IASB Update November 2021

Work plan overview

IASB work plan update (Agenda Paper 8)

Post-implementation Reviews

The IASB met on 16 November 2021 to consider the timing of Post-implementation Reviews (PIRs) of IFRS 15 Revenue from Contracts with Customers, IFRS 16 Leases and the impairment and hedge accounting requirements in IFRS 9 Financial Instruments.

The IASB decided that in the second half of 2022 it will:

• begin the PIRs of IFRS 15 and the impairment requirements in IFRS 9; and
• consider when to begin the PIRs of IFRS 16 and the hedge accounting requirements in IFRS 9.

All 12 IASB members agreed with these decisions.

Next step

The IASB will:

• discuss a project plan for the PIRs of IFRS 15 and the impairment requirements in IFRS 9; and
• consider in the second half of 2022 when to begin the PIRs of IFRS 16 and the hedge accounting requirements in IFRS 9.

Research and standard-setting

Dynamic Risk Management (Agenda Paper 4)

The IASB met on 19 November 2021 to discuss refinements to the Dynamic Risk Management model (DRM model) to address challenges identified during meetings with preparers.

Refinements to the DRM—Risk Limits (Agenda Paper 4A)

To enable an entity to better reflect its risk management strategy in the DRM model, the IASB tentatively decided:

1. to revise the definition of the target profile as the range (risk limits) within which the current net open risk position can vary while still being consistent with an entity’s risk management strategy;
2. to introduce to the DRM model a ‘risk mitigation intention’ element, representing the extent of risk an entity intends to mitigate using derivatives;
3. to revise the requirements for construction of benchmark derivatives so that the benchmark derivatives represent the risk mitigation intention; and
4. to introduce prospective assessments to ensure that an entity uses the DRM model to mitigate repricing risk due to changes in interest rates and achieve its target profile, as well as similar retrospective assessments to reflect misalignment arising from unexpected changes in the DRM model.

All 12 IASB members agreed with these decisions.

Designation of a portion of prepayable assets in the DRM model (Agenda Paper 4B)

The IASB tentatively decided not to make additional refinements in the DRM model to allow an entity to designate a portion of a portfolio of prepayable assets.

All 12 IASB members agreed with this decision.

Next step

The IASB will consider whether to take further action in relation to other topics identified from outreach feedback.

Post-implementation Review of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities (Agenda Paper 7)

The IASB met on 16 November 2021 to decide:

• whether to take further action on two topics arising from the Post-implementation Review of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities; and
• whether to conclude the Post-implementation Review.

Before deciding to take action on the topics arising from the Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 or concluding this Post-implementation Review, the IASB decided to develop further aspects of its strategy for deciding whether to take further action based on feedback from post-implementation reviews.

Next step

The IASB will discuss its strategy at a future meeting.

Rate-regulated Activities (Agenda Paper 9)

The IASB met on 15 November 2021 to complete its discussion of the feedback on its Exposure Draft Regulatory Assets and Regulatory Liabilities. (The Exposure Draft sets out the IASB’s proposals for a model to account for regulatory assets and regulatory liabilities. If issued as a new IFRS Standard, the proposals would replace IFRS 14 Regulatory Deferral Accounts.)

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.

Goodwill and Impairment (Agenda Paper 18)

The IASB met on 16 November 2021 to redeliberate aspects of the IASB’s preliminary views on improving the disclosure requirements in IFRS 3 Business Combinations. (The Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment sets out the IASB’s preliminary views on this matter.)

Expected synergies arising from a business combination (Agenda Paper 18A)

The IASB discussed aspects of the feedback on its preliminary view of requiring an entity to disclose (a) the estimated amount or range of amounts of the synergies, and (b) when the synergies are expected to be realised.

To understand better the practical concerns raised by respondents the IASB is testing examples with stakeholders. For the purpose of testing those examples the IASB decided that the examples should illustrate disclosure of information about:

1. total expected synergies disaggregated by nature; for example, total revenue, total cost and totals for other types of synergies; and
2. when the benefits expected from the synergies are expected to start and how long they will last (which would require an entity to identify whether those synergies are expected to be one-off or recurring).

