IASB Update October 2020

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 out in the Due Process Handbook of the IFRS Foundation and the IFRS Interpretation Committee. 

The Board met remotely on 27–29 October 2020.

The topics, in order of discussion, were as follows:

Board work plan update (Agenda Paper 8)

Update (Agenda Paper 8)

The Board met on 27 October 2020 to receive an update on its work plan. The Board was not asked to make any decisions.

Next step

The Board expects to receive the next update on its work plan in the first quarter of 2021.

Covid-19 implications (Agenda Paper 8A)

The Board tentatively decided to extend the comment period for the discussion paper on business combinations under common control from 180 days to 270 days. Nine of 13 Board members agreed with this decision.

The Board also discussed the time lines for other forthcoming consultation documents. In particular, the Board discussed the comment period for the Request for Information on the Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 and potential deferral of the publication date for the exposure draft on management commentary. The Board was not asked to make any decisions.

Next steps

The Board will decide on the comment period for the Request for Information on the Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 at its November meeting.

The Board expects to publish the exposure draft on management commentary in April 2021 instead of February 2021.

Timing of Post-implementation Reviews of IFRS 9 and IFRS 15 (Agenda Paper 8B)

The Board met on 27 October 2020 to consider the timing of the Post-implementation Reviews (PIRs) of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

The Board discussed whether to consider the timing of the PIR of IFRS 15 as part of the 2020 Agenda Consultation.

Nine of 13 Board members agreed to do so.

The Board decided to begin the PIR of the IFRS 9 classification and measurement requirements now, but not to begin the PIR of the Standard’s impairment and hedge accounting requirements.

All 13 Board members agreed with this decision.

Next step

The Board will discuss:

  • a project plan for the PIR of the IFRS 9 classification and measurement requirements; and
  • whether, and how if so how, the timing of the PIRs of IFRS 15 and the impairment and hedge accounting requirements in IFRS 9 should be considered as part of the 2020 Agenda Consultation at a future Board meeting.

2020 Agenda Consultation (Agenda Paper 24)

The Board met on 27 October 2020 to discuss its approach to seeking feedback in the Request for Information on:

  • the strategic direction and balance of the Board’s activities (Agenda Paper 24A);
  • the criteria for assessing the priority of financial reporting issues that may be added to the work plan (Agenda Paper 24B); and
  • the financial reporting issues that should be given priority (Agenda Papers 24C and 24D).

Strategic direction and balance of the Board’s activities (Agenda Paper 24A)

The Board discussed how its activities should be categorised and described in the Request for Information. The Board was not asked to make any decisions.

Criteria for assessing projects to be added to the work plan (Agenda Paper 24B)

The Board discussed the criteria for assessing the priority of projects to be added to its work plan and considered:

  • the specific criteria on which to seek feedback on the Request for Information; and
  • how those criteria should be described in the Request for Information.

The Board was not asked to make any decisions.

Approach to the Board’s current projects (Agenda Paper 24C)

The Board tentatively decided that the Request for Information should:

  • not ask stakeholders to re-prioritise the Board’s current work plan projects; and
  • include the following research pipeline and other projects for stakeholders to comment on and, if necessary, re-prioritise:
    1. High Inflation—Scope of IAS 29;
    2. Pollutant Pricing Mechanisms;
    3. Variable and Contingent Consideration; and
    4. Post-implementation Review of IFRS 5.

All 13 Board members agreed with this decision.

Financial reporting issues to be included in the Request for Information (Agenda Paper 24D)

The Board received a summary of the outreach undertaken to develop the list of potential projects to be included in the Request for Information and discussed:

  • how the feedback should be reflected in the Request for Information;
  • which potential projects would be described in the Request for Information; and
  • what content and how much detail to include in the description of each potential project.

The Board was not asked to make any decisions.

Next step

At a future meeting, the Board will discuss the due process steps taken in developing the Request for Information.

