13 Items for Noting
28 March 2024 Agenda Paper 13: Appendix A
Project Type: Endorsement and adoption Project Scope: Significant
Executive Summary
Purpose of the paper
This paper presents an updated Project Initiation Plan (PIP) for the project to assess whether to adopt the International Accounting Standards Board (IASB) standard IFRS 18 Presentation and Disclosure in Financial Statements for use in the UK. The standard is expected to have an effective date of 1 January 2027 with earlier application permitted (subject to UKEB adoption in the UK).
Summary of the Issue
At its 23 February 2024 meeting, the Board approved the PIP for the project to assess the adoption of IFRS 18 subject to further revisions. This paper presents a revised PIP with changes highlighted in grey as well as a revised timeline for the adoption of IFRS 18. This PIP is presented for noting.
Questions for the Board
Does the Board have any comments or questions on the updated PIP?
Appendices
Appendix A Updated Project Initiation Plan—IFRS 18 Presentation and Disclosure in Financial Statements
Background
1The Board approved the PIP for the project at the February 2024 meeting, subject to the Board's comments set out below. The project is to assess whether IFRS 18 Presentation and Disclosure in Financial Statements is suitable for adoption for use by companies in the UK.
2This paper includes a review of the PIP being built into the project timeline in line with the following recommendations made by the Board:
- Making more explicit the list of activities that will be carried out as part of the endorsement work, and to identify the list of potential additional activities and consequential effects (e.g. on the timetable) if critical evidence emerges from the preparer and/or user survey responses and/or from feedback derived from other outreach activities [refer to paragraphs A14–A16 and A38–A44];
- Including an explicit review point to assess the feedback/evidence received and to ask the Board whether the identified additional activities should be carried out [refer to paragraph A26];
- Organising additional educational activities with UK stakeholders concurrent to the publication of IFRS 18 to allow those stakeholders an opportunity to familiarise themselves with the main requirements of IFRS 18. The Board asked the Secretariat to put special emphasis on small and medium sized listed entities as they may be less aware of the new requirements in IFRS 18 [refer to paragraphs A36–A37]; and
- Considering whether it is possible to accelerate the proposed original timeline to finish the adoption of IFRS 18 earlier (i.e. by Q4 2025) [Table 1 following paragraph A66].
3In relation to the planned user and preparer surveys [refer to paragraphs A20–A28], the Board recommended:
- Adding more clarity to the purpose of the planned surveys and keeping the deadline for the planned surveys flexible, with a suggestion to give participants at least two months to respond; and
- Allowing the Board to contribute to the surveys' design.
4The Board also asked the Secretariat to review the format of the timetable to reflect that some of the different activities that have been identified to be part of the endorsement process will be carried out concurrently [Table 1 following paragraph A66].
5The Secretariat has also switched the order of some of the original paragraphs in the PIP to fit a more logical sequence.
Project Type: Endorsement and adoption Project Scope: Significant
Purpose
A1This paper sets out the plan to assess whether to adopt for use in the UK 1 the forthcoming International Accounting Standards Board (IASB) standard IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 will replace IAS 1 Presentation of Financial Statements.
A2IFRS 18 is expected to be published by the IASB in April 2024. IFRS 18 will be effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted (subject to the UKEB adoption in the UK).
A3The UKEB's statutory functions mean that the Board must assess the requirements in IFRS 18 against the statutory adoption criteria before IFRS 18 can be formally adopted for use in the UK.
Background
A4The Primary Financial Statements (PFS) project was added to the IASB's research agenda in July 2014 in response to investors' concerns about the comparability and transparency of companies' performance reporting. Following stakeholder feedback on the IASB's 2015 Agenda Consultation 2, the project was added to the active standard-setting projects.
A5In December 2019, the IASB published the Exposure Draft ED/2019/7 General Presentation and Disclosures (ED). The IASB's snapshot summarises the ED's proposals. At the time the UKEB had not been established. However, the UKEB Secretariat (Secretariat) response 3 to the ED was submitted in September 2020, following public consultation. The Secretariat's feedback statement (published in October 2020) summarises the outreach work undertaken, stakeholder views, and the final position on the proposals in the ED.
