AI-B4.01 - IASB’s Third Agenda Consultation - Cover
UK ENDORSEMENT BOARD 22 APRIL 2021 AGENDA PAPER B4
Purpose
1The purpose of this paper is to introduce board members to IASB’s Third Agenda Consultation (the Agenda Consultation), invite early views on the IASB’s consultation questions, share our initial views, and share our planned project approach.
Decision
2This paper does not require decisions. However, we would welcome questions, comments and views from Board members on the following:
a) the questions in IASB’s Request for Information (RFI) for the Agenda Consultation and our initial views on them; b) our planned project approach; and c) how board members might support the development of our response to the Agenda Consultation?
Background
3The IASB undertakes a public consultation on its activities and its work plan every five years. On 30 March 2021, the IASB published a RFI for its Third Agenda Consultation1 with comments due by 27 September 2021.
4IASB’s objectives for its Agenda Consultation are to seek feedback on:
a) Its strategic direction and the balance of its activities. b) The criteria it uses to decide whether potential projects are added to its work plan. c) The projects which should be given priority in setting IASB’s 2022 – 2026 work plan.
5As context, in the RFI IASB states that:
a) its current scope is financial statements and management commentary for profit-oriented companies. Therefore, the agenda consultation is not seeking feedback on wider issues, e.g. those related to sustainability reporting, except to the extent that those issues relate to the current scope of the board’s work.2 b) its resource levels are not expected to change significantly for the period 2022 – 2026. c) it expects to complete projects on its current work plan. Appendix 3 lists these projects.
IASB Questions in RFI and tentative views
6The Agenda consultation gives stakeholders the opportunity to help shape the balance and focus of the IASB’s work programme over the coming five-year period.
7Our view is that, given the difficulty of predicting the impact for economies and companies of global events and trends such as the pandemic, climate change, and technology developments, it is important that the IASB’s work programme over the coming five years retains some flexibility to be able to address the resulting impacts for financial reporting.
8The remainder of this section considers the questions in the IASB’s RFI and our tentative views on these to aid discussion. We expect our views to evolve over the coming months as we undertake further work and perform outreach with stakeholders.
RFI Question 1: Balance of IASB's activities
9Question 1 in the RFI asks whether the board should change its current level of focus for each of its main activities, and whether it should undertake additional activities within the current scope of its work.
10IASB’s conducts its activities under the following six main categories:
a) New IFRS standards and major amendments to IFRS standards; b) Maintenance and consistent application of existing IFRS standards; c) The IFRS for SMEs standard; d) Digital financial reporting; e) Understandability and accessibility of IFRS standards; and f) Stakeholder engagement.
11Appendix 1 to this paper shows for each main IASB activity category: its objective, the approximate current allocation of resource, and additional activities which could be undertaken if the allocation of resource was increased.
12Our initial views are that: the focus on different activities is broadly correct; and the focus on digital financial reporting should increase over the coming work cycle as we expect technology to play a greater role in financial reporting.
RFI Question 2: IASB's criteria for assessing the priority of financial reporting issues that could be added to the IASB's work plan
13Question 2 in the RFI asks whether IASB has identified the right criteria to use when assessing the priority of financial reporting issues that could be added to its work plan, and whether it should consider any other criteria.
14IASB’s proposed criteria for assessing the priority of financial reporting issues that could be added to its work plan are:
a) The importance of the matter to investors; b) Whether there is any deficiency in the way companies report the type of transaction or activity in financial reports; c) The type of companies that the matter is likely to affect, including whether the matter is more prevalent in some jurisdictions than others; d) How pervasive or acute the matter is likely to be for companies; e) The potential project’s interaction with other projects on the work plan; f) The complexity and feasibility of the potential project and its solutions; and g) The capacity of the Board and its stakeholders to make timely progress on the potential project.
15Our initial views are that these criteria are appropriate. We intend to seek stakeholder input on whether convergence or alignment with US GAAP and cost-benefit analysis of implementation should be added to the IASB’s list of criteria for assessing the priority of financial reporting issues.
RFI Question 3: Financial reporting issues that could be added to the IASB's work plan
16Question 3 in the RFI asks for stakeholder views on the financial reporting issues that could be added to the IASB’s work plan.
17The RFI includes a list of 22 potential projects for inclusion in its 2022–2026 work plan. These have been identified from initial outreach and from the IASB’s existing research pipeline. IASB’s existing research pipeline consists of projects identified during the Second Agenda Consultation in 2015 but not yet started.
18The RFI also classified those 22 potential projects as large, medium, or small projects. IASB has indicated that it has capacity to add 2 – 3 large projects, 4 – 5 medium projects, 7 – 8 small projects, or any similar combination in terms of overall resource requirements, to its work programme. It is seeking stakeholders’ views on whether each project is high, medium or low priority. Where a respondent ranks a project as high or low, IASB asks the respondent to provide the rationale for that conclusion.
19Our initial views are that the high priority projects are:
a) Climate-related risks and other emerging risks; b) Intangible assets; and c) Statement of cash flows and related matters.
