IASB Update October 2023

Research and standard-setting

Dynamic Risk Management (Agenda Paper 4)

The IASB met on 25 October 2023 to discuss the types of risk management activities for which the Dynamic Risk Management (DRM) model would be appropriate and provide useful information.

The IASB was not asked to make any decisions. 

Next step

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

Rate-regulated Activities (Agenda Paper 9)

The IASB met on 25 October 2023:

• to discuss whether to include guidance in the prospective Accounting Standard based on feedback from a survey on the direct (no direct) relationship concept. The feedback relates to capitalised borrowing costs, inflation and other items included in the regulatory capital base (Agenda Paper 9A). Agenda Paper 9A complements Agenda Paper 9B from the September 2023 IASB meeting.
• to redeliberate the proposals in the Exposure Draft Regulatory Assets and Regulatory Liabilities (Exposure Draft) relating to the boundary of a regulatory agreement (Agenda Paper 9B).

Survey on the direct (no direct) relationship concept—Additional feedback (Agenda Paper 9A)

The IASB tentatively decided to include in the prospective Accounting Standard guidance on how to account for regulatory returns on an asset not yet available for use that compensate for borrowing costs an entity has capitalised. The guidance would illustrate how an entity accounts for such regulatory returns if:

1. the entity determines the capitalised borrowing costs at a higher level of aggregation than the individual asset level; or
2. a regulator determines the regulatory returns on a real basis.

Twelve of the 13 IASB members present agreed with this decision. One member was absent.

Boundary of a regulatory agreement (Agenda Paper 9B)

The IASB tentatively decided that the prospective Accounting Standard would:

1. retain the proposed guidance in the Exposure Draft on rights to renew or cancel a regulatory agreement. The IASB would clarify in the prospective Accounting Standard that those rights might be explicit or implicit.
2. retain the proposed guidance in the Exposure Draft on compensation for cancellation of a regulatory agreement. The IASB would clarify in the prospective Accounting Standard that the guidance also applies to other circumstances in which termination occurs.
3. include the principles in paragraph 35(c) of IFRS 15 Revenue from Contracts with Customers that relate to an entity’s right to payment for performance completed to date. An entity would use those principles to help it assess whether there exists an enforceable present right to receive, or an enforceable present obligation to pay, compensation on termination of a regulatory agreement for an amount comprising unrecovered regulatory assets and unfulfilled regulatory liabilities.
4. retain the proposed requirements in the Exposure Draft on reassessment of and changes to the boundary of a regulatory agreement.

All of the 13 IASB members present agreed with these decisions. One member was absent.

The IASB also tentatively decided not to add more guidance on how an entity assesses its practical ability to renew, and other parties’ practical ability to cancel, a regulatory agreement.

Eleven of the 13 IASB members present agreed with this decision. One member was absent.

Next step

The IASB will continue to redeliberate the project proposals, including whether to add more guidance on how an entity identifies and measures cash flows within the boundary of a regulatory agreement.

Equity Method (Agenda Paper 13)

The IASB met on 26 October 2023 to discuss whether its tentative decisions on application questions for investments in associates apply to investments other than those in associates accounted for using the equity method.

Towards an exposure draft—Implications of applying the IASB’s tentative decisions to investments in subsidiaries in separate financial statements (Agenda Paper 13A)

The IASB tentatively decided that its tentative decisions on application questions for investments in associates apply when a parent elects to use the equity method to account for its investments in subsidiaries in separate financial statements.

Twelve of the 13 IASB members present agreed with this decision. One member was absent.

Towards an exposure draft—Implications of applying the IASB’s tentative decisions to investments in joint ventures (Agenda Paper 13B)

The IASB tentatively decided that its tentative decisions on application questions for investments in associates apply to investments in joint ventures.

All of the 13 IASB members present agreed with this decision. One member was absent.

Next step

The IASB will discuss possible improvements to disclosure requirements for investments other than those in associates accounted for using the equity method.

Amendments to the Classification and Measurement of Financial Instruments (Agenda Paper 16)

The IASB met on 26 October 2023 to discuss stakeholder feedback on the Exposure Draft Amendments to the Classification and Measurement of Financial Instruments, which proposes amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures.

Following stakeholder feedback, the IASB discussed possible ways of clarifying the application guidance on:

1. elements of interest that are consistent with a basic lending arrangement; and
2. contractual terms that change the timing or amount of contractual cash flows.

The IASB was not asked to make any decisions.

Next step

The IASB will continue its discussions on the topic.

Primary Financial Statements (Agenda Paper 21) 

The IASB met on 25 October 2023 to discuss sweep issues identified in drafting IFRS 18 Presentation and Disclosure in Financial Statements related to aggregation and disaggregation and other topics. The IASB tentatively decided:

1. to require an entity to present a line item for cost of sales separately from any other expenses classified by function in the statement of profit or loss only if the entity classifies operating expenses by function that include cost of sales.
   All of the 13 IASB members present agreed with this decision. One member was absent.
2. to clarify that for the statement of financial position an entity uses:
   1. the characteristics of duration and timing of recovery and settlement to classify assets and liabilities as either current or non-current and the characteristic of liquidity to classify assets and liabilities by order of liquidity.
   2. the characteristics of nature and function to aggregate assets and liabilities into separate line items. Other characteristics, like duration, liquidity, measurement basis, type and tax effects, assist an entity identifying the nature or function of the assets and liabilities.
      All of the 13 IASB members present agreed with this decision. One member was absent.
3. to provide no transitional relief from retrospective application of IFRS 18 for any earlier periods than the annual period immediately preceding the initial period of application.
   Eight of the 13 IASB members present agreed with this decision. One member was absent.