A6The IASB received 216 comment letters in response to the ED. It also conducted significant additional outreach activities during the development of IFRS 18. The IASB redeliberated the proposals in the ED from March 2021 to June 2023.
A7The IASB conducted targeted outreach between October 2022 and December 2022, including attending UKEB's Advisory Groups meetings 4, to obtain feedback on specific tentative decisions made by the IASB.
A8In July 2023 the IASB began its balloting process of the forthcoming IFRS 18 and stated its intention to publish the final standard in April 2024. This included seeking views on a first draft 5 of the forthcoming standard from International Forum of Accounting Standard Setters (IFASS) members, which includes the UKEB. The Secretariat submitted comments to the IASB staff.
A9In October and November 2023, the Secretariat held education sessions with the UKEB's Advisory Groups with the support of the IASB PFS staff 6. The purpose was to obtain feedback on key aspects of IFRS 18 to help identify any significant endorsement concerns and start identifying any likely costs and benefits resulting from the application of the new requirements.
A10Consistent with paragraphs 4.18–4.19 of the UKEB's Due Process Handbook, the Board has received regular progress reports on the PFS project, including updates of tentative decisions made by the IASB, commentary on how those decisions changed the ED proposals and the consistency with UKEB's comments.
A11As a result of this activity, the UKEB Board and Secretariat has fulsome understanding of the expected requirements of IFRS 18.
Description of the main requirements in IFRS 18
A12A description of the main requirements in IFRS 18 and of the expected effects derived from these requirements is presented in the table below.
| Requirements in IFRS 18 | Expected effects ---
The following, 28 March 2024, Agenda Paper 13: Appendix A, and UKEB UK Endorsement Board are found in the header on every page. This content will be removed.
Purpose
A1This paper sets out the plan to assess whether to adopt for use in the UK 1 the forthcoming International Accounting Standards Board (IASB) standard IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 will replace IAS 1 Presentation of Financial Statements.
A2IFRS 18 is expected to be published by the IASB in April 2024. IFRS 18 will be effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted (subject to UKEB adoption in the UK).
A3The UKEB's statutory functions mean that the Board must assess the requirements in IFRS 18 against the statutory adoption criteria before IFRS 18 can be formally adopted for use in the UK.
Background
A4The Primary Financial Statements (PFS) project was added to the IASB's research agenda in July 2014 in response to investors' concerns about the comparability and transparency of companies' performance reporting. Following stakeholder feedback on the IASB's 2015 Agenda Consultation 2, the project was added to the active standard-setting projects.
A5In December 2019, the IASB published the Exposure Draft ED/2019/7 General Presentation and Disclosures (ED). The IASB's snapshot summarises the ED's proposals. At the time the UKEB had not been established. However, the UKEB Secretariat (Secretariat) response 3 to the ED was submitted in September 2020, following public consultation. The Secretariat's feedback statement (published in October 2020) summarises the outreach work undertaken, stakeholder views, and the final position on the proposals in the ED.
A6The IASB received 216 comment letters in response to the ED. It also conducted significant additional outreach activities during the development of IFRS 18. The IASB redeliberated the proposals in the ED from March 2021 to June 2023.
A7The IASB conducted targeted outreach between October 2022 and December 2022, including attending UKEB's Advisory Groups meetings 4, to obtain feedback on specific tentative decisions made by the IASB.
A8In July 2023 the IASB began its balloting process of the forthcoming IFRS 18 and stated its intention to publish the final standard in April 2024. This included seeking views on a first draft 5 of the forthcoming standard from International Forum of Accounting Standard Setters (IFASS) members, which includes the UKEB. The Secretariat submitted comments to the IASB staff.
A9In October and November 2023, the Secretariat held education sessions with the UKEB's Advisory Groups with the support of the IASB PFS staff 6. The purpose was to obtain feedback on key aspects of IFRS 18 to help identify any significant endorsement concerns and start identifying any likely costs and benefits resulting from the application of the new requirements.