20We also think there may be scope to combine projects on similar themes and we tentatively support IASB’s application of this approach to some of the proposals. For example, one option proposed by IASB is a large project on intangible assets which incorporates financial reporting for pollutant pricing mechanisms. We intend to perform further work to consider whether a thematic approach could help the IASB use its resources more effectively in addressing any likely future changes to financial reporting, for example those arising from any post-pandemic adjustment to economies and companies.
21The potential projects, the IASB’s assessment of their indicative size and our initial views on their priority are shown in appendix 2.
RFI Question 4: Other comments
22Question 4 in the RFI asks if respondents have any other comments on IASB’s activities and work plan. Appendix 3 of this paper provides a summary of IASB’s current work plan.
23Our initial views are that:
a) Our response should consider the feasibility and desirability of combining projects on similar themes. Projects could be grouped on themes such as group accounting, presentation and disclosure, liabilities, and changes to financial reporting necessary to underpin any non-financial reporting. These groups could combine projects from the existing work plan and from the list of 22 potential projects. Our outreach could explore whether this approach would be expected to deliver efficiency benefits. b) Although IASB has stated its intention to complete projects on the current work plan, our response should consider whether all pre-existing projects should be retained. c) Our response should also consider any additional financial reporting issues which are not on IASB’s current work plan or on its list of 22 potential projects and could be suggested as replacement items.
Proposed UKEB objective for this project and UKEB Secretariat Project Approach
24We suggest that the UKEB’s objectives for this project should be to:
a) Influence the IASB’s forward agenda so that it reflects UK interests and priorities. b) Establish UKEB’s profile and reputation by demonstrating UKEB’s guiding principles in our approach. c) Engage with key stakeholders to develop our understanding of their key areas of concern. d) Identify potential research projects for the UKEB to take forward.
25Our intended work plan includes both desk-based research and outreach with stakeholders. We will bring a more detailed work plan for approval at the May Board meeting. However, we have already started desk-based research to rank the IASB’s 22 potential projects (see Appendix 2 to this paper) and to identify any changes we can recommend to the IASB’s 2022 – 2026 work plan.
26The desk-based research will include:
a) Gathering empirical evidence from FTSE 350 data and financial statement reviews. b) Review of IFRS standards, application guidance, academic and other literature. c) Following the discussion in other fora including GPF, ASAF, IFASS, and CMAC.
27We applied the following criteria to establish our initial ranking (included in Appendix 2):
a) Whether a deficiency in financial reporting exists, by reference to IASB’s Conceptual Framework. b) Whether there is potential for a principles-based solution to the financial reporting deficiency. c) Whether the deficiency is significant for UK stakeholders, considering prevalence and pervasiveness by reference to external trends such as economic growth, predicted sector performance, government intervention in business etc. d) Whether the deficiency is likely to remain significant at the end of the IASB’s next work cycle i.e. in 2026.
Next Steps
28We intend to bring a formal work plan to the UKEB’s May board meeting for decision. Our initial high-level work plan is:
a) May / June: develop initial views through further desk-based research. b) June: hold stakeholder roundtables to discuss initial views and develop draft response to bring to June UKEB board meeting for decision. c) July: publish draft response and hold joint outreach event with IASB. d) September: prepare final response for decision at UKEB September board meeting and submission to IASB. e) As we develop the formal work plan we will seek to accommodate board members’ preferences for supporting the project, for example as project sponsors or through sharing particular areas of expertise and insight.
Appendices
Appendix 1:
Summary of IASB’s main activities, resource allocation, objectives and examples of potential additional activities
| Activity / current resource allocation | IASB's objective | Examples of additional activities markdown
UUKKEEBB Endorsement
Board
UK ENDORSEMENT BOARD 22 APRIL 2021 AGENDA PAPER B4
Purpose
1The purpose of this paper is to introduce board members to IASB’s Third Agenda Consultation (the Agenda Consultation), invite early views on the IASB’s consultation questions, share our initial views, and share our planned project approach.
Decision
2This paper does not require decisions. However, we would welcome questions, comments and views from Board members on the following:
a) the questions in IASB’s Request for Information (RFI) for the Agenda Consultation and our initial views on them; b) our planned project approach; and c) how board members might support the development of our response to the Agenda Consultation?
Background
3The IASB undertakes a public consultation on its activities and its work plan every five years. On 30 March 2021, the IASB published a RFI for its Third Agenda Consultation1 with comments due by 27 September 2021.
4IASB’s objectives for its Agenda Consultation are to seek feedback on:
a) Its strategic direction and the balance of its activities. b) The criteria it uses to decide whether potential projects are added to its work plan. c) The projects which should be given priority in setting IASB’s 2022 – 2026 work plan.
5As context, in the RFI IASB states that:
a) its current scope is financial statements and management commentary for profit-oriented companies. Therefore, the agenda consultation is not seeking feedback on wider issues, e.g. those related to sustainability reporting, except to the extent that those issues relate to the current scope of the board’s work.2 b) its resource levels are not expected to change significantly for the period 2022 – 2026. c) it expects to complete projects on its current work plan. Appendix 3 lists these projects.