Eleven of 12 IASB members agreed with these decisions.

The IASB also tentatively decided:

1. not to define ‘synergies’.
2. not to make changes to its preliminary view as a result of feedback on other specific aspects of its preliminary view.

Eleven of 12 IASB members agreed with these tentative decisions.

Contribution of the acquired business (Agenda Paper 18B)

The IASB tentatively decided:

1. to retain the requirement in paragraph B64(q) of IFRS 3.
2. to explain the objective of the requirement in paragraph B64(q)(ii) of IFRS 3 but not to provide guidance on how the information required by paragraph B64(q)(ii) should be prepared.

Eleven of 12 IASB members agreed with these tentative decisions. One member was absent.

The IASB tentatively decided to specify in paragraph B64(q)(ii) of IFRS 3 that the basis that an entity applies in preparing the information required by that paragraph is an accounting policy. Nine of 12 IASB members agreed with this tentative decision. One member was absent.

The IASB tentatively decided to replace the term ‘profit or loss’ in paragraph B64(q) of IFRS 3 with ‘operating profit or loss’. ‘Operating profit or loss’ will be as defined in the IASB’s Primary Financial Statements project. Eleven of 12 IASB members agreed with this tentative decision. One member was absent.

The IASB tentatively decided not to add a requirement to disclose information about cash flows arising from operating activities. Ten of 12 IASB members agreed with this tentative decision. One member was absent.

Liabilities arising from financing activities and defined benefit pension liabilities (Agenda Paper 18C)

The IASB discussed feedback on its preliminary view on developing proposals to specify that liabilities arising from financing activities and defined benefit pension liabilities are major classes of liabilities. The IASB tentatively decided to achieve the objective of its preliminary view by not specifying that these liabilities are major classes of liabilities but instead by proposing to amend:

1. paragraph B64(i) of IFRS 3 to remove the term ‘major’; and
2. paragraph IE72 of the Illustrative Examples accompanying IFRS 3 to illustrate liabilities arising from financing activities and defined benefit pension liabilities as classes of liabilities assumed.

All 12 IASB members agreed with this tentative decision.

Next step

The IASB will continue redeliberating its preliminary views that it should improve the disclosure requirements in IFRS 3 at future meetings.

Primary Financial Statements (Agenda Paper 21)

The IASB met on 16 and 19 November 2021 to redeliberate some of the proposals in the Exposure Draft General Presentation and Disclosures relating to management performance measures by:

• continuing to discuss the definition of management performance measures, focusing on:
• management’s view of an aspect of performance—Agenda Paper 21A; and
• public communications outside financial statements—Agenda Paper 21B; and
• discussing the requirement for management performance measures to faithfully represent aspects of financial performance to users of financial statements—Agenda Paper 21C.

Management performance measures—management’s view of an aspect of performance (Agenda Paper 21A)

The IASB tentatively decided:

1. to retain ‘providing management’s view of an aspect of an entity’s financial performance’ as the objective of management performance measures. Ten of 12 IASB members agreed with this decision.
2. to also retain ‘communicate to users of financial statements management’s view of an aspect of an entity’s financial performance’ in the definition of management performance measures. Eleven of 12 IASB members agreed with this decision.
3. to establish a rebuttable presumption that a subtotal of income and expenses included in public communications outside financial statements represents management’s view of an aspect of the entity’s financial performance. All 12 IASB members agreed with this decision.
4. to allow an entity to rebut the presumption in paragraph (c) only when the entity has reasonable and supportable information demonstrating that a subtotal of income and expenses does not represent management’s view of an aspect of performance. All 12 IASB members agreed with this decision.
5. to provide high-level application guidance on how to assess whether the entity has reasonable and supportable information to support the rebuttal. The guidance would include an explanation that the assessment of whether a subtotal of income and expenses is a management performance measure is made for the subtotal as a whole. All 12 IASB members agreed with this decision.