A10Consistent with paragraphs 4.18–4.19 of the UKEB's Due Process Handbook, the Board has received regular progress reports on the PFS project, including updates of tentative decisions made by the IASB, commentary on how those decisions changed the ED proposals and the consistency with UKEB's comments.
A11As a result of this activity, the UKEB Board and Secretariat has fulsome understanding of the expected requirements of IFRS 18.
Description of the main requirements in IFRS 18
A12A description of the main requirements in IFRS 18 and of the expected effects derived from these requirements is presented in the table below.
| Requirements in IFRS 18 | Expected effects Key Information:
Filing Dates: Annual Report publication date: [DATE] This form completed: [DATE]
Related Party Information: Relationship of related party to the organization: [RELATIONSHIP] Nature of related party transactions: [TRANSACTIONS]
Auditor Details: Firm Name: [NAME] Address: [ADDRESS] Contact Person: [NAME] Email: [EMAIL] Phone: [PHONE]
Project plan
A13The project plan is guided by the following factors.
Identification of required evidence
A14The Secretariat has commenced identifying issues for further consideration as part of the UKEB's endorsement work. The principal components of this work are set out below.
- Desk-based research (see paragraph A16);
- Preliminary views of the UKEB's Advisory Groups ahead of the publication of IFRS 18 (see paragraphs A17–A19);
- User and preparer surveys (see paragraphs A20–A26);
- Subsequent consultations with UKEB Advisory Groups/UKEB Financial Instruments Working Group (FIWG) (see paragraphs A27–A28);
- In-house research on long-term public good (see paragraphs A29–A35); and
- Educational webcasts/webinars in coordination with IASB staff (see paragraphs A36–A37).
A15If critical evidence emerges from the preparer and user survey responses and/or from feedback derived from other outreach activities, the Board will be asked to confirm whether additional activities should be carried out (refer to paragraph A26 and paragraphs A38–A44).
Desk-based research
A16We have carried out desktop analysis of a draft version of IFRS 18 and the basis for its requirements (when a first draft version was shared with IFASS members 7) and of commentaries/articles issued in advance of the publication of the standard, for example by accounting firms. The Secretariat will continue carrying out this type of analysis once IFRS 18 is published.
Preliminary views from advisory groups
A17The preliminary feedback from members of these groups during Q4 2023 indicated overall support for the presentation and disclosure requirements of IFRS 18. In their view the requirements in IFRS 18 will provide greater comparability and consistency of financial information and reduce diversity in practice. 8
A18However, they identified three main topics requiring further detailed consideration prior to the endorsement of IFRS 18 (see table below). 9
| IFRS 18 requirements | Issues raised |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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-----------
Project Type: Endorsement and adoption
Project Scope: Significant
This paper presents an updated Project Initiation Plan (PIP) for the project to assess whether to adopt the International Accounting Standards Board (IASB) standard IFRS 18 Presentation and Disclosure in Financial Statements for use in the UK. The standard is expected to have an effective date of 1 January 2027 with earlier application permitted (subject to UKEB adoption in the UK).
At its 23 February 2024 meeting, the Board approved the PIP for the project to assess the adoption of IFRS 18 subject to further revisions. This paper presents a revised PIP with changes highlighted in grey as well as a revised timeline for the adoption of IFRS 18. This PIP is presented for noting.
Does the Board have any comments or questions on the updated PIP?
Appendix A Updated Project Initiation Plan—IFRS 18 Presentation and Disclosure in Financial Statements
## Background
<a class="section__global-number" href="#paragraph-1" id="paragraph-1">1</a>The Board approved the PIP for the project at the February 2024 meeting, subject to the Board's comments set out below. The project is to assess whether IFRS 18 Presentation and Disclosure in Financial Statements is suitable for adoption for use by companies in the UK.