IASB Questions in RFI and tentative views
6The Agenda consultation gives stakeholders the opportunity to help shape the balance and focus of the IASB’s work programme over the coming five-year period.
7Our view is that, given the difficulty of predicting the impact for economies and companies of global events and trends such as the pandemic, climate change, and technology developments, it is important that the IASB’s work programme over the coming five years retains some flexibility to be able to address the resulting impacts for financial reporting.
8The remainder of this section considers the questions in the IASB’s RFI and our tentative views on these to aid discussion. We expect our views to evolve over the coming months as we undertake further work and perform outreach with stakeholders.
RFI Question 1: Balance of IASB's activities
9Question 1 in the RFI asks whether the board should change its current level of focus for each of its main activities, and whether it should undertake additional activities within the current scope of its work.
10IASB’s conducts its activities under the following six main categories:
a) New IFRS standards and major amendments to IFRS standards; b) Maintenance and consistent application of existing IFRS standards; c) The IFRS for SMEs standard; d) Digital financial reporting; e) Understandability and accessibility of IFRS standards; and f) Stakeholder engagement.
11Appendix 1 to this paper shows for each main IASB activity category: its objective, the approximate current allocation of resource, and additional activities which could be undertaken if the allocation of resource was increased.
12Our initial views are that: the focus on different activities is broadly correct; and the focus on digital financial reporting should increase over the coming work cycle as we expect technology to play a greater role in financial reporting.
RFI Question 2: IASB's criteria for assessing the priority of financial reporting issues that could be added to the IASB's work plan
13Question 2 in the RFI asks whether IASB has identified the right criteria to use when assessing the priority of financial reporting issues that could be added to its work plan, and whether it should consider any other criteria.
14IASB’s proposed criteria for assessing the priority of financial reporting issues that could be added to its work plan are:
a) The importance of the matter to investors; b) Whether there is any deficiency in the way companies report the type of transaction or activity in financial reports; c) The type of companies that the matter is likely to affect, including whether the matter is more prevalent in some jurisdictions than others; d) How pervasive or acute the matter is likely to be for companies; e) The potential project’s interaction with other projects on the work plan; f) The complexity and feasibility of the potential project and its solutions; and g) The capacity of the Board and its stakeholders to make timely progress on the potential project.
15Our initial views are that these criteria are appropriate. We intend to seek stakeholder input on whether convergence or alignment with US GAAP and cost-benefit analysis of implementation should be added to the IASB’s list of criteria for assessing the priority of financial reporting issues.
RFI Question 3: Financial reporting issues that could be added to the IASB's work plan
16Question 3 in the RFI asks for stakeholder views on the financial reporting issues that could be added to the IASB’s work plan.
17The RFI includes a list of 22 potential projects for inclusion in its 2022–2026 work plan. These have been identified from initial outreach and from the IASB’s existing research pipeline. IASB’s existing research pipeline consists of projects identified during the Second Agenda Consultation in 2015 but not yet started.
18The RFI also classified those 22 potential projects as large, medium, or small projects. IASB has indicated that it has capacity to add 2 – 3 large projects, 4 – 5 medium projects, 7 – 8 small projects, or any similar combination in terms of overall resource requirements, to its work programme. It is seeking stakeholders’ views on whether each project is high, medium or low priority. Where a respondent ranks a project as high or low, IASB asks the respondent to provide the rationale for that conclusion.
19Our initial views are that the high priority projects are:
a) Climate-related risks and other emerging risks; b) Intangible assets; and c) Statement of cash flows and related matters.
20We also think there may be scope to combine projects on similar themes and we tentatively support IASB’s application of this approach to some of the proposals. For example, one option proposed by IASB is a large project on intangible assets which incorporates financial reporting for pollutant pricing mechanisms. We intend to perform further work to consider whether a thematic approach could help the IASB use its resources more effectively in addressing any likely future changes to financial reporting, for example those arising from any post-pandemic adjustment to economies and companies.
21The potential projects, the IASB’s assessment of their indicative size and our initial views on their priority are shown in appendix 2.
RFI Question 4: Other comments
22Question 4 in the RFI asks if respondents have any other comments on IASB’s activities and work plan. Appendix 3 of this paper provides a summary of IASB’s current work plan.
23Our initial views are that:
a) Our response should consider the feasibility and desirability of combining projects on similar themes. Projects could be grouped on themes such as group accounting, presentation and disclosure, liabilities, and changes to financial reporting necessary to underpin any non-financial reporting. These groups could combine projects from the existing work plan and from the list of 22 potential projects. Our outreach could explore whether this approach would be expected to deliver efficiency benefits. b) Although IASB has stated its intention to complete projects on the current work plan, our response should consider whether all pre-existing projects should be retained. c) Our response should also consider any additional financial reporting issues which are not on IASB’s current work plan or on its list of 22 potential projects and could be suggested as replacement items.
