IASB Update May 2023

Work plan overview

IASB work plan update (Agenda Paper 8)

The IASB met on 22 May 2023 to receive an update on its work plan. The IASB was not asked to make any decisions.

Next step

The IASB expects to receive an update on its work plan in three to four months.

Research and standard-setting

Dynamic Risk Management (Agenda Paper 4)

The IASB met on 24 May 2023 to continue its discussions on the Dynamic Risk Management (DRM) model, with a set of illustrative examples intended to demonstrate the designation and application of the DRM model.

The IASB was not asked to make any decisions.

Next step

The IASB will continue its discussions on the topics identified in the project plan.

Financial Instruments with Characteristics of Equity (Agenda Paper 5)

The IASB met on 24 May 2023 to discuss:

• proposed consequential amendments to the prospective IFRS Accounting Standard Subsidiaries without Public Accountability (that Accounting Standard is to be issued as part of the IASB’s project which aims to reduce disclosure requirements for eligible subsidiaries); and
• the due process steps—including permission to begin the balloting process—for the Exposure Draft Financial Instruments with Characteristics of Equity (FICE exposure draft).

Subsidiaries without public accountability—disclosures (Agenda Paper 5A)

The IASB tentatively decided to propose consequential amendments to be made to the IFRS Accounting Standard Subsidiaries without Public Accountability after it has been issued. The amendments would add to the Standard the following disclosure requirements that are to be proposed in the FICE exposure draft:

1. for all financial liabilities and equity instruments within the scope of IAS 32 Financial Instruments: Presentation, an entity would disclose and categorise claims against its assets in a way that reflects differences in their nature and priority, and at a minimum, distinguishes between:
   1. secured and unsecured financial instruments; and
   2. contractually subordinated and unsubordinated financial instruments;
2. for financial instruments with characteristics of both financial liabilities and equity instruments (except for stand-alone derivatives), an entity would disclose information about:
   1. debt-like features in financial instruments that are classified as equity instruments;
   2. equity-like features in financial instruments that are classified as financial liabilities;
   3. debt-like and equity-like features that determine the classification of such financial instruments as financial liabilities, equity instruments or compound financial instruments;
   4. terms and conditions that indicate priority on liquidation;
   5. terms and conditions that could lead to changes in priority on liquidation;
   6. more than one level of contractual subordination, if applicable (for example, if some subordinated liabilities are contractually subordinated to other subordinated liabilities);
   7. any significant uncertainty regarding the application of relevant laws or regulations that could affect how priority will be determined on liquidation; and
   8. intra-group arrangements such as guarantees that may affect their priority on liquidation (for example, which entities are providing and receiving guarantees);
3. an entity would disclose information about terms and conditions that become, or stop being, effective with the passage of time before the end of the contractual term of the financial instrument;
4. for instruments containing obligations to redeem own equity instruments, an entity would disclose:
   1. the amount removed from equity and included in financial liabilities when the obligation was initially recognised and the component of equity from which it was removed;
   2. the amount of remeasurement gain or loss recognised in profit or loss during the reporting period;
   3. the amount of gain or loss, if any, that was recognised on settlement if the obligation is settled during the reporting period; and
   4. the amount removed from financial liabilities and included in equity if the written put option has expired unexercised;
5. an entity would separately disclose the total gains or losses in each reporting period that arise from remeasuring financial liabilities containing contractual obligations to pay amounts based on the entity’s performance or changes in the entity’s net assets (that are measured at fair value through profit or loss); and
6. an entity would disclose the significant judgements it made in determining the classification of a financial instrument, or its component parts, as a financial liability or as equity.

Nine of 14 IASB members agreed with the decisions in (b)(iv)–(viii). All 14 IASB members agreed with the other decisions.

Due process and permission to begin the balloting process (Agenda Paper 5B)

The IASB decided to set a comment period of 120 days for the FICE exposure draft.

All 14 IASB members agreed with this decision.

One IASB member indicated an intention to dissent from the proposals in the FICE exposure draft.

All 14 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 FICE exposure draft.

Next step

The staff will prepare the exposure draft for balloting.