<a class="section__global-number" href="#paragraph-2" id="paragraph-2">2</a>This paper includes a review of the PIP being built into the project timeline in line with the following recommendations made by the Board:
<ol markdown="1" type="a">
<li markdown="1">Making more explicit the list of activities that will be carried out as part of the endorsement work, and to identify the list of potential additional activities and consequential effects (e.g. on the timetable) if critical evidence emerges from the preparer and/or user survey responses and/or from feedback derived from other outreach activities [refer to paragraphs A14–A16 and A38–A44];</li>
<li markdown="1">Including an explicit review point to assess the feedback/evidence received and to ask the Board whether the identified additional activities should be carried out [refer to paragraph A26];</li>
<li markdown="1">Organising additional educational activities with UK stakeholders concurrent to the publication of IFRS 18 to allow those stakeholders an opportunity to familiarise themselves with the main requirements of IFRS 18. The Board asked the Secretariat to put special emphasis on small and medium sized listed entities as they may be less aware of the new requirements in IFRS 18 [refer to paragraphs A36–A37]; and</li>
<li markdown="1">Considering whether it is possible to accelerate the proposed original timeline to finish the adoption of IFRS 18 earlier (i.e. by Q4 2025) [Table 1 following paragraph A66].</li>
</ol>
<a class="section__global-number" href="#paragraph-3" id="paragraph-3">3</a>In relation to the planned user and preparer surveys [refer to paragraphs A20–A28], the Board recommended:
<ol markdown="1" type="a">
<li markdown="1">Adding more clarity to the purpose of the planned surveys and keeping the deadline for the planned surveys flexible, with a suggestion to give participants at least two months to respond; and</li>
<li markdown="1">Allowing the Board to contribute to the surveys' design.</li>
</ol>
<a class="section__global-number" href="#paragraph-4" id="paragraph-4">4</a>The Board also asked the Secretariat to review the format of the timetable to reflect that some of the different activities that have been identified to be part of the endorsement process will be carried out concurrently [Table 1 following paragraph A66].
<a class="section__global-number" href="#paragraph-5" id="paragraph-5">5</a>The Secretariat has also switched the order of some of the original paragraphs in the PIP to fit a more logical sequence.
## Purpose {: #purpose }
<a class="section__global-number" href="#paragraph-A1" id="paragraph-A1">A1</a>This paper sets out the plan to assess whether to adopt for use in the UK [^1] the forthcoming International Accounting Standards Board (IASB) standard IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 will replace IAS 1 Presentation of Financial Statements.
<a class="section__global-number" href="#paragraph-A2" id="paragraph-A2">A2</a>IFRS 18 is expected to be published by the IASB in April 2024. IFRS 18 will be effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted (subject to the UKEB adoption in the UK).
<a class="section__global-number" href="#paragraph-A3" id="paragraph-A3">A3</a>The UKEB's statutory functions mean that the Board must assess the requirements in IFRS 18 against the statutory adoption criteria before IFRS 18 can be formally adopted for use in the UK.
## Background
<a class="section__global-number" href="#paragraph-A4" id="paragraph-A4">A4</a>The Primary Financial Statements (PFS) project was added to the IASB's research agenda in July 2014 in response to investors' concerns about the comparability and transparency of companies' performance reporting. Following stakeholder feedback on the IASB's 2015 Agenda Consultation [^2], the project was added to the active standard-setting projects.
<a class="section__global-number" href="#paragraph-A5" id="paragraph-A5">A5</a>In December 2019, the IASB published the Exposure Draft ED/2019/7 General Presentation and Disclosures (ED). The IASB's snapshot summarises the ED's proposals. At the time the UKEB had not been established. However, the UKEB Secretariat (Secretariat) response [^3] to the ED was submitted in September 2020, following public consultation. The Secretariat's feedback statement (published in October 2020) summarises the outreach work undertaken, stakeholder views, and the final position on the proposals in the ED.
<a class="section__global-number" href="#paragraph-A6" id="paragraph-A6">A6</a>The IASB received 216 comment letters in response to the ED. It also conducted significant additional outreach activities during the development of IFRS 18. The IASB redeliberated the proposals in the ED from March 2021 to June 2023.
