9 IASB General Update
13 July 2023 Agenda Paper 9
Executive Summary
| Project Type | Monitoring |
|---|---|
| Project Scope | Various |
Purpose of the paper
This paper provides the Board with an update on projects the Secretariat is currently monitoring, including the work of the IFRS Interpretations Committee.
As agreed with the Board, the Secretariat monitors projects being undertaken by the IASB and IFRS Interpretations Committee. This is undertaken to inform the Board about the progress and decisions being made by the IASB on active projects. Discussion by the Board may also help inform interactions with international standard setter meetings, including the IASB's Accounting Standards Advisory Forum (ASAF).
Summary of the Issue
Topics covered by the IASB at its June meeting included:
Topics identified for discussion:
- Subsidiaries without Public Accountability: Disclosures
- IFRIC Agenda Decisions Update
Topic identified for noting:
- Rate-regulated Activities
Whilst the Primary Financial Statements and Equity Method projects were also discussed by the IASB at its June 2023 meeting, these topics will be discussed in more detail at a future Board meeting.
Questions and decision for the Board
Items for discussion
Subsidiaries without Public Accountability: Disclosures
1Do Board members have any questions or comments on the IASB's tentative decisions on the revisions to the proposed disclosure requirements in the ED?
2Do Board members have any questions or comments on any of the IASB's tentative decisions (excluding in relation to Topic 3, which is addressed in Question 1 above)?
IFRIC Agenda Decisions Update
1Do Board members agree that the UKEB will NOT respond to the Interpretations Committee Tentative Agenda Decision currently open for comment?
Items for noting
1Do Board members have any questions or comments on the update for noting?
Recommendation
N/A
Appendices
Appendix A Subsidiaries without Public Accountability: Disclosures Appendix B Rate-regulated Activities Appendix C IFRIC Agenda Decisions Update Appendix D List of IASB projects
Appendix A: Subsidiaries without Public Accountability: Disclosures
| UKEB Project Status: | Monitoring | UKEB project page |
|---|---|---|
| IASB Next Milestone: | IFRS Accounting Standard | UKEB Final Comment Letter (Published February 2022) |
Background
A1In October 2022, the IASB decided on an approach to analysing the feedback on the proposed disclosure requirements in the forthcoming standard[^1].
A2Following a decision on the approach, the IASB continued its discussion on the proposals in the Exposure Draft Subsidiaries without Public Accountability: Disclosures (the ED) as part of its project on reduced disclosure for subsidiaries without public accountability.
A3At its April and May 2023 meetings the IASB discussed the feedback received and considered whether to revise any of the proposed disclosure requirements in the forthcoming standard.
A4At its June 2023 meeting the IASB discussed whether any of the feedback received on the proposed disclosure requirements and proposed clarification to the definition of public Accountability on the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard[^2] needs to be taken into consideration in finalising the forthcoming standard.
A5As a result of these discussions the IASB made some tentative decisions. At this meeting we would like to ask the Board for any comments on these decisions. The topics discussed at the April, May and June 2023 meetings were:
- disclosure objectives;
- relief from providing comparative information;
- the feedback on the proposed disclosure requirements in the ED;
- guidance on how to apply the disclosure requirements;
- updating the language of the disclosure requirements to be the same as in IFRS Accounting Standards;
- disclosure requirements about transition in other IFRS Accounting Standards;
- new disclosure requirements in IFRS Accounting Standards that have been issued or will be issued after the ED was published;
- proposed consequential amendments to the forthcoming standard in the forthcoming Exposure Draft Financial Instruments with Characteristics of Equity ("the FICE ED");
- feedback on proposed disclosure requirements in the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard; and
- proposed clarification to the definition of public accountability.
A6For each of these topics we provide some background information around the IASB's tentative decisions (i.e. how they relate to the ED proposals and the IASB's rationale for making those decisions). When applicable we have included commentary on the consistency of these decisions with the UKEB's recommendations.
Topic 1: Disclosure objectives
Background
A7In developing the proposed disclosure requirements in the ED, the IASB excluded disclosure objectives included in IFRS Accounting Standards because including them might result in eligible subsidiaries being compelled to provide the same disclosures as if they had not applied the forthcoming standard[^3].
A8Some respondents disagreed with the ED proposal because in their view disclosure objectives are helpful in achieving 'fair presentation' as required by IAS 1 Presentation of Financial Statements, and not having them could compromise the reliability and completeness of the information required to enable the users of the financial statements to make informed decisions.
