IASB Update March 2022

Research and standard-setting

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

The IASB met on 23 March to discuss:

• a summary of the feedback on the Request for Information Post-Implementation Review of IFRS 9—Classification and Measurement; and
• a plan for the next phase of the project.

The IASB was not asked to make any decisions.

Next step

At future meetings the IASB will analyse feedback on:

1. contractual cash flow characteristics (including financial assets with sustainability-linked features and contractually linked instruments);
2. business model assessment;
3. equity instruments and other comprehensive income;
4. modifications to contractual cash flows;
5. amortised cost and the effective interest method; and
6. other matters related to IFRS 9 classification measurement requirements.

The IASB expects to complete its discussions in the third quarter of 2022.

Financial Instruments with Characteristics of Equity (Agenda Paper 5)

The IASB met on 23 March 2022 to discuss the reclassification of financial instruments issued by an entity as financial liabilities or equity instruments.  Questions have arisen in practice about whether IAS 32 Financial Instruments: Presentation permits or requires reclassification after initial recognition. The IASB was not asked to make any decisions.

Next step

The IASB will consider proposals for potential reclassification principles.

Management Commentary (Agenda Paper 15)

The IASB met on 24 March 2022 to discuss 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 continue to discuss feedback on the Exposure Draft at future meetings and decide on a plan for the project’s next phase in the second quarter of 2022.

Extractive Activities (Agenda Paper 19)

The IASB met on 22 March 2022 to consider its plan to explore:

• developing requirements or guidance to improve an entity’s disclosures about its exploration and evaluation expenditure and activities in order to provide more useful information to primary users of financial statements; and
• removing the temporary status of IFRS 6 Exploration for and Evaluation of Mineral Resources.

The plan outlined the research the IASB would need to do to understand:

1. users’ information needs;
2. why users do not currently get information they need;
3. the costs of requiring entities to provide information that users need; and
4. whether the comprehensive review of extractive activities as envisaged by the IASB in 2004 has been completed and, consequently, whether the temporary status of IFRS 6 can be removed.

The IASB decided that, as part of its work on exploring the removal of IFRS 6’s temporary status, it would explore removing paragraphs 13 and 14 of the Standard.

The IASB decided to proceed with the plan.

All 11 IASB members agreed with this decision.

Next step

The IASB will begin its research as set out in the project plan.

Primary Financial Statements (Agenda Paper 21)

The IASB met on 23 March 2022 to redeliberate some of the proposals in the Exposure Draft General Presentation and Disclosures relating to:

• some of the proposals for entities with specified main business activities—Agenda Paper 21A.
• the location and cross-referencing of management performance measures—Agenda Paper 21B.

Entities with specified main business activities—general issues (Agenda Paper 21A)

The IASB tentatively decided to provide additional guidance to that proposed in the Exposure Draft on ‘main business activities’ by clarifying that:

1. the role of main business activities in the requirements of the draft IFRS Accounting Standard is limited to assessing whether an entity invests in the course of its main business activities or provides financing to customers as a main business activity.
2. investing in the course of its main business activities or providing financing to customers as a main business activity is a matter of fact and not an assertion. An entity will need to use its judgement in assessing whether it invests in the course of its main business activities or provides financing to customers as a main business activity. The assessment should be based on observable evidence to the extent available.
3. examples of observable evidence are:
   1. operating performance measures used in public communications.
   2. information about segments, if an entity applies IFRS 8 Operating Segments. Specifically:
      1. a reportable segment that comprises a single business activity indicates that the business activity is a main business activity of the entity.
      2. an operating segment that comprises a single business activity indicates the business activity could be a main business activity of the entity—if the performance of the operating segment is an important indicator of the operating performance of the entity.
4. the specified subtotals similar to gross profit in paragraph B78 of the Exposure Draft are examples of important indicators of operating performance for an entity that invests in the course of its main business activities or provides financing to customers as a main business activity.

        All 11 IASB members agreed with these decisions.

The IASB tentatively decided to clarify that, applying the proposals, an entity assesses at reporting-entity level whether it invests in the course of its main business activities or provides financing to customers as a main business activity. All of 11 IASB members agreed with this decision.

The IASB also tentatively decided to clarify that, applying the proposals, an entity applies prospectively any change in outcome of its assessment of whether it invests in the course of its main business activities or provides financing to customers as a main business activity; thus, applying the proposals, the entity does not restate comparatives. All 11 IASB members agreed with this decision.

The IASB further tentatively decided to require an entity to disclose the following when there is a change in the outcome of its assessment of whether it invests in the course of its main business activities or provides financing to customers as a main business activity:

1. the fact that there has been a change. All 11 IASB members agreed with this decision.
2. information about the effect of the change that would allow users to perform trend analysis on operating profit. Ten of 11 IASB members agreed with this decision.