<a class="section__global-number" href="#paragraph-A7" id="paragraph-A7">A7</a>The IASB conducted targeted outreach between October 2022 and December 2022, including attending UKEB's Advisory Groups meetings [^4], to obtain feedback on specific tentative decisions made by the IASB.
<a class="section__global-number" href="#paragraph-A8" id="paragraph-A8">A8</a>In July 2023 the IASB began its balloting process of the forthcoming IFRS 18 and stated its intention to publish the final standard in April 2024. This included seeking views on a first draft [^5] of the forthcoming standard from International Forum of Accounting Standard Setters (IFASS) members, which includes the UKEB. The Secretariat submitted comments to the IASB staff.
<a class="section__global-number" href="#paragraph-A9" id="paragraph-A9">A9</a>In October and November 2023, the Secretariat held education sessions with the UKEB's Advisory Groups with the support of the IASB PFS staff [^6]. The purpose was to obtain feedback on key aspects of IFRS 18 to help identify any significant endorsement concerns and start identifying any likely costs and benefits resulting from the application of the new requirements.
<a class="section__global-number" href="#paragraph-A10" id="paragraph-A10">A10</a>Consistent with paragraphs 4.18–4.19 of the UKEB's Due Process Handbook, the Board has received regular progress reports on the PFS project, including updates of tentative decisions made by the IASB, commentary on how those decisions changed the ED proposals and the consistency with UKEB's comments.
<a class="section__global-number" href="#paragraph-A11" id="paragraph-A11">A11</a>As a result of this activity, the UKEB Board and Secretariat has fulsome understanding of the expected requirements of IFRS 18.
## Description of the main requirements in IFRS 18 {: #description-of-the-main-requirements-in-ifrs-18 }
<a class="section__global-number" href="#paragraph-A12" id="paragraph-A12">A12</a>A description of the main requirements in IFRS 18 and of the expected effects derived from these requirements is presented in the table below.
<div class="table-container" markdown="1">
| Requirements in IFRS 18 | Expected effects |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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**Key Information:**
**Filing Dates:**
Annual Report publication date: 28 March 2024
This form completed: 28 March 2024
**Related Party Information:**
Relationship of related party to the organization: N/A
Nature of related party transactions: N/A
**Auditor Details:**
Firm Name: N/A
Address: N/A
Contact Person: N/A
Email: N/A
Phone: N/A
---
## Project plan {: #project-plan }
<a class="section__global-number" href="#paragraph-A13" id="paragraph-A13">A13</a>The project plan is guided by the following factors.
### Identification of required evidence {: #identification-of-required-evidence }
<a class="section__global-number" href="#paragraph-A14" id="paragraph-A14">A14</a>The Secretariat has commenced identifying issues for further consideration as part of the UKEB's endorsement work. The principal components of this work are set out below.
<ol markdown="1" type="a">
<li markdown="1">Desk-based research (see paragraph A16);</li>
<li markdown="1">Preliminary views of the UKEB's Advisory Groups ahead of the publication of IFRS 18 (see paragraphs A17–A19);</li>
<li markdown="1">User and preparer surveys (see paragraphs A20–A26);</li>
<li markdown="1">Subsequent consultations with UKEB Advisory Groups/UKEB Financial Instruments Working Group (FIWG) (see paragraphs A27–A28);</li>
<li markdown="1">In-house research on long-term public good (see paragraphs A29–A35); and</li>
<li markdown="1">Educational webcasts/webinars in coordination with IASB staff (see paragraphs A36–A37).</li>
</ol>
<a class="section__global-number" href="#paragraph-A15" id="paragraph-A15">A15</a>If critical evidence emerges from the preparer and user survey responses and/or from feedback derived from other outreach activities, the Board will be asked to confirm whether additional activities should be carried out (refer to paragraph A26 and paragraphs A38–A44).
### Desk-based research {: #desk-based-research }
<a class="section__global-number" href="#paragraph-A16" id="paragraph-A16">A16</a>We have carried out desktop analysis of a draft version of IFRS 18 and the basis for its requirements (when a first draft version was shared with IFASS members [^7]) and of commentaries/articles issued in advance of the publication of the standard, for example by accounting firms. The Secretariat will continue carrying out this type of analysis once IFRS 18 is published.