Management performance measures and the scope of public communications (Agenda Paper 21B)

The IASB tentatively decided to narrow the scope of public communications considered for the purposes of applying the definition of management performance measures, by excluding oral communications, transcripts and social media posts.

Eleven of 12 IASB members agreed with this decision.

Management performance measures—faithful representation (Agenda Paper 21C)

The IASB tentatively decided: 

1. to add application guidance on how an entity could apply the requirement to describe a management performance measure in a clear and understandable manner that would not mislead users. The guidance would address the need for an entity to be transparent about the meaning of the terms used and the methods applied, in particular when they differ from those used when applying IFRS Accounting Standards.
2. given the general requirement for information in financial statements to give a faithful representation, there is no need to repeat that requirement in the specific requirements for management performance measures.

All 12 IASB members agreed with these decisions.

Next step

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

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

The IASB met on 19 November 2021 to discuss whether and, if so, how to propose amendments to the IFRS for SMEs Standard.

Towards an exposure draft—IFRS 16 Leases (Agenda Papers 30A–30B)

The IASB tentatively decided:

1. to retain Section 20 Leases of the IFRS for SMEs Standard unchanged; and
2. to consider amending the IFRS for SMEs Standard to align with IFRS 16 Leases in a future review of the Standard.
   Seven of 12 IASB members agreed with these decisions.
3. not to pursue improving disclosure requirements for operating leases without changing the recognition and measurement requirements in Section 20 Leases of the IFRS for SMEs Standard.
   All 12 IASB members agreed with this decision.

Towards an exposure draft—IAS 19 Employee Benefits (2011) (Agenda Paper 30C)

The IASB tentatively decided:

1. to propose amendments to the IFRS for SMEs Standard to align the recognition requirements for termination benefits in Section 28 of the IFRS for SMEs Standard with the 2011 amendments to IAS 19 Employee Benefits.
   All 12 IASB members agreed with this decision.
2. to retain the accounting policy option in paragraph 28.24 of the IFRS for SMEs Standard.
   Ten of 12 IASB members agreed with this decision.

Towards an exposure draft—simplifications permitted by paragraph 28.19 (Agenda Paper 30D)

The IASB tentatively decided:

1. to propose removing paragraph 28.19 of the IFRS for SMEs Standard.
   All 12 IASB members agreed with this decision.
2. to include in the Invitation to Comment an alternative proposal clarifying how to apply paragraph 28.19 of the IFRS for SMEs Standard, if stakeholders do not agree to remove paragraph 28.19.
   Ten of 12 IASB members agreed with this decision.

Towards an exposure draft—other topics with no amendments recommended (Agenda Paper 30E)

The IASB tentatively decided to retain unchanged the IFRS for SMEs Standard for the topics identified in Agenda Paper 30E, considering the feedback on the Request for Information Comprehensive Review of the IFRS for SMEs Standard, except for the recognition and measurement of developments costs. Agenda Paper 30E discusses feedback on topics not addressed by the IFRS for SMEs Standard and topics respondents have brought to the IASB’s attention relating to the IFRS for SMEs Standard.

All 12 IASB members agreed with this decision.

The IASB decided to explore possible changes to the recognition and measurement of developments costs in the IFRS for SMEs Standard at a future meeting.

Eight of 12 IASB members agreed with this decision.

Next step

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

Strategy and governance

Third Agenda Consultation (Agenda Paper 24)

The IASB met on 15 November 2021 to discuss feedback on its Request for Information Third Agenda Consultation. The Request for Information sought feedback on:

• the strategic direction and balance of the IASB’s activities;
• the criteria for assessing the priority of financial reporting issues that could be added to the work plan for 2022 to 2026; and
• new financial reporting issues that could be given priority in the IASB’s work plan for 2022 to 2026.

The IASB was not asked to make any decisions.

Next step

At future meetings, the IASB will continue discussing feedback on the Request for Information and make decisions on the matters raised in it.