Proposed UKEB objective for this project and UKEB Secretariat Project Approach
24We suggest that the UKEB’s objectives for this project should be to:
a) Influence the IASB’s forward agenda so that it reflects UK interests and priorities. b) Establish UKEB’s profile and reputation by demonstrating UKEB’s guiding principles in our approach. c) Engage with key stakeholders to develop our understanding of their key areas of concern. d) Identify potential research projects for the UKEB to take forward.
25Our intended work plan includes both desk-based research and outreach with stakeholders. We will bring a more detailed work plan for approval at the May Board meeting. However, we have already started desk-based research to rank the IASB’s 22 potential projects (see Appendix 2 to this paper) and to identify any changes we can recommend to the IASB’s 2022 – 2026 work plan.
26The desk-based research will include:
a) Gathering empirical evidence from FTSE 350 data and financial statement reviews. b) Review of IFRS standards, application guidance, academic and other literature. c) Following the discussion in other fora including GPF, ASAF, IFASS, and CMAC.
27We applied the following criteria to establish our initial ranking (included in Appendix 2):
a) Whether a deficiency in financial reporting exists, by reference to IASB’s Conceptual Framework. b) Whether there is potential for a principles-based solution to the financial reporting deficiency. c) Whether the deficiency is significant for UK stakeholders, considering prevalence and pervasiveness by reference to external trends such as economic growth, predicted sector performance, government intervention in business etc. d) Whether the deficiency is likely to remain significant at the end of the IASB’s next work cycle i.e. in 2026.
Next Steps
28We intend to bring a formal work plan to the UKEB’s May board meeting for decision. Our initial high-level work plan is:
a) May / June: develop initial views through further desk-based research. b) June: hold stakeholder roundtables to discuss initial views and develop draft response to bring to June UKEB board meeting for decision. c) July: publish draft response and hold joint outreach event with IASB. d) September: prepare final response for decision at UKEB September board meeting and submission to IASB. e) As we develop the formal work plan we will seek to accommodate board members’ preferences for supporting the project, for example as project sponsors or through sharing particular areas of expertise and insight.
Appendices
Appendix 1:
Summary of IASB’s main activities, resource allocation, objectives and examples of potential additional activities
| Activity / current resource allocation | IASB's objective | Examples of additional activities | New IFRS standards and major amendments to IFRS standards / 40% - 45% | Research issues and, if appropriate, develop major new financial reporting requirements | New projects to address financial reporting issues |
| New IFRS standards and major amendments to IFRS standards / 40% - 45% | Research issues and, if appropriate, develop major new financial reporting requirements | New projects to address financial reporting issues |
| Maintenance and consistent application of existing IFRS standards / 15%-20% | Help stakeholders obtain a common understanding of financial reporting requirements | Work more with stakeholders to identify challenges in applying IFRS Standards Address these application challenges through agenda decisions, narrow scope amendments and interpretations Support high-quality and consistent application by providing more educational material 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----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Please begin output with this paragraph:
This is the start of the IASB Update Report 2024
This is the start of the IASB Update Report 2024
UK ENDORSEMENT BOARD 22 APRIL 2021 AGENDA PAPER B4
Purpose
1The purpose of this paper is to introduce board members to IASB’s Third Agenda Consultation (the Agenda Consultation), invite early views on the IASB’s consultation questions, share our initial views, and share our planned project approach.
Decision
2This paper does not require decisions. However, we would welcome questions, comments and views from Board members on the following:
a) the questions in IASB’s Request for Information (RFI) for the Agenda Consultation and our initial views on them; b) our planned project approach; and c) how board members might support the development of our response to the Agenda Consultation?
Background
3The IASB undertakes a public consultation on its activities and its work plan every five years. On 30 March 2021, the IASB published a RFI for its Third Agenda Consultation1 with comments due by 27 September 2021.
4IASB’s objectives for its Agenda Consultation are to seek feedback on:
a) Its strategic direction and the balance of its activities. b) The criteria it uses to decide whether potential projects are added to its work plan. c) The projects which should be given priority in setting IASB’s 2022 – 2026 work plan.
5As context, in the RFI IASB states that:
a) its current scope is financial statements and management commentary for profit-oriented companies. Therefore, the agenda consultation is not seeking feedback on wider issues, e.g. those related to sustainability reporting, except to the extent that those issues relate to the current scope of the board’s work.2 b) its resource levels are not expected to change significantly for the period 2022 – 2026. c) it expects to complete projects on its current work plan. Appendix 3 lists these projects.
IASB Questions in RFI and tentative views
6The Agenda consultation gives stakeholders the opportunity to help shape the balance and focus of the IASB’s work programme over the coming five-year period.
7Our view is that, given the difficulty of predicting the impact for economies and companies of global events and trends such as the pandemic, climate change, and technology developments, it is important that the IASB’s work programme over the coming five years retains some flexibility to be able to address the resulting impacts for financial reporting.