Post-implementation Review of IFRS 15 Revenue from Contracts with Customers (Agenda Paper 6)

The IASB met on 22 May 2023 to discuss its forthcoming Request for Information Post-implementation Review of IFRS 15 Revenue from Contracts with Customers.

The IASB:

1. approved the publication of the Request for Information for public comment.
   All 14 IASB members agreed with this decision.
2. set a 120-day comment period.
   Thirteen of 14 IASB members agreed with this decision.

Next step

The IASB expects to publish the Request for Information at the end of June 2023.

Rate-regulated Activities (Agenda Paper 9)

The IASB met on 24 May 2023:

• to receive an update on the status of the project, including the expected timing for completing redeliberations and issuing the prospective Standard; and
• to redeliberate the proposals in its Exposure Draft Regulatory Assets and Regulatory Liabilities relating to the timing of initial recognition of regulatory assets and regulatory liabilities (Agenda Paper 9A).

Timing of initial recognition (Agenda Paper 9A)

The IASB tentatively decided that the prospective Standard would retain:

1. the proposal to require recognition of all regulatory assets and all regulatory liabilities existing at the end of the reporting period; and
2. the proposal to treat any regulatory assets or regulatory liabilities arising from regulated rates denominated in a foreign currency as monetary items when applying IAS 21 The Effects of Changes in Foreign Exchange Rates.

All 14 IASB members agreed with these decisions.

Next step

The IASB will continue to redeliberate the project proposals.

Management Commentary (Agenda Paper 15A)

The IASB met on 23 May 2023 for an education session on:

1. the IFRS Foundation staff analysis of the similarities and differences between proposals in the Exposure Draft Management Commentary, published in May 2021, and the Integrated Reporting Framework, revised in January 2021; and
2. feedback on that analysis and on the approach to further alignment between these documents from the IFRS Advisory Council and the Integrated Reporting and Connectivity Council in April 2023.

The IASB was not asked to make any decisions.

Next step

The IASB will consider the project direction at a future meeting.

Business Combinations—Disclosures, Goodwill and Impairment (Agenda Paper 18)

The IASB met on 24 May 2023 to discuss proposed changes to IAS 36 Impairment of Assets in relation to the impairment test of cash-generating units containing goodwill (impairment test).

Removing the annual quantitative impairment test (Agenda Paper 18A)

The IASB tentatively decided:

1. to retain the requirement to perform a quantitative impairment test annually; and
2. not to pursue any of the alternatives to it that were suggested by respondents to the IASB’s Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment.

All 14 IASB members agreed with these decisions.

Feasibility of designing a different impairment test (Agenda Paper 18B)

The IASB tentatively decided that it is not feasible to design a different impairment test that would, at a reasonable cost, be significantly more effective than the impairment test currently required by IAS 36.

All 14 IASB members agreed with this decision.

Suggestions to improve the effectiveness of the impairment test (Agenda Papers 18C–18D)

The IASB discussed:

1. suggestions to improve the effectiveness of the impairment test that were provided by respondents to its Discussion Paper;
2. the criteria to consider those suggestions; and
3. feedback from the IASB’s consultative groups and the IFRS Interpretations Committee on some of those suggestions.

The IASB was not asked to make any decisions.

Next steps

The IASB will make tentative decisions on matters including whether:

1. to pursue respondents’ suggestions to improve the effectiveness of the impairment test; and
2. to clarify other aspects of the IASB’s proposed package of disclosure requirements for business combinations.

The IASB will then consider whether its proposed package of decisions meets the project objective and whether it will publish an exposure draft setting out its proposals.

Primary Financial Statements (Agenda Paper 21) 

The IASB met on 23 May 2023 to redeliberate the proposals in the Exposure Draft General Presentation and Disclosures on: 

• associates and joint ventures accounted for using the equity method (Agenda Paper 21A); and
• issues relating to management performance measures and IFRS 8 Operating Segments (Agenda Paper 21B).

Associates and joint ventures accounted for using the equity method (Agenda Paper 21A) 

The IASB reconfirmed its tentative decision to require all entities to classify, in the investing category in the statement of profit or loss, income and expenses from associates and joint ventures accounted for using the equity method.