IASB tentative decision
A9All IASB members agreed with the IASB staff recommendation to retain the ED proposal because including disclosure objectives would be contrary to the project objective i.e. eligible subsidiaries might feel compelled to comply with the disclosure requirements in full IFRS in order to meet the objective.
A10One IASB member was concerned that it is not always clear whether a disclosure requirement is an objective. Whilst removing disclosure objectives in the forthcoming Standard may impact the development of new disclosure requirements in IFRS Accounting Standards, IASB members generally agreed on flexibility for the inclusion of disclosure objectives and guidance in IFRS Accounting Standards.
A11The IASB tentatively decided not to include disclosure objectives in the forthcoming standard.
Consistency with UKEB's recommendations
A12In its Final Comment Letter (FCL) the UKEB expressed support for excluding disclosure objectives in IFRS Accounting Standards from the forthcoming standard. We agreed with the IASB's rationale in the ED for excluding disclosure objectives and believe this will avoid the challenges with an objective-based approach to disclosures for subsidiaries without public accountability, as highlighted in our comment letter on the IASB's ED Disclosure Requirements in IFRS Standards-A Pilot Approach (Proposed Amendments to IFRS13 and IAS 19).
Topic 2: relief from providing comparative information
Background
A13The IFRS for SMEs Accounting Standard does not require comparative information to be presented for some disclosures, specifically on the reconciliation of the movements of certain assets and liabilities (for example, comparative information need not be provided for investment property, property, plant and equipment, intangible assets and provisions)[^4].
A14The rationale for providing such relief in the IFRS for SMEs Accounting Standard was to avoid lengthy note disclosures that would repeat a prior year disclosure and would be available from prior year financial statements.
A15In developing the proposed disclosure requirements in the ED, the relief was also proposed for IAS 16 Property. Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, IAS 38 Intangible Assets and IAS 40 Investment Property[^5].
A16Some respondents to the ED suggested to the IASB that the comparative information for these reconciliations should be required.
IASB tentative decision
A17The IASB staff paper observed that removing the relief for comparative information would be an exception to the IASB's approach to developing the disclosure requirements and do not identify any reason why the eligible subsidiaries should not be provided with this relief [^6].
A18One IASB member disagreed with the staff recommendation. In his view, 'length' is not a qualitative characteristic of useful information in financial statements. His concern is when a company changes its accounting policy, referring to prior year financial statements for comparative information will not provide valid information to users. Other IASB members pointed out that when there is a change in accounting policy, IAS 8 disclosure requirements in the ED will require comparative information to be provided.
A19The IASB tentatively decided to retain the ED proposal i.e. provide relief from providing comparative information for some of the proposed disclosure requirements.
UKEB Secretariat views
A20This topic was not covered in the FCL. The Secretariat is of the view that the IASB's tentative decision to retain the relief as proposed in the ED will contribute to cost savings for preparers and is unlikely to result in a significant loss of usefulness of information for users. Therefore, this relief achieves an appropriate balance of costs for preparers and users' information needs.
Topic 3: Proposed disclosure requirements
A21The principles applied by the IASB for reducing disclosure requirements consider the information needs of users of non-publicly accountable entities and, in particular, that these users find information on the following useful:
- short-term cash flows, obligations, commitments and contingencies;
- liquidity and solvency;
- measurement uncertainty;
- accounting policy choices; and
- disaggregation of amounts.
A22In October 2022, the IASB agreed to assess the feedback on the proposed disclosure requirements taking into consideration these principles including the following factors:
- Cost-benefit considerations—whether the feedback would lead to a better balance between the costs and benefits of applying the requirements.
- Distribution of the comment—whether the comment is specific to a particular jurisdiction or a particular stakeholder group.
- Overall usefulness of information—whether the overall disclosure requirements for a topic or a standard provides useful information to users of eligible subsidiaries' financial statements.
- IASB decision(s)—whether the proposed disclosure requirement has been specifically discussed by the IASB and the feedback provides further insights.
A23The table below summarises the IASB's tentative decisions on revisions to the proposed disclosure requirements in ED (that is, the table summarises the changes from the ED):
| IFRS Accounting Standard | IASB tentative decision U
1Do Board members have any questions or comments on the IASB's tentative decisions on the revisions to the proposed disclosure requirements in the ED?
2Do Board members have any questions or comments on any of the IASB's tentative decisions (excluding in relation to Topic 3, which is addressed in Question 1 above)?