Management performance measures—location and cross-referencing (Agenda Paper 21B)

The IASB tentatively decided:

1. to confirm the proposed requirement for an entity to disclose information about management performance measures in a single note to the financial statements. All 11 IASB members agreed with this decision.
2. not to add any requirements relating to an entity including disclosures about management performance measures in the financial statements by reference to another document. The IASB decided it was not necessary to prohibit including the required disclosures in the financial statements by reference to another document because general practice is to include required disclosures by reference to another document only when it is specifically permitted by an IFRS Accounting Standard. All 11 IASB members agreed with this decision.

The IASB also discussed the disclosure in the notes to the financial statements of non-GAAP measures that are not management performance measures. The IASB was not asked to make any decisions.

Next step

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

Business Combinations under Common Control (Agenda Paper 23)

The IASB met on 24 March 2022 to deliberate the objective and scope of its Business Combinations under Common Control project.

The IASB tentatively decided to update the project's objective to reflect the stage of the project and to emphasise that, in developing reporting requirements, the IASB is considering the needs of users of the receiving entity’s (that is, the reporting entity’s) financial statements.

All 11 IASB members agreed with this decision.

The IASB tentatively decided not to expand the project’s scope to address:

1. reporting by any entity in a business combination under common control other than the receiving entity;
2. the reporting, in separate financial statements, by a receiving entity obtaining control of an investment in a subsidiary from a party under common control; or
3. the reporting of common control transactions other than business combinations under common control.

Ten of 11 IASB members agreed with this decision.

Next step

The IASB will deliberate other proposals arising from the project at a future meeting.

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

The IASB met on 24 March 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—aligning disclosure requirements with IFRS Accounting Standards (Agenda Paper 30A)

The IASB tentatively decided on an approach to develop proposed amendments to the disclosure requirements in the IFRS for SMEs Accounting Standard that would result in consistency between these disclosure requirements and the Exposure Draft Subsidiaries without Public Accountability: Disclosures.

All 11 IASB members agreed with this decision.

Towards an exposure draft—IFRS 9 Financial Instruments (Issued financial guarantee contracts) (Agenda Paper 30B)

The IASB tentatively decided to propose amendments to the IFRS for SMEs Accounting Standard to require the issuer of a financial guarantee contract to initially measure the contract at the premium received (plus the present value of any future premium payments receivable) and subsequently measure it at the higher of:

1. the expected credit losses; and 
2. the amount initially recognised, if any, amortised on a straight-line basis over the life of the guarantee.

Ten of 11 IASB members agreed with this decision.

Next step

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

Maintenance and consistent application

Maintenance and consistent application (Agenda Paper 12)

The IASB met on 23 March 2022 to consider an agenda decision—and other matters—discussed at the February 2022 meeting of the IFRS Interpretations Committee.

TLTRO III Transactions (IFRS 9 and IAS 20): Finalisation of agenda decision (Agenda Paper 12A)

The IASB discussed whether any IASB member objected to the Agenda Decision TLTRO III Transactions (IFRS 9 Financial Instruments and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance).

No IASB member objected to the Agenda Decision.

Next step

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

IFRIC Update February 2022 (Agenda Paper 12B)

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

The IASB was not asked to make any decisions.

Strategy and governance

Third Agenda Consultation (Agenda Paper 24)

The IASB met on 22 March 2022 to discuss new financial reporting issues to be added to the IASB’s work plan for 2022 to 2026.

The IASB discussed:

• an analysis approach for potential projects (Agenda Paper 24A);
• a proposed shortlist of potential projects to be discussed at a future meeting (Agenda Paper 24B);
• other potential projects described in Appendix B to the Request for Information Third Agenda Consultation (Agenda Paper 24C); and
• other suggestions for potential projects (Agenda Paper 24D).

Agenda Paper 24E—Potential projects—Feedback summary for proposed shortlisted projects—was provided for information only.

Potential projects—Approach to staff analysis (Agenda Paper 24A)

The IASB discussed its approach to analysing potential projects and the next steps to be taken.

The IASB was not asked to make any decisions.

Potential projects—Proposed shortlisted projects (Agenda Paper 24B)

The IASB tentatively decided to shortlist these projects for discussion at a future meeting (in alphabetical order):

1. climate-related risks;
2. cryptocurrencies and related transactions;
3. going concern disclosures;
4. intangible assets;
5. operating segments;
6. pollutant pricing mechanisms; and
7. statement of cash flows and related matters.

All 11 IASB members agreed with this decision.

The IASB will decide which of the shortlisted projects to add to its work plan for 2022 to 2026 at a future meeting.

Potential projects—Other projects described in the Request for Information (Agenda Paper 24C)

The IASB tentatively decided none of the potential projects in Agenda Paper 24C should be included on the shortlist for discussion at a future meeting.

All 11 IASB members agreed with this decision.

Potential projects—Other suggestions (Agenda Paper 24D)

The IASB tentatively decided none of the potential projects in Agenda Paper 24D should be included on the shortlist for discussion at a future meeting.

All 11 IASB members agreed with this decision.

Next step

The IASB will discuss the shortlisted projects and decide which projects to add to its work plan for 2022 to 2026.