### Preliminary views from advisory groups {: #preliminary-views-from-advisory-groups }
<a class="section__global-number" href="#paragraph-A17" id="paragraph-A17">A17</a>The preliminary feedback from members of these groups during Q4 2023 indicated overall support for the presentation and disclosure requirements of IFRS 18. In their view the requirements in IFRS 18 will provide greater comparability and consistency of financial information and reduce diversity in practice. [^8]
<a class="section__global-number" href="#paragraph-A18" id="paragraph-A18">A18</a>However, they identified three main topics requiring further detailed consideration prior to the endorsement of IFRS 18 (see table below). [^9]
<div class="table-container" markdown="1">
| IFRS 18 requirements | Issues raised |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------## Foreword
### Statement by the Chair of the UKEB
I am pleased to present the UKEB's Project Initiation Plan (PIP) for the endorsement of IFRS 18 *Presentation and Disclosure in Financial Statements*. This plan sets out how the UK Endorsement Board (UKEB) intends to assess the IASB's new financial reporting standard for its suitability for use by UK companies.
The IASB's project on Primary Financial Statements (PFS) was established in 2014 and has been a topic of interest for UK stakeholders for many years, including during the public consultation for the UKEB's first Statement of Strategic Intent and Plan in 2021. Throughout the IASB's project, the UKEB has engaged with UK stakeholders to help ensure their views were heard. This work was critical in informing the UKEB’s analysis and formal response to the IASB’s Exposure Draft and in preparing for the subsequent endorsement assessment.
IFRS 18 will introduce significant changes to the structure of the income statement, require new disclosures of management-defined performance measures and enhance the general principles of aggregation and disaggregation. The standard has the potential to improve the comparability and transparency of financial reporting in the UK and globally.
The UKEB's endorsement assessment will involve in-depth analysis of IFRS 18 against the UK's statutory adoption criteria. Our approach is designed to be rigorous, evidence-based, and transparent. We will:
* **Conduct extensive outreach** through surveys and consultations with preparers, users, auditors, and other stakeholders across the UK, including small and medium-sized listed entities. This is crucial for understanding the practical implications and potential costs and benefits of implementing IFRS 18.
* **Perform detailed technical analysis** of the requirements in IFRS 18, focusing on significant issues raised by UK stakeholders. This includes assessing the standard against criteria such as understandability, relevance, reliability, and comparability, as well as considering whether it provides a true and fair view.
* **Evaluate the long-term public good** of adopting IFRS 18 in the UK, assessing its wider economic effects, including on economic growth.
The timeline for our assessment is ambitious but achievable, aiming to complete the endorsement process before the standard's effective date of 1 January 2027. We recognise that, should critical evidence emerge from our outreach or analysis, additional activities may be necessary, potentially extending the timeline.
I am confident that the UKEB's robust process will ensure a thorough and well-considered decision on IFRS 18, contributing to high-quality financial reporting in the UK.
**António Gomes**
Chair, UK Endorsement Board
## Introduction
### UK Endorsement Board
<a class="section__global-number" href="#paragraph-A1" id="paragraph-A1">A1</a>The UK Endorsement Board (UKEB) is responsible for assessing newly issued or amended International Financial Reporting Standards (IFRS) to determine their suitability for adoption for use in the UK. We also influence the development of IFRS and provide thought leadership to promote high quality financial reporting.
<a class="section__global-number" href="#paragraph-A2" id="paragraph-A2">A2</a>The UKEB uses an evidence-based approach to carry out our endorsement activities. We engage with a broad range of UK stakeholders, including preparers, users, auditors, and academics, to gather diverse perspectives and insights on the likely impacts of new or amended IFRS. Our decisions are guided by statutory adoption criteria, which require us to assess standards against criteria such as understandability, relevance, reliability, and comparability, whether they provide a true and fair view, and whether they are conducive to the long-term public good in the UK.