Thirteen of 14 IASB members agreed with this decision.

The IASB tentatively decided to provide transition requirements that will permit an entity to elect to measure investments in associates or joint ventures at fair value through profit or loss in accordance with IFRS 9 Financial Instruments when the investment is held by, or is held through, an entity that is a venture capital organisation, a mutual fund, unit trust and similar entities including investment-linked insurance funds (see paragraph 18 of IAS 28 Investments in Associates and Joint Ventures).

All 14 IASB members agreed with this decision.

The IASB tentatively decided to withdraw the new paragraph 38A of IAS 7 Statement of Cash Flows proposed in the Exposure Draft. As a result, an entity would be required to classify in a single category dividends received from associates and joint ventures accounted for using the equity method, applying the requirements applicable to the entity for other dividends received.

Thirteen of 14 IASB members agreed with this decision.

Issues related to Management Performance Measures and IFRS 8 Operating Segments (Agenda Paper 21B) 

The IASB tentatively decided:

1. to clarify that management performance measures are measures that reflect management’s view of the performance of the entity as a whole.
   All 14 IASB members agreed with this decision.
2. to confirm the proposal in paragraph B83 of the Exposure Draft, which states that, if one or more of an entity’s management performance measures are the same as part of the operating segment information disclosed by the entity in applying IFRS 8, the entity may disclose information about those management performance measures in the same note as the operating segment information, provided the entity either:
   1. includes in that note all the information required to be disclosed for management performance measures; or
   2. includes in a separate note all the information required for management performance measures.

Eleven of 14 IASB members agreed with this decision.

The IASB asked the staff to consider the relationship between paragraph B83 and the general requirement for presentation of notes in a systematic manner in paragraph 97 of the Exposure Draft when drafting the proposed Standard.

The IASB discussed other outstanding issues related to management performance measures for which the staff had concluded no further action was required, including:

1. subtotals included in the statement of profit or loss;
2. subtotals (other than specified subtotals) disclosed in the notes and not presented in the statement of profit or loss; and
3. public communications related to interim financial statements.

The IASB was not asked to make any decisions.

The IASB discussed a consequential amendment to paragraph 23(f) of IFRS 8, which refers to a requirement in IAS 1 Presentation of Financial Statements to disclose the nature and amount of items of income or expense separately when they are material.

The IASB was not asked to make any decisions.

Next step

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

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

The IASB met on 23 May 2023 to continue redeliberating the proposals in the Exposure Draft Subsidiaries without Public Accountability: Disclosures.

Feedback on proposed disclosure requirements (Agenda Paper 31A)

The IASB tentatively decided to revise the proposed disclosure requirements in the Exposure Draft under the subheadings:

1. IFRS 3 Business Combinations—by adding subparagraph B64(j)(i) of IFRS 3;
2. IFRS 7 Financial Instruments: Disclosures—by restricting the application of paragraphs 62, 66 and 67 of the Exposure Draft to eligible subsidiaries that provide financing to customers as a main business activity;
3. IFRS 12 Disclosure of Interests in Other Entities—by:
   1. adding paragraphs 14, 15, 19D(b), 19E, 19F, 30 and 31 of IFRS 12; and
   2. amending paragraph 68 of the Exposure Draft to add ‘joint operations’ from paragraph B4 of IFRS 12;
4. IFRS 15 Revenue from Contracts with Customers—by:
   1. withdrawing paragraph 93 of the Exposure Draft; and
   2. adding paragraph 119(a) of IFRS 15;
5. IFRS 16 Leases—by:
   1. withdrawing paragraphs 100(d) and 105 of the Exposure Draft; and
   2. adding subparagraphs (e), (g) and (i) of paragraph 53 of IFRS 16;
      
6. IAS 1 Presentation of Financial Statements—by:
   1. adding paragraph 137 of IAS 1; and
   2. withdrawing paragraphs 120–122 of the Exposure Draft and retaining paragraphs 112–114 of IAS 1 as applicable;
7. IAS 19 Employee Benefits—by:
   1. adding paragraph 141(b) of IAS 19, in particular the requirement to disclose separately the effects of interest income;
   2. replacing paragraph 152(c)(iii) of the Exposure Draft with paragraph 141(c)(i) of IAS 19; and
   3. adding paragraph 147(b) of IAS 19; and
8. IAS 27 Separate Financial Statements—by amending paragraphs 177–180 of the Exposure Draft to reference the applicable IFRS 12 disclosure requirements.