The IASB discussed and confirmed the drafting approaches for minor sweep issues, except in relation to the disclosure of specified expenses by nature by an entity that presents one or more function line items.  The IASB tentatively decided to confirm that such an entity will be required to disclose in a single note the amounts for these expenses that are included in each line item in the operating category only.  In addition, the entity will be required to include in the same note two disclosures for each specified expense: 

1. the total for the specified expenses by nature, already required in IFRS Accounting Standards; and
2. an explanation of which line items outside the operating category include any difference between the total of the amounts included in the line items in the operating category and the total described in (a). Such an explanation is already required by a previous tentative decision in September 2021 (Agenda Paper 21D) to provide a qualitative explanation of the line item in which disclosed items are included.   

Twelve of the 13 IASB members present agreed with these decisions. One member was absent.

Next step

The IASB will discuss other sweep issues at a future meeting.

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

The IASB met on 25 October 2023 to redeliberate the proposals in the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard (Exposure Draft).

Proposed revised Section 23 Revenue from Contracts with Customers (Agenda Paper 30A)

The IASB tentatively decided to revise Section 23 of the IFRS for SMEs Accounting Standard (Standard) to reflect the principles in IFRS 15 Revenue from Contracts with Customers.

All of the 13 IASB members present agreed with this decision. One member was absent.

Simplification of the control model in Section 9 Consolidated and Separate Financial Statements (Agenda Paper 30B)

The IASB tentatively decided to clarify how an entity applies the rebuttable presumption in paragraph 9.5 of the Standard.

All of the 13 IASB members present agreed with this decision. One member was absent.

Recognition of development costs (Agenda Paper 30C)

The IASB tentatively decided to retain the requirements in the Standard for recognising development costs.

Seven of the 13 IASB members present agreed with this decision. One member was absent.

Recognition of borrowing costs (Agenda Paper 30D)

The IASB tentatively decided to retain the requirements in the Standard for recognising borrowing costs.

Ten of the 13 IASB members present agreed with this decision. One member was absent.

 

Recent amendments to full IFRS Accounting Standards (Agenda Paper 30E)

The IASB tentatively decided to expose for public comment a proposal to align the Standard with:

1. Supplier Finance Arrangements, which amended IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures; and
2. Lack of Exchangeability, which amended IAS 21 The Effects of Changes in Foreign Exchange Rates.

Eight of the 13 IASB members present agreed with this decision. One member was absent.

Next steps

The IASB will continue to redeliberate the proposals in the Exposure Draft as set out in the project plan.

The IASB will publish a second exposure draft as part of this second comprehensive review following its decisions on Agenda Paper 30E.

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

The IASB met on 26 October 2023 to continue its discussion about some of the disclosure requirements proposed in its Exposure Draft Subsidiaries without Public Accountability: Disclosures. The IASB tentatively decided:

1. to withdraw the proposed requirements in paragraphs 33, 54(c), 56(b), 100(c), 101, 109, 158, 159 and 181(c) of the Exposure Draft;
2. to amend the proposed requirements in paragraphs 32, 53, 69(d), 76, 77, 128(d), 133, 146(e), 147(e), 152(d), 152(f), 154, 196(a) and 210 of the Exposure Draft to align their language with that used in the relevant disclosure requirements in the IFRS Accounting Standards in relation to which these proposals are reduced versions;
3. to amend paragraph 38 of the Exposure Draft so that the proposed disclosure requirement in that paragraph is more consistent with the requirement proposed in paragraph 37; and
4. to retain the language in the proposed requirements in paragraphs 36(e), 36(g), 92, 94, 98, 106(a) and 107(a) of the Exposure Draft.

All of the 13 IASB members present agreed with this decision. One member was absent.

Next step

The IASB will discuss any further sweep issues that arise in the drafting process.

Maintenance and consistent application

Maintenance and consistent application (Agenda Paper 12)

The IASB met on 26 October 2023 to consider three agenda decisions discussed at the September 2023 meeting of the IFRS Interpretations Committee (Committee), and to receive an update on that meeting.

Premiums Receivable from an Intermediary (IFRS 17 and IFRS 9)—Finalisation of agenda decision (Agenda Paper 12A)

The IASB was asked whether it objected to the Agenda Decision Premiums Receivable from an Intermediary (IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments).

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in October 2023 in an addendum to IFRIC Update September 2023.

Homes and Home Loans Provided to Employees—Finalisation of agenda decision (Agenda Paper 12B)

The IASB was asked whether it objected to the Agenda Decision Homes and Home Loans Provided to Employees.

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in October 2023 in an addendum to IFRIC Update September 2023.

Guarantee over a Derivative Contract (IFRS 9)—Finalisation of agenda decision (Agenda Paper 12C)

The IASB was asked whether it objected to the Agenda Decision Guarantee over a Derivative Contract (IFRS 9).

No IASB member objected to the Agenda Decision.

Next step

The Agenda Decision will be published in October 2023 in an addendum to IFRIC Update September 2023.

IFRIC Update September 2023 (Agenda Paper 12D)

The IASB received an update on the Committee’s September 2023 meeting. Details of this meeting were published in IFRIC Update September 2023.

The IASB was not asked to make any decisions.