8The remainder of this section considers the questions in the IASB’s RFI and our tentative views on these to aid discussion. We expect our views to evolve over the coming months as we undertake further work and perform outreach with stakeholders.
RFI Question 1: Balance of IASB's activities
9Question 1 in the RFI asks whether the board should change its current level of focus for each of its main activities, and whether it should undertake additional activities within the current scope of its work.
10IASB’s conducts its activities under the following six main categories:
a) New IFRS standards and major amendments to IFRS standards; b) Maintenance and consistent application of existing IFRS standards; c) The IFRS for SMEs standard; d) Digital financial reporting; e) Understandability and accessibility of IFRS standards; and f) Stakeholder engagement.
11Appendix 1 to this paper shows for each main IASB activity category: its objective, the approximate current allocation of resource, and additional activities which could be undertaken if the allocation of resource was increased.
12Our initial views are that: the focus on different activities is broadly correct; and the focus on digital financial reporting should increase over the coming work cycle as we expect technology to play a greater role in financial reporting.
RFI Question 2: IASB's criteria for assessing the priority of financial reporting issues that could be added to the IASB's work plan
13Question 2 in the RFI asks whether IASB has identified the right criteria to use when assessing the priority of financial reporting issues that could be added to its work plan, and whether it should consider any other criteria.
14IASB’s proposed criteria for assessing the priority of financial reporting issues that could be added to its work plan are:
a) The importance of the matter to investors; b) Whether there is any deficiency in the way companies report the type of transaction or activity in financial reports; c) The type of companies that the matter is likely to affect, including whether the matter is more prevalent in some jurisdictions than others; d) How pervasive or acute the matter is likely to be for companies; e) The potential project’s interaction with other projects on the work plan; f) The complexity and feasibility of the potential project and its solutions; and g) The capacity of the Board and its stakeholders to make timely progress on the potential project.
15Our initial views are that these criteria are appropriate. We intend to seek stakeholder input on whether convergence or alignment with US GAAP and cost-benefit analysis of implementation should be added to the IASB’s list of criteria for assessing the priority of financial reporting issues.
RFI Question 3: Financial reporting issues that could be added to the IASB's work plan
16Question 3 in the RFI asks for stakeholder views on the financial reporting issues that could be added to the IASB’s work plan.
17The RFI includes a list of 22 potential projects for inclusion in its 2022–2026 work plan. These have been identified from initial outreach and from the IASB’s existing research pipeline. IASB’s existing research pipeline consists of projects identified during the Second Agenda Consultation in 2015 but not yet started.
18The RFI also classified those 22 potential projects as large, medium, or small projects. IASB has indicated that it has capacity to add 2 – 3 large projects, 4 – 5 medium projects, 7 – 8 small projects, or any similar combination in terms of overall resource requirements, to its work programme. It is seeking stakeholders’ views on whether each project is high, medium or low priority. Where a respondent ranks a project as high or low, IASB asks the respondent to provide the rationale for that conclusion.
19Our initial views are that the high priority projects are:
a) Climate-related risks and other emerging risks; b) Intangible assets; and c) Statement of cash flows and related matters.
20We also think there may be scope to combine projects on similar themes and we tentatively support IASB’s application of this approach to some of the proposals. For example, one option proposed by IASB is a large project on intangible assets which incorporates financial reporting for pollutant pricing mechanisms. We intend to perform further work to consider whether a thematic approach could help the IASB use its resources more effectively in addressing any likely future changes to financial reporting, for example those arising from any post-pandemic adjustment to economies and companies.
21The potential projects, the IASB’s assessment of their indicative size and our initial views on their priority are shown in appendix 2.
RFI Question 4: Other comments
22Question 4 in the RFI asks if respondents have any other comments on IASB’s activities and work plan. Appendix 3 of this paper provides a summary of IASB’s current work plan.
23Our initial views are that:
a) Our response should consider the feasibility and desirability of combining projects on similar themes. Projects could be grouped on themes such as group accounting, presentation and disclosure, liabilities, and changes to financial reporting necessary to underpin any non-financial reporting. These groups could combine projects from the existing work plan and from the list of 22 potential projects. Our outreach could explore whether this approach would be expected to deliver efficiency benefits. b) Although IASB has stated its intention to complete projects on the current work plan, our response should consider whether all pre-existing projects should be retained. c) Our response should also consider any additional financial reporting issues which are not on IASB’s current work plan or on its list of 22 potential projects and could be suggested as replacement items.
Proposed UKEB objective for this project and UKEB Secretariat Project Approach
24We suggest that the UKEB’s objectives for this project should be to:
a) Influence the IASB’s forward agenda so that it reflects UK interests and priorities. b) Establish UKEB’s profile and reputation by demonstrating UKEB’s guiding principles in our approach. c) Engage with key stakeholders to develop our understanding of their key areas of concern. d) Identify potential research projects for the UKEB to take forward.
25Our intended work plan includes both desk-based research and outreach with stakeholders. We will bring a more detailed work plan for approval at the May Board meeting. However, we have already started desk-based research to rank the IASB’s 22 potential projects (see Appendix 2 to this paper) and to identify any changes we can recommend to the IASB’s 2022 – 2026 work plan.