All 14 IASB members agreed with these decisions.

Paragraph 16 of the draft Standard (Agenda Paper 31B)

The IASB tentatively decided:

1. to retain paragraph 16 of the Exposure Draft and not add guidance; and
2. an overall disclosure objective for the Standard was not necessary.

All 14 IASB members agreed with these decisions.

Disclosure requirements about transition in other IFRS Accounting Standards (Agenda Paper 31C)

The IASB tentatively decided to proceed with its proposal in the Exposure Draft that disclosure requirements about the transition to a new or amended IFRS Accounting Standard set out in that new or amended Standard apply to eligible subsidiaries.

All 14 IASB members agreed with this decision.

New disclosure requirements in IFRS Accounting Standards (Agenda Paper 31D)

The IASB tentatively decided that until the IASB issues an amendment to the prospective Standard, eligible subsidiaries would be required to comply with disclosure requirements in amendments to IFRS Accounting Standards that have been issued after the publication of the Exposure Draft.

All 14 IASB members agreed with this decision.

Next step

In a future meeting, the IASB will consider whether to start the balloting process for the prospective Standard.

Maintenance and consistent application

Maintenance and consistent application (Agenda Paper 12)

The IASB met on 22 May 2023 to discuss the next cycle of annual improvements to IFRS Accounting Standards.

Lessee Derecognition of Lease Liabilities (IFRS 9)—Potential annual improvement (Agenda Paper 12A)

The IASB discussed a potential lack of clarity in IFRS 9 Financial Instruments about how a lessee is required to account for an extinguished lease liability. This lack of clarity has arisen because paragraph 2.1(b)(ii) of IFRS 9 includes a cross-reference to paragraph 3.3.1, but not to paragraph 3.3.3 of IFRS 9.

The IASB tentatively decided:

1. to propose an amendment to paragraph 2.1(b)(ii) of IFRS 9 to add a cross-reference to paragraph 3.3.3 of IFRS 9;
2. to require an entity to apply this proposed amendment prospectively; and
3. to include this proposed amendment in its next annual improvements cycle.

All 14 IASB members agreed with these decisions.

Disclosure of Deferred Difference between Fair Value and Transaction Price (IFRS 7 IG)—Potential annual improvement (Agenda Paper 12B)

The IASB discussed an inconsistency between paragraph 28 of IFRS 7 Financial Instruments: Disclosures and paragraph IG14 of its accompanying implementation guidance. In 2011 the IASB amended paragraph 28 of IFRS 7 but did not similarly amend paragraph IG14 accompanying IFRS 7.

The IASB tentatively decided:

1. to propose an amendment to paragraph IG14 accompanying IFRS 7 to make it consistent with paragraph 28 of IFRS 7; and
2. to include this proposed amendment in its next annual improvements cycle.

All 14 IASB members agreed with these decisions.

Annual Improvements to IFRS Accounting Standards—Early application and due process (Agenda Paper 12C)

The IASB discussed whether to permit early application of the proposed amendments. The IASB also discussed due process and whether to begin the balloting process.

The IASB tentatively decided to permit early application of the proposed amendments.

All 14 IASB members agreed with this decision.

The IASB decided to allow a comment period of 90 days for the exposure draft.

All 14 IASB members agreed with this decision.

No IASB member indicated an intention to dissent from publication of the exposure draft.

All 14 IASB members confirmed they were satisfied that the IASB has complied with the applicable due process requirements and has undertaken sufficient consultation and analysis to begin the balloting process for the exposure draft.

Next step

The IASB plans to publish an exposure draft in the third quarter of 2023.