Equity Method (Agenda Paper 13)

The Board met on 27 October 2020 to discuss the objective and approach of the Equity Method research project.

The Board decided that the objective of the project is:

To assess whether application problems with the equity method, as set out in IAS 28 Investments in Associates and Joint Ventures, can be addressed in consolidated and individual financial statements by identifying and explaining the principles of IAS 28.

Twelve of 13 Board members agreed with this decision.

The Board decided that to achieve this objective, the project should be focused on:

  • identifying application problems and deciding which of these problems to address.
  • addressing these application problems by identifying and explaining the principles that underlie IAS 28. Identifying and explaining these principles may also help the Board develop new requirements, new application guidance or other amendments to the Standard.

Eleven of 13 Board members agreed with this decision.

Next step

The Board will identify the application problems on which the project should be focused.

IFRS Taxonomy (oral update)

The Board met on 28 October 2020 to receive an oral update on proposed updates to the IFRS Taxonomy.

The Board heard feedback and discussed next steps on proposed updates to the IFRS Taxonomy to reflect:

  • Interest Rate Benchmark Reform—Phase 2, which amended IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases;
  • Amendments to IFRS 17 which amended IFRS 17 Insurance Contracts;
  • Extension of the Temporary Exemption from Applying IFRS 9 which amended IFRS 4 Insurance Contracts; and
  • Property, Plant and Equipment: Proceeds before Intended Use which amended IAS 16 Property, Plant and Equipment.

The Board was not asked to make any decisions.

Next steps

The Board expects to publish the IFRS Taxonomy Update for Interest Rate Benchmark Reform—Phase 2 in December 2020 and to publish the remaining updates as part of the annual IFRS Taxonomy in the first quarter of 2021.

Maintenance and consistent application (Agenda Papers 12–12E)

The Board met on 28 October 2020 to discuss the following maintenance and consistent application topics.

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) (Agenda Papers 12A–12D)

The Board discussed feedback on its Exposure Draft Deferred Tax related to Assets and Liabilities arising from a Single Transaction.

Feedback analysis—Proposed approach (Agenda Paper 12B)

The Board tentatively decided to:

  • confirm its proposal to narrow the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 Income Taxes so that it would not apply to transactions that give rise to equal amounts of taxable and deductible temporary differences;
  • remove the capping proposal—in other words, include no requirement to limit the recognition of a deferred tax liability to the amount recognised for a deferred tax asset;
  • provide no application guidance or examples illustrating how an entity determines whether tax deductions relate to the lease asset or lease liability; and
  • provide an illustrative example explaining the deferred tax accounting for advance lease payments and initial direct costs.

Twelve of 13 Board members agreed with these decisions.

Feedback analysis—Other matters (Agenda Paper 12C)

The Board tentatively decided to:

  • require entities to apply the amendments to transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences.
  • require entities already applying IFRS Standards to apply the amendments for the first time by:
    1. recognising deferred tax for all temporary differences related to leases and decommissioning obligations at the beginning of the earliest comparative period presented, with the cumulative effect recognised as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at that date; and
    2. applying the amendments prospectively to transactions other than leases and decommissioning obligations (in other words, only to such transactions that occur on or after the beginning of the earliest comparative period presented).
  • require first-time adopters to recognise deferred tax for all temporary differences related to leases and decommissioning obligations at the date of transition to IFRS Standards. The Board would provide no other requirements for first-time adopters.

All 13 Board members agreed with these decisions.

Next step

The Board will discuss the proposed amendment’s effective date, as well as the Board’s compliance with applicable due process steps, at a future meeting.

IFRIC Update (Agenda Paper 12E)

The Board received an update on the September 2020 meeting of the IFRS Interpretations Committee. Details of this meeting were published in the IFRIC Update for September 2020.

The Board was not asked to make any decisions.

Dynamic Risk Management (oral update)

The Board met on 28 October 2020 to receive an update on its stakeholder consultation on the core elements of the DRM accounting model, which started in October 2020.