26The desk-based research will include:
a) Gathering empirical evidence from FTSE 350 data and financial statement reviews. b) Review of IFRS standards, application guidance, academic and other literature. c) Following the discussion in other fora including GPF, ASAF, IFASS, and CMAC.
27We applied the following criteria to establish our initial ranking (included in Appendix 2):
a) Whether a deficiency in financial reporting exists, by reference to IASB’s Conceptual Framework. b) Whether there is potential for a principles-based solution to the financial reporting deficiency. c) Whether the deficiency is significant for UK stakeholders, considering prevalence and pervasiveness by reference to external trends such as economic growth, predicted sector performance, government intervention in business etc. d) Whether the deficiency is likely to remain significant at the end of the IASB’s next work cycle i.e. in 2026.
Next Steps
28We intend to bring a formal work plan to the UKEB’s May board meeting for decision. Our initial high-level work plan is:
a) May / June: develop initial views through further desk-based research. b) June: hold stakeholder roundtables to discuss initial views and develop draft response to bring to June UKEB board meeting for decision. c) July: publish draft response and hold joint outreach event with IASB. d) September: prepare final response for decision at UKEB September board meeting and submission to IASB. e) As we develop the formal work plan we will seek to accommodate board members’ preferences for supporting the project, for example as project sponsors or through sharing particular areas of expertise and insight.
Appendices
Appendix 1:
Summary of IASB’s main activities, resource allocation, objectives and examples of potential additional activities
| Activity / current resource allocation | IASB's objective | Examples of additional activities | | New IFRS standards and major amendments to IFRS standards / 40% - 45% | Research issues and, if appropriate, develop major new financial reporting requirements | New projects to address financial reporting issues | | Maintenance and consistent application of existing IFRS standards / 15%-20% | Help stakeholders obtain a common understanding of financial reporting requirements | Work more with stakeholders to identify challenges in applying IFRS Standards Address these application challenges through agenda decisions, narrow scope amendments and interpretations Support high-quality and consistent application by providing more educational material |----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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layout: default title: Home HomeIASB's Third Agenda Consultation Project Update for Discussion Purpose1The purpose of this paper is to introduce board members to IASB’s Third Agenda Consultation (the Agenda Consultation), invite early views on the IASB’s consultation questions, share our initial views, and share our planned project approach. Decision2This paper does not require decisions. However, we would welcome questions, comments and views from Board members on the following: a) the questions in IASB’s Request for Information (RFI) for the Agenda Consultation and our initial views on them; b) our planned project approach; and c) how board members might support the development of our response to the Agenda Consultation? Background3The IASB undertakes a public consultation on its activities and its work plan every five years. On 30 March 2021, the IASB published a RFI for its Third Agenda Consultation1 with comments due by 27 September 2021. 4IASB’s objectives for its Agenda Consultation are to seek feedback on: a) Its strategic direction and the balance of its activities. b) The criteria it uses to decide whether potential projects are added to its work plan. c) The projects which should be given priority in setting IASB’s 2022 – 2026 work plan. 5As context, in the RFI IASB states that: a) its current scope is financial statements and management commentary for profit-oriented companies. Therefore, the agenda consultation is not seeking feedback on wider issues, e.g. those related to sustainability reporting, except to the extent that those issues relate to the current scope of the board’s work.2 b) its resource levels are not expected to change significantly for the period 2022 – 2026. c) it expects to complete projects on its current work plan. Appendix 3 lists these projects. IASB Questions in RFI and tentative views6The Agenda consultation gives stakeholders the opportunity to help shape the balance and focus of the IASB’s work programme over the coming five-year period. 7Our view is that, given the difficulty of predicting the impact for economies and companies of global events and trends such as the pandemic, climate change, and technology developments, it is important that the IASB’s work programme over the coming five years retains some flexibility to be able to address the resulting impacts for financial reporting. 8The remainder of this section considers the questions in the IASB’s RFI and our tentative views on these to aid discussion. We expect our views to evolve over the coming months as we undertake further work and perform outreach with stakeholders. RFI Question 1: Balance of IASB's activities9Question 1 in the RFI asks whether the board should change its current level of focus for each of its main activities, and whether it should undertake additional activities within the current scope of its work. 10IASB’s conducts its activities under the following six main categories: a) New IFRS standards and major amendments to IFRS standards; b) Maintenance and consistent application of existing IFRS standards; c) The IFRS for SMEs standard; d) Digital financial reporting; e) Understandability and accessibility of IFRS standards; and f) Stakeholder engagement. 11Appendix 1 to this paper shows for each main IASB activity category: its objective, the approximate current allocation of resource, and additional activities which could be undertaken if the allocation of resource was increased. 12Our initial views are that: the focus on different activities is broadly correct; and the focus on digital financial reporting should increase over the coming work cycle as we expect technology to play a greater role in financial reporting. RFI Question 2: IASB's criteria for assessing the priority of financial reporting issues that could be added to the IASB's work plan13Question 2 in the RFI asks whether IASB has identified the right criteria to use when assessing the priority of financial reporting issues that could be added to its work plan, and whether it should consider any other criteria. 