IFRIC Agenda Decisions Update
1Do Board members agree that the UKEB will NOT respond to the Interpretations Committee Tentative Agenda Decision currently open for comment?
Items for noting
1Do Board members have any questions or comments on the update for noting?
Recommendation
N/A
Appendices
Appendix A Subsidiaries without Public Accountability: Disclosures Appendix B Rate-regulated Activities Appendix C IFRIC Agenda Decisions Update Appendix D List of IASB projects
Appendix A: Subsidiaries without Public Accountability: Disclosures
| UKEB Project Status: | Monitoring | UKEB project page |
|---|---|---|
| IASB Next Milestone: | IFRS Accounting Standard | UKEB Final Comment Letter (Published February 2022) |
Background
A1In October 2022, the IASB decided on an approach to analysing the feedback on the proposed disclosure requirements in the forthcoming standard[^1].
A2Following a decision on the approach, the IASB continued its discussion on the proposals in the Exposure Draft Subsidiaries without Public Accountability: Disclosures (the ED) as part of its project on reduced disclosure for subsidiaries without public accountability.
A3At its April and May 2023 meetings the IASB discussed the feedback received and considered whether to revise any of the proposed disclosure requirements in the forthcoming standard.
A4At its June 2023 meeting the IASB discussed whether any of the feedback received on the proposed disclosure requirements and proposed clarification to the definition of public Accountability on the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard[^2] needs to be taken into consideration in finalising the forthcoming standard.
A5As a result of these discussions the IASB made some tentative decisions. At this meeting we would like to ask the Board for any comments on these decisions. The topics discussed at the April, May and June 2023 meetings were:
- disclosure objectives;
- relief from providing comparative information;
- the feedback on the proposed disclosure requirements in the ED;
- guidance on how to apply the disclosure requirements;
- updating the language of the disclosure requirements to be the same as in IFRS Accounting Standards;
- disclosure requirements about transition in other IFRS Accounting Standards;
- new disclosure requirements in IFRS Accounting Standards that have been issued or will be issued after the ED was published;
- proposed consequential amendments to the forthcoming standard in the forthcoming Exposure Draft Financial Instruments with Characteristics of Equity ("the FICE ED");
- feedback on proposed disclosure requirements in the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard; and
- proposed clarification to the definition of public accountability.
A6For each of these topics we provide some background information around the IASB's tentative decisions (i.e. how they relate to the ED proposals and the IASB's rationale for making those decisions). When applicable we have included commentary on the consistency of these decisions with the UKEB's recommendations.
Topic 1: Disclosure objectives
Background
A7In developing the proposed disclosure requirements in the ED, the IASB excluded disclosure objectives included in IFRS Accounting Standards because including them might result in eligible subsidiaries being compelled to provide the same disclosures as if they had not applied the forthcoming standard[^3].
A8Some respondents disagreed with the ED proposal because in their view disclosure objectives are helpful in achieving 'fair presentation' as required by IAS 1 Presentation of Financial Statements, and not having them could compromise the reliability and completeness of the information required to enable the users of the financial statements to make informed decisions.
IASB tentative decision
A9All IASB members agreed with the IASB staff recommendation to retain the ED proposal because including disclosure objectives would be contrary to the project objective i.e. eligible subsidiaries might feel compelled to comply with the disclosure requirements in full IFRS in order to meet the objective.
A10One IASB member was concerned that it is not always clear whether a disclosure requirement is an objective. Whilst removing disclosure objectives in the forthcoming Standard may impact the development of new disclosure requirements in IFRS Accounting Standards, IASB members generally agreed on flexibility for the inclusion of disclosure objectives and guidance in IFRS Accounting Standards.
A11The IASB tentatively decided not to include disclosure objectives in the forthcoming standard.
Consistency with UKEB's recommendations
A12In its Final Comment Letter (FCL) the UKEB expressed support for excluding disclosure objectives in IFRS Accounting Standards from the forthcoming standard. We agreed with the IASB's rationale in the ED for excluding disclosure objectives and believe this will avoid the challenges with an objective-based approach to disclosures for subsidiaries without public accountability, as highlighted in our comment letter on the IASB's ED Disclosure Requirements in IFRS Standards-A Pilot Approach (Proposed Amendments to IFRS13 and IAS 19).