The Board was not asked to make any decisions.

Next step

The Board will consider the feedback from its consultation on the core elements of the DRM accounting model during the first half of 2021.

Extractive Activities (Agenda Paper 19)

The Board met on 28 October 2020 to discuss findings from its research on accounting policies developed by entities applying IFRS 6 Exploration for and Evaluation of Mineral Resources. The research will help the Board decide at a future meeting whether to replace or amend IFRS 6.

Accounting policies developed applying IFRS 6 (Agenda Paper 19A)

The Board considered research findings on the diversity of accounting policies applied to exploration and evaluation expenditure within the scope of IFRS 6.

The Board was not asked to make any decisions.

Next step

The Board will hold educational sessions to develop its understanding of extractive activities further.

Disclosure Initiative—Subsidiaries that are SMEs (Agenda Paper 31)

The Board met on 29 October 2020 to discuss four matters. The Board tentatively decided that, should it propose a reduced disclosure IFRS Standard for subsidiaries, the proposed Standard would:

  • require a subsidiary to disclose that it had applied the reduced disclosure IFRS Standard, and require this disclosure to be located with the statement required by paragraph 16 of IAS 1 Presentation of Financial Statements. Twelve of 13 Board members agreed with this decision.
  • require a subsidiary to apply all of the disclosure requirements of IAS 8 Accounting Polices, Changes in Accounting Estimates and Errors. All 13 Board members agreed with this decision.
  • require a subsidiary to apply the disclosure requirements about transition provisions that are included in other IFRS Standards, subject to any modification to those disclosure requirements the Board considers appropriate for subsidiaries. All 13 Board members agreed with this decision.
  • not include disclosure requirements for combined financial statements. Ten of 13 Board members agreed with this decision.

Next step

The Board will continue discussing matters arising in November 2020.

Management Commentary (Agenda Paper 15)

The Board met on 29 October 2020 to discuss:

  • an overview of the Board’s proposals intended to promote provision of information in management commentary on matters that could affect an entity’s long-term prospects, on intangible resources and relationships, and on environmental, social and governance (ESG) matters—Agenda Paper 15A;
  • an initial assessment of the likely effects of implementing the Board’s proposals for revising IFRS Practice Statement 1 Management Commentary (Practice Statement)—Agenda Paper 15B; and
  • due process steps and permission to begin the balloting process for the exposure draft of the revised Practice Statement—Agenda Paper 15C.

Overview of guidance on matters affecting long-term prospects, on intangible resources and relationships, and on ESG matters (Agenda Paper 15A)

The Board discussed the overview of its proposals intended to promote provision of information in management commentary on interrelated matters of particular interest to investors and creditors, namely:

  • matters that could affect an entity’s long-term prospects;
  • the entity’s intangible resources and relationships; and
  • ESG matters.

The Board was not asked to make any decisions.

Overview of the likely effects of the proposals (Agenda Paper 15B)

The Board discussed an initial assessment of the likely effects of implementing the Board’s proposals for revising the Practice Statement. The Board was not asked to make any decisions.

Due process steps and permission for balloting (Agenda Paper 15C)

The Board tentatively decided that:

  • entities stating compliance with the Practice Statement will be required to apply the revised Practice Statement for annual reporting periods beginning on or after the date of its publication; and
  • earlier application of the revised Practice Statement will be permitted.

All 13 Board members agreed with these decisions.

All 13 Board members confirmed that they were satisfied that the Board has complied with the applicable due process requirements and has undertaken sufficient consultation and analysis to begin the balloting process for the exposure draft.

No Board member indicated an intention to dissent from the proposals in the exposure draft.

Next steps

The staff will prepare the exposure draft for balloting. As noted in this IASB Update on Agenda Paper 8A Covid-19 implications, the Board expects to publish the exposure draft in April 2021 instead of February 2021.

At a future meeting, the Board plans to discuss a comment letter period for the exposure draft.

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