14IASB’s proposed criteria for assessing the priority of financial reporting issues that could be added to its work plan are: a) The importance of the matter to investors; b) Whether there is any deficiency in the way companies report the type of transaction or activity in financial reports; c) The type of companies that the matter is likely to affect, including whether the matter is more prevalent in some jurisdictions than others; d) How pervasive or acute the matter is likely to be for companies; e) The potential project’s interaction with other projects on the work plan; f) The complexity and feasibility of the potential project and its solutions; and g) The capacity of the Board and its stakeholders to make timely progress on the potential project. 15Our initial views are that these criteria are appropriate. We intend to seek stakeholder input on whether convergence or alignment with US GAAP and cost-benefit analysis of implementation should be added to the IASB’s list of criteria for assessing the priority of financial reporting issues. RFI Question 3: Financial reporting issues that could be added to the IASB's work plan16Question 3 in the RFI asks for stakeholder views on the financial reporting issues that could be added to the IASB’s work plan. 17The RFI includes a list of 22 potential projects for inclusion in its 2022–2026 work plan. These have been identified from initial outreach and from the IASB’s existing research pipeline. IASB’s existing research pipeline consists of projects identified during the Second Agenda Consultation in 2015 but not yet started. 18The RFI also classified those 22 potential projects as large, medium, or small projects. IASB has indicated that it has capacity to add 2 – 3 large projects, 4 – 5 medium projects, 7 – 8 small projects, or any similar combination in terms of overall resource requirements, to its work programme. It is seeking stakeholders’ views on whether each project is high, medium or low priority. Where a respondent ranks a project as high or low, IASB asks the respondent to provide the rationale for that conclusion. 19Our initial views are that the high priority projects are: a) Climate-related risks and other emerging risks; b) Intangible assets; and c) Statement of cash flows and related matters. 20We also think there may be scope to combine projects on similar themes and we tentatively support IASB’s application of this approach to some of the proposals. For example, one option proposed by IASB is a large project on intangible assets which incorporates financial reporting for pollutant pricing mechanisms. We intend to perform further work to consider whether a thematic approach could help the IASB use its resources more effectively in addressing any likely future changes to financial reporting, for example those arising from any post-pandemic adjustment to economies and companies. 21The potential projects, the IASB’s assessment of their indicative size and our initial views on their priority are shown in appendix 2. RFI Question 4: Other comments22Question 4 in the RFI asks if respondents have any other comments on IASB’s activities and work plan. Appendix 3 of this paper provides a summary of IASB’s current work plan. 23Our initial views are that: a) Our response should consider the feasibility and desirability of combining projects on similar themes. Projects could be grouped on themes such as group accounting, presentation and disclosure, liabilities, and changes to financial reporting necessary to underpin any non-financial reporting. These groups could combine projects from the existing work plan and from the list of 22 potential projects. Our outreach could explore whether this approach would be expected to deliver efficiency benefits. b) Although IASB has stated its intention to complete projects on the current work plan, our response should consider whether all pre-existing projects should be retained. c) Our response should also consider any additional financial reporting issues which are not on IASB’s current work plan or on its list of 22 potential projects and could be suggested as replacement items. Proposed UKEB objective for this project and UKEB Secretariat Project Approach24We suggest that the UKEB’s objectives for this project should be to: a) Influence the IASB’s forward agenda so that it reflects UK interests and priorities. b) Establish UKEB’s profile and reputation by demonstrating UKEB’s guiding principles in our approach. c) Engage with key stakeholders to develop our understanding of their key areas of concern. d) Identify potential research projects for the UKEB to take forward. 25Our intended work plan includes both desk-based research and outreach with stakeholders. We will bring a more detailed work plan for approval at the May Board meeting. However, we have already started desk-based research to rank the IASB’s 22 potential projects (see Appendix 2 to this paper) and to identify any changes we can recommend to the IASB’s 2022 – 2026 work plan. 26The desk-based research will include: a) Gathering empirical evidence from FTSE 350 data and financial statement reviews. b) Review of IFRS standards, application guidance, academic and other literature. c) Following the discussion in other fora including GPF, ASAF, IFASS, and CMAC. 27We applied the following criteria to establish our initial ranking (included in Appendix 2): a) Whether a deficiency in financial reporting exists, by reference to IASB’s Conceptual Framework. b) Whether there is potential for a principles-based solution to the financial reporting deficiency. c) Whether the deficiency is significant for UK stakeholders, considering prevalence and pervasiveness by reference to external trends such as economic growth, predicted sector performance, government intervention in business etc. d) Whether the deficiency is likely to remain significant at the end of the IASB’s next work cycle i.e. in 2026. Next Steps28We intend to bring a formal work plan to the UKEB’s May board meeting for decision. Our initial high-level work plan is: a) May / June: develop initial views through further desk-based research. b) June: hold stakeholder roundtables to discuss initial views and develop draft response to bring to June UKEB board meeting for decision. c) July: publish draft response and hold joint outreach event with IASB. d) September: prepare final response for decision