with Characteristics of Equity project has developed further;
• perform outreach with members of ASAF and the IFRS Interpretations Committee to gather further information about Question C and Question D; and
• take no further action on Question E and Question F.

All 10 IASB members agreed with this decision.

Next step

At the May 2022 meeting, the IASB will conclude its discussions on contractual cash flow characteristics.

At future meetings, the IASB will analyse feedback on the other topics being considered in this post-implementation review.

Equity Method (Agenda Paper 13)

The IASB met on 27 April 2022 to continue its discussion on the Equity Method research project. The IASB:

• discussed applying the equity method to the purchase of an additional interest in an associate without a change in significant influence (Agenda Paper 13A).
• reviewed the research findings on changes made to IFRS Accounting Standards arising from the Conceptual Framework, Business Combinations and Joint Arrangements projects (Agenda Paper 13B). The IASB was not asked to make any decisions relating to the research findings.

Purchases of an additional ownership interest in an associate without a change in significant influence (Agenda Paper 13A)

The IASB tentatively decided to consult with stakeholders on measuring the cost of an investment, when an investor obtains significant influence, as the fair value of the consideration transferred, including the fair value of any previously held interest in the investee.

All 10 IASB members agreed with this decision.

The IASB also:

1. considered three approaches to applying the equity method when an investor purchases an additional ownership interest in an associate without a change in significant influence; and
2. asked the staff to proceed with an approach whereby an investor that has obtained significant influence would measure the investment in the associate as an accumulation of purchases.

Next step

The IASB will discuss how the approach applies to other application questions.

Management Commentary (Agenda Paper 15)

The IASB met on 28 April 2022 to complete its discussion of feedback on its proposals for a revised practice statement on management commentary, as set out in the Exposure Draft Management Commentary. The IASB was not asked to make any decisions.

Next step

The IASB will consider a path forward for this project at a future meeting.

Goodwill and Impairment (Agenda Paper 18)

The IASB met on 26 April 2022 to discuss its Goodwill and Impairment project. In September 2021 the IASB decided to prioritise:

• making tentative decisions on the package of potential disclosure requirements about business combinations described in its Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment; and
• analysing specific aspects of the feedback on the subsequent accounting for goodwill.

In this meeting the IASB discussed:

1. feedback from additional outreach activities on the IASB’s preliminary views, as described in the Discussion Paper, concerning potential improvements to the current disclosure requirements about business combinations; and
2. how to advance or develop those preliminary views.

The IASB was not asked to make any decisions.

Next step

The IASB will discuss specific aspects of the feedback identified in September 2021 on the subsequent accounting for goodwill.

The IASB will then make decisions about: (a) the package of disclosure requirements about business combinations; (b) whether to maintain its preliminary view to retain the impairment-only approach to the subsequent accounting for goodwill; and (c) other topics within the scope of the project.

Primary Financial Statements (Agenda Paper 21)

The IASB met on 26 April 2022 to discuss a proposal in its Exposure Draft General Presentation and Disclosures. The proposal discussed would be to require an entity to disclose an analysis of its operating expenses by nature in the notes when the entity reports its operating expenses by function in the statement of profit or loss.

Analysis of operating expenses by nature in the notes (Agenda Paper 21A)

The IASB was not asked to make any decisions. It discussed:

1. comment-letter feedback suggesting a partial-matrix approach and what a partial-matrix disclosure requirement might comprise;
2. the costs and benefits associated with such an approach based on feedback from limited outreach with the IASB’s consultative bodies and preparers and users; and
3. the scope of future papers related to this topic.

Next step

The IASB will continue to redeliberate the project proposals at future meetings.

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

The IASB met on 27 April 2022 to discuss whether and, if so, how to propose amendments to the IFRS for SMEs Accounting Standard as a part of the second comprehensive review.

Towards an exposure draft—disclosures (Agenda Paper 30A)

The IASB tentatively decided to propose amendments to 16 sections of the current Standard based on the application of the principles it had agreed in March 2022 for updating disclosure requirements in the IFRS for SMEs Accounting Standard.

All 10 IASB members agreed with this decision.

Next step

The IASB will continue to develop the project proposals at a future meeting.

Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures (Agenda Paper 31)

The IASB met on 27 April 2022 to discuss feedback on its Exposure Draft Subsidiaries without Public Accountability: Disclosures. The Exposure Draft sets out proposals for a new IFRS Accounting Standard that would permit eligible subsidiaries to apply IFRS Accounting Standards with reduced disclosure requirements in their financial statements.

The IASB was not asked to make any decisions.

Next step

The IASB will discuss its plans for redeliberating the project proposals at a future meeting. The IASB will first redeliberate the main issues relating to the scope of the proposed Standard together with its discussion on the scope of the IFRS for SMEs Accounting Standard.

Maintenance and consistent application

Maintenance and consistent application (Agenda Paper 12)

The IASB met on 26 April 2022 to consider an agenda decision—and other matters—discussed at the March 2022 meeting of the IFRS Interpretations Committee.

Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7): Finalisation of Agenda Decision (Agenda Paper 12A)

The IASB was asked whether it objected to the Agenda Decision Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows).

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in April 2022 in an addendum to IFRIC Update March 2022.

IFRIC Update March 2022 (Agenda Paper 12B)

The IASB received an update on the Committee’s March 2022 meeting. Details of this meeting were published in IFRIC Update March 2022.

The IASB was not asked to make any decisions.

Strategy and governance

Third Agenda Consultation (Agenda Paper 24)

The IASB met on 25 April 2022:

• to decide which new projects to add to its work plan for 2022 to 2026 (Agenda Paper 24A); and
• to discuss due process comments made by respondents to the Request for Information Third Agenda Consultation (Agenda Paper 24B).

The IASB also received an update on some national standard-setters’ strategic consultations.

Projects to add to the IASB’s work plan for 2022 to 2026 (Agenda Paper 24A)

At its March 2022 meeting, the IASB shortlisted seven projects for discussion at a future meeting. At its April 2022 meeting, the IASB considered further those shortlisted projects and decided:

1. to add to its work plan a maintenance and consistent application project on climate-related risks;
2. to add to the research pipeline projects on:
   1. intangible assets; and
   2. the statement of cash flows and related matters;
3. to create a reserve list of projects that could be added to the work plan only if additional capacity becomes available;
4. to add to the reserve list projects on:
   1. operating segments; and
   2. pollutant-pricing mechanisms; and
5. not to add to its work plan projects on:
   1. cryptocurrencies and related transactions; or
   2. going concern disclosures.

All 10 IASB members agreed with this decision.

Overview of due process comments (Agenda Paper 24B)

The IASB discussed due process comments made by respondents to the Request for Information. The IASB was not asked to make any decisions. The respondents’ comments and the staff’s observations will be communicated to the Due Process Oversight Committee of the IFRS Foundation Trustees.

Next step

The IASB will publish a feedback statement summarising feedback on the Request for Information and the IASB’s activities and work plan for 2022 to 2026.