IASB Update July 2022

Research and standard-setting

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

The IASB met on 19 July 2022 to discuss feedback on the requirements in IFRS 9 Financial Instruments for:

• modifications of financial assets and liabilities (Agenda Paper 3A); and
• amortised cost measurement and the effective interest method (Agenda Paper 3B).

Based on its analysis and prioritisation assessment (Agenda Paper 3C), the IASB decided to add a standard-setting project to its research pipeline to clarify the requirements in IFRS 9 for modifications of financial assets and liabilities and applying the effective interest method.

Any forthcoming standard-setting project will also consider the findings of the Post-implementation Review of IFRS 9—Impairment.

All 10 IASB members agreed with this decision.

Next step

The IASB will continue its discussions of the feedback received on the Post-implementation Review at a future meeting. 

Dynamic Risk Management (Agenda Paper 4)

The IASB met on 20 July 2022 to discuss the proposed project plan for the Dynamic Risk Management project.

In particular, the IASB discussed topics to consider further as part of its development of the DRM model and the order in which to consider the topics.

The IASB was not asked to make any decisions.

Next step

The IASB will begin deliberations on the topics identified in the project plan.

Financial Instruments with Characteristics of Equity (Agenda Paper 5)

The IASB met on 18 July 2022 to discuss the accounting for financial instruments containing obligations for an entity to redeem its own equity instruments, including written put options on non-controlling interests (Agenda Paper 5A). The IASB discussed problems that arise when entities apply paragraph 23 of IAS 32 Financial instruments: Presentation. The IASB also discussed possible clarifications it could develop to help resolve these problems.

The IASB was not asked to make any decisions.

Next step

The IASB will continue to discuss this topic at a future meeting.

Rate-regulated Activities (Agenda Paper 9)

The IASB met on 18 and 21 July 2022 to redeliberate the proposals in its Exposure Draft Regulatory Assets and Regulatory Liabilities on total allowed compensation. In particular, the IASB discussed:

• components of total allowed compensation (Agenda Paper 9A); and
• regulatory returns on an asset not yet available for use (Agenda Papers 9B and 9C).

Components of total allowed compensation (Agenda Paper 9A)

The IASB tentatively decided that in the Standard, the application guidance focus on:

1. helping entities to identify differences in timing instead of specifying the components of total allowed compensation; and
2. the most common differences in timing that could arise from various types of regulatory schemes.

All 10 IASB members agreed with this decision.

Regulatory returns on an asset not yet available for use (Agenda Papers 9B and 9C)

The IASB tentatively decided that the Standard specify that when an entity has an enforceable present right to regulatory returns on an asset not yet available for use, those returns would form part of the total allowed compensation for goods or services supplied during the construction period of that asset. The Standard will provide guidance for entities to assess whether their rights to these regulatory returns are enforceable.

Eight of nine IASB members agreed with this decision. One IASB member was absent.

Next step

The IASB will continue to redeliberate the project proposals.

Disclosure Initiative—Targeted Standards-level Review of Disclosures (Agenda Paper 11)

The IASB met on 18 July 2022 to explore possible ways of taking the project forward in the light of the feedback on its Exposure Draft Disclosure Requirements in IFRS Standards—A Pilot Approach.

The IASB was not asked to make any decisions.

Next step

The IASB will decide the project’s direction.

Management Commentary (Agenda Paper 15)

The IASB met on 20 July 2022 to receive an update on the project. It was not asked to make any decisions.

Next step

The IASB will discuss the project’s direction.

Contractual Cash Flow Characteristics of Financial Assets (Amendments to IFRS 9) (Agenda Paper 16)

The IASB met on 20 July 2022 to discuss how to clarify the requirements in IFRS 9 Financial Instruments for assessing a financial asset’s contractual cash flow characteristics. The IASB:

• discussed the concept of a basic lending arrangement, including contractual terms that could change the timing or amount of contractual cash flows (Agenda Paper 16A).
• discussed the characteristics of financial assets with non-recourse features and contractually linked instruments (Agenda Paper 16B).

The IASB was not asked to make any decisions.

Next step

The IASB will continue to discuss potential clarifications to the requirements.

Goodwill and Impairment (Agenda Paper 18)

The IASB met on 21 July 2022 to discuss its Goodwill and Impairment project.

The IASB continued its discussions on:

• its preliminary views about improving the disclosure requirements for business combinations as described in the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment; and
• possible ways forward to improve disclosure requirements for business combinations.

In this meeting the IASB discussed:

• research and analysis on matters discussed in its April 2022 meeting about the possible ways forward to improve disclosure requirements for business combinations after comments made by IASB members at that meeting.

The IASB was not asked to make any decisions.

Next step

The IASB will make decisions about:

1. whether to continue developing proposals to require entities to disclose information about the subsequent performance of business combinations and to disclose quantitative information about expected synergies;
2. whether to retain the impairment-only model to account for goodwill, or to explore reintroducing amortisation of goodwill; and
3. other topics within the scope of the project.

Primary Financial Statements (Agenda Paper 21)

The IASB met on 19–21 July 2022 to redeliberate the proposals in its Exposure Draft General Presentation and Disclosures relating to:

• entities with specified main business activities;
• disclosures relating to operating expenses by nature; and
• unusual income and expenses.