at UKEB September board meeting and submission to IASB. e) As we develop the formal work plan we will seek to accommodate board members’ preferences for supporting the project, for example as project sponsors or through sharing particular areas of expertise and insight. AppendicesAppendix 1:Summary of IASB’s main activities, resource allocation, objectives and examples of potential additional activities | Activity / current resource allocation | IASB's objective | Examples of additional activities | New IFRS standards and major amendments to IFRS standards / 40% - 45% | Research issues and, if appropriate, develop major new financial reporting requirements | New projects to address financial reporting issues | | The IFRS for SMEs standard / 5% | Provide financial reporting requirements tailored for companies that do not have public accountability (SMEs) | Work with auditors, national standard-setters (NSS) and regulators to support consistent application Provide more educational material Work more with NSS and others to increase global adoption of the IFRS for SMEs Standard | | Digital financial reporting / 5% | Facilitate the digital consumption of financial information | Explore how advances in technology are changing the way information is consumed and assess which improvements are needed to the IFRS Taxonomy Work more with regulators and others to increase global adoption of the IFRS Taxonomy Work more with stakeholders to improve the quality of electronic data and consistency in application of the IFRS Taxonomy Provide more educational material | | Understandability and accessibility of IFRS standards / 5% | Improve the understandability and accessibility of our financial reporting requirements | Identify and address areas of unnecessary complexity Improve accessibility by using technology and other tools to help stakeholders find the most relevant materials to them 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| NewFRS 15 Revenue from Contracts with CustomersIASB Update Report 2024 | The objective of IFRS 15 is to establish the principles that an entity applies to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. | This project considers whether additional guidance is needed on how to apply IFRS 15 to contracts that include specific features common to some industries or types of transactions. | | IASB Update Report 2024 | The objective of IFRS 15 is to establish the principles that an entity applies to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. | This project considers whether additional guidance is needed on how to apply IFRS 15 to contracts that include specific features common to some industries or types of transactions. | | Primary Financial Statements | The objective of the Primary Financial Statements project is to improve the communication in financial statements by developing new requirements for the presentation and disclosure of information in the statement of profit or loss and OCI. The project focuses on improving disaggregation of information in the statement of profit or loss and OCI and improving the usefulness of subtotals. | The project aims to improve how information is communicated in financial statements, particularly in the statement of profit or loss and other comprehensive income (OCI). It focuses on disaggregating information and enhancing the usefulness of subtotals in the statement of profit or loss and OCI. | The objective of IFRS 15 is to establish the principles that an entity applies to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. | This project considers whether additional guidance is needed on how to apply IFRS 15 to contracts that include specific features common to some industries or types of transactions. | | Primary Financial Statements | The objective of the Primary Financial Statements project is to improve the communication in financial statements by developing new requirements for the presentation and disclosure of information in the statement of profit or loss and OCI. The project focuses on improving disaggregation of information in the statement of profit or loss and OCI and improving the usefulness of subtotals. | The project aims to improve how information is communicated in financial statements, particularly in the statement of profit or loss and other comprehensive income (OCI). It focuses on disaggregating information and enhancing the usefulness of subtotals in the statement of profit or loss and OCI. | | Understand Stakeholder engagement / 20% - 25% | Obtain views to support the development of high-quality financial reporting requirements and promote acceptance of the Standards | Increase engagement with a broad range of stakeholders through standing consultative groups and informal events Increase engagement on formal consultations through use of digital-friendly approaches Arrange more investor-focused educational materials | | Stakeholder engagement / 20% - 25% | Obtain views to support the development of high-quality financial reporting requirements and promote acceptance of the Standards | Increase engagement with a broad range of stakeholders through standing consultative groups and informal events Increase engagement on formal consultations through use of digital-friendly approaches Arrange more investor-focused educational materials | Appendix 2:List of potential projects identified by IASB for inclusion in 2022–2026 work plan, presented in alphabetical order.
* Project is in IASB’s current research pipeline, as it was identified as a priority in the IASB’s previous agenda consultation. However, work has not yet commenced on the project, so IASB is seeking views on whether these projects are still priorities. Appendix 3:List of projects on IASB’s current work plan
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Footnotes
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The IASB’s RFI for its Third Agenda Consultation can be found here: https://www.ifrs.org/content/dam/ifrs/project/third-agenda-consultation/rfi-third-agenda-consultation-2021.pdf ↩↩↩↩
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However, the RFI for the Agenda Consultation notes that the Trustees of the IFRS Foundation are considering the expansion of the Foundation’s role through the possible creation of a new board to set sustainability reporting standards, and that the Trustees decision will be taken into account in finalising IASB’s work plan. If a sustainability standards board requires support from IASB, IASB’s 2022 – 2026 work plan will be amended to reflect this. ↩↩↩↩