Topic 2: relief from providing comparative information
Background
A13The IFRS for SMEs Accounting Standard does not require comparative information to be presented for some disclosures, specifically on the reconciliation of the movements of certain assets and liabilities (for example, comparative information need not be provided for investment property, property, plant and equipment, intangible assets and provisions)[^4].
A14The rationale for providing such relief in the IFRS for SMEs Accounting Standard was to avoid lengthy note disclosures that would repeat a prior year disclosure and would be available from prior year financial statements.
A15In developing the proposed disclosure requirements in the ED, the relief was also proposed for IAS 16 Property. Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, IAS 38 Intangible Assets and IAS 40 Investment Property[^5].
A16Some respondents to the ED suggested to the IASB that the comparative information for these reconciliations should be required.
IASB tentative decision
A17The IASB staff paper observed that removing the relief for comparative information would be an exception to the IASB's approach to developing the disclosure requirements and do not identify any reason why the eligible subsidiaries should not be provided with this relief [^6].
A18One IASB member disagreed with the staff recommendation. In his view, 'length' is not a qualitative characteristic of useful information in financial statements. His concern is when a company changes its accounting policy, referring to prior year financial statements for comparative information will not provide valid information to users. Other IASB members pointed out that when there is a change in accounting policy, IAS 8 disclosure requirements in the ED will require comparative information to be provided.
A19The IASB tentatively decided to retain the ED proposal i.e. provide relief from providing comparative information for some of the proposed disclosure requirements.
UKEB Secretariat views
A20This topic was not covered in the FCL. The Secretariat is of the view that the IASB's tentative decision to retain the relief as proposed in the ED will contribute to cost savings for preparers and is unlikely to result in a significant loss of usefulness of information for users. Therefore, this relief achieves an appropriate balance of costs for preparers and users' information needs.
Topic 3: Proposed disclosure requirements
A21The principles applied by the IASB for reducing disclosure requirements consider the information needs of users of non-publicly accountable entities and, in particular, that these users find information on the following useful:
- short-term cash flows, obligations, commitments and contingencies;
- liquidity and solvency;
- measurement uncertainty;
- accounting policy choices; and
- disaggregation of amounts.
A22In October 2022, the IASB agreed to assess the feedback on the proposed disclosure requirements taking into consideration these principles including the following factors:
- Cost-benefit considerations—whether the feedback would lead to a better balance between the costs and benefits of applying the requirements.
- Distribution of the comment—whether the comment is specific to a particular jurisdiction or a particular stakeholder group.
- Overall usefulness of information—whether the overall disclosure requirements for a topic or a standard provides useful information to users of eligible subsidiaries' financial statements.
- IASB decision(s)—whether the proposed disclosure requirement has been specifically discussed by the IASB and the feedback provides further insights.
A23The table below summarises the IASB's tentative decisions on revisions to the proposed disclosure requirements in ED (that is, the table summarises the changes from the ED):
| IFRS Accounting Standard | IASB tentative decision | IASB's rationale | The disclosure Proposed disclosure is more onerous than IFRS 1. IFRS 1 First-time Adoption of International Financial Reporting Standards Remove paragraph 25(a) from the ED (transition from previous GAAP to IFRS Standards—description of the nature of each change in accounting policy). | | IFRS 3 Business Combinations | Add paragraph B64(j)(i) of IFRS 3 to the forthcoming standard (description of the nature of contingent liability assumed in a business combination). IASB's rationale | 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-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------IFRS Accounting Standards IFRS 1 First-time Adoption of International Financial Reporting Standards IFRS 3 Business Combinations IFRS 5 Non-current Assets Held for Sale and Discontinued Operation IASB tentative decision Remove paragraph 25(a) from the ED (transition from previous GAAP to IFRS Standards-description of the nature of each change in accounting policy). Add paragraph B64(j)(i) of IFRS 3 to the forthcoming standard (description of the nature of contingent liability assumed in a business combination). Add paragraph 33(c) of IFRS 5 to the forthcoming standard (net cash flows attributable to the operating, investing and financing activities of discontinued operations). Add paragraph 41(d) of IFRS 5 to the forthcoming standard (non-current asset (or disposal group) that has been classified as held for sale or sold-if applicable, the reportable segment in which the non-current asset (or disposal group) is presented in accordance with IFRS 8). IASB's rationale Proposed disclosure is more onerous than IFRS 1. Provides information about contingencies and measurement uncertainties. Provides information about short-term cash flows. Consistent with the IASB's approach on IFRS 8 Operating Segments. 6 ```