Entities with specified main business activities—Issues specific to the investing category (Agenda Paper 21A)

The IASB tentatively decided:

1. to require an entity that invests as a main business activity to classify in the operating category income and expenses from assets that would otherwise be classified in the investing category. All 10 IASB members agreed with this decision.
2. to permit an entity to group assets with shared characteristics for the purpose of assessing whether those investments are made as a main business activity. The way an entity groups financial assets for this assessment should be consistent with the way it groups financial assets into classes for the purposes of disclosures about financial instruments, in accordance with IFRS 7 Financial Instruments: Disclosures. All 10 IASB members agreed with this decision.
3. to add application guidance clarifying that income and expenses from financial assets arising from providing financing to customers are classified in the operating category. The IASB also decided to explore a related disclosure requirement. All 10 IASB members agreed with this decision.

Entities with specified main business activities—Issues specific to the financing category (Agenda Paper 21B)

The IASB tentatively decided:

1. to confirm the proposed accounting policy choice for an entity for classifying income and expenses from liabilities that arise from transactions that involve only the raising of finance. All 10 IASB members agreed with this decision.
2. to confirm that the proposed accounting policy choice described in (a) is not applied to specified income and expenses from other liabilities. All 10 IASB members agreed with this decision.
3. to confirm the proposed requirement for entities that invest in financial assets as a main business activity to classify income and expenses from cash and cash equivalents in the operating category. All 10 IASB members agreed with this decision.
4. to explore withdrawing the accounting policy choice for classifying income and expenses from cash and cash equivalents proposed for entities that provide financing to customers as a main business activity. All 10 IASB members agreed with this decision.

Disclosures of operating expenses by nature in the notes (Agenda Paper 21C)

The IASB tentatively decided:

1. to require an entity to disclose the amounts of depreciation, amortisation and employee benefits included in each line item in the statement of profit or loss. All 10 IASB members agreed with this decision.
2. to explore an approach that would require an entity to disclose, for all operating expenses disclosed in the notes, the amounts included in each line item in the statement of profit or loss. Nine of 10 IASB members agreed with this decision.

Unusual income and expenses (Agenda Paper 21E)

The IASB considered the feedback from a discussion of unusual income and expenses at the joint meeting of the Capital Markets Advisory Committee and Global Preparers Forum in June 2022 and the Accounting Standards Advisory Forum in July 2022. The IASB discussed the questions it will need to resolve to proceed with a definition of unusual income and expenses and areas to explore in targeted outreach.

The IASB was not asked to make any decisions.

Next step

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

Post-implementation Review of IFRS 9—Impairment (Agenda Paper 27)

The IASB met on 19 July 2022 to discuss objectives, activities and an anticipated time line for the first phase of the Post-implementation Review of the IFRS 9 Financial Instruments impairment requirements.

The IASB was not asked to make any decisions.

Next step

The IASB plans to meet with stakeholders from September 2022 to February 2023 and expects to publish a request for information in the first half of 2023.

Maintenance and consistent application

Maintenance and consistent application (Agenda Paper 12)

The IASB met on 20 July 2022 to discuss its projects on Supplier Finance Arrangements and Non-current Liabilities with Covenants (Amendments to IAS 1), as well as agenda decisions and other matters discussed at the June 2022 meeting of the IFRS Interpretations Committee (Committee).

Supplier Finance Arrangements (Agenda Papers 12A–12E)

The IASB discussed feedback on its Exposure Draft Supplier Finance Arrangements. The Exposure Draft proposed amendments to the disclosure requirements in IAS 7 Statement of Cash Flows and in IFRS 7 Financial Instruments: Disclosures to enable users of financial statements to assess the effects of such arrangements.

The IASB was not asked to make any decisions.

Next step

The IASB will consider the project’s direction.

Non-current Liabilities with Covenants (IAS 1): Effective date and due process (Agenda Paper 12F)

The IASB discussed the amendments to IAS 1 Presentation of Financial Statements that it tentatively decided to make as part of its project on Non-current Liabilities with Covenants (Amendments to IAS 1).

The IASB tentatively decided to require entities to apply the amendments for annual reporting periods beginning on or after 1 January 2024.

All 10 IASB members agreed with this decision.

The IASB decided that the amendments do not require re-exposure.

All 10 IASB members agreed with this decision.

No IASB member indicated an intention to dissent from issuing the amendments.

All 10 IASB members confirmed they were satisfied the IASB has complied with the applicable due process requirements and has undertaken sufficient consultation and analysis to begin the process for balloting the amendments.

Next step

The IASB expects to issue the amendments in the fourth quarter of 2022.

Negative Low Emission Vehicle Credits (IAS 37): Finalisation of agenda decision (Agenda Paper 12G)

The IASB was asked whether it objected to the Agenda Decision Negative Low Emission Vehicle Credits (IAS 37 Provisions, Contingent Liabilities and Contingent Assets).

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in July 2022 in an addendum to IFRIC Update June 2022.

Special Purpose Acquisition Companies (SPAC): Classification of Public Shares as Financial Liabilities or Equity (IAS 32): Finalisation of agenda decision (Agenda Paper 12H)

The IASB was asked whether it objected to the Agenda Decision Special Purpose Acquisition Companies (SPAC): Classification of Public Shares as Financial Liabilities or Equity (IAS 32 Financial Instruments: Presentation).

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in July 2022 in an addendum to IFRIC Update June 2022.

Transfer of Insurance Coverage under a Group of Annuity Contracts (IFRS 17): Finalisation of agenda decision (Agenda Paper 12I)

The IASB was asked whether it objected to the Agenda Decision Transfer of Insurance Coverage under a Group of Annuity Contracts (IFRS 17 Insurance Contracts).

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in July 2022 in an addendum to IFRIC Update June 2022.

IFRIC Update June 2022 (Agenda Paper 12J)

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

The IASB was not asked to make any decisions.