<a class="section__global-number" href="#paragraph-A3" id="paragraph-A3">A3</a>In April 2024, the International Accounting Standards Board (IASB) expects to publish IFRS 18 *Presentation and Disclosure in Financial Statements*. IFRS 18 will replace IAS 1 *Presentation of Financial Statements*. The standard is expected to be effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted (subject to UKEB adoption in the UK).
<a class="section__global-number" href="#paragraph-A4" id="paragraph-A4">A4</a>The UKEB considers that IFRS 18 is likely to be a significant standard for UK companies, affecting how they present their financial performance and communicate with stakeholders.
<a class="section__global-number" href="#paragraph-A5" id="paragraph-A5">A5</a>This Project Initiation Plan (PIP) sets out the UKEB’s plan to assess IFRS 18 for adoption. It outlines our proposed approach, key activities, and timeline for the endorsement assessment, which will lead to a recommendation to the Secretary of State for Business and Trade on whether IFRS 18 should be adopted for use in the UK.
<a class="section__global-number" href="#paragraph-A6" id="paragraph-A6">A6</a>We value stakeholder input throughout our endorsement process. We encourage all interested parties to engage with us, provide their insights, and respond to our consultations to help us make an informed decision on IFRS 18.
### Background on IFRS 18
<a class="section__global-number" href="#paragraph-A7" id="paragraph-A7">A7</a>The IASB’s project on Primary Financial Statements (PFS) began in 2014 in response to investor concerns about the comparability and transparency of companies’ performance reporting. Following extensive stakeholder feedback, the project was added to the IASB’s active standard-setting agenda.
<a class="section__global-number" href="#paragraph-A8" id="paragraph-A8">A8</a>IFRS 18 aims to improve the usefulness of information in financial statements by:
<ol markdown="1" type="a">
<li markdown="1">Requiring entities to present two new defined subtotals in the income statement: **operating profit** and **profit before financing and income taxes**, along with defined categories (operating, investing, and financing).</li>
<li markdown="1">Enhancing disclosures of **management-defined performance measures (MPMs)**, including a reconciliation to IFRS Accounting Standards totals.</li>
<li markdown="1">Improving the general principles for **aggregation and disaggregation** of information in financial statements.</li>
</ol>
<a class="section__global-number" href="#paragraph-A9" id="paragraph-A9">A9</a>The standard is expected to enhance the consistency and comparability of financial information across entities, providing better insights into management’s view of performance and improving the transparency of performance measures.
### UKEB's engagement with IASB's project
<a class="section__global-number" href="#paragraph-A10" id="paragraph-A10">A10</a>The UKEB has closely monitored the IASB's PFS project since its inception. Our engagement has included:
<ol markdown="1" type="a">
<li markdown="1">Providing formal responses to the IASB's Exposure Draft ED/2019/7 *General Presentation and Disclosures*, which formed the basis for IFRS 18.</li>
<li markdown="1">Conducting extensive outreach with UK stakeholders to gather their views on the proposed changes, informing our responses to the IASB.</li>
<li markdown="1">Participating in IASB Advisory Group meetings and educational sessions to stay abreast of the project's developments and provide UK perspectives.</li>
<li markdown="1">Regularly updating the UKEB Board on the progress of the PFS project and the IASB’s tentative decisions.</li>
</ol>
<a class="section__global-number" href="#paragraph-A11" id="paragraph-A11">A11</a>This continuous engagement has provided the UKEB Board and Secretariat with a comprehensive understanding of the expected requirements of IFRS 18, laying a strong foundation for our endorsement assessment.
### Key aspects of IFRS 18
<a class="section__global-number" href="#paragraph-A12" id="paragraph-A12">A12</a>IFRS 18 introduces several key changes related to the presentation and disclosure of financial information:
<div class="table-container" markdown="1">
| Area | Requirements under IFRS 18 | Expected Impact 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IFRS 18 Presentation and Disclosure in Financial Statements
(effective date 1 January 2027)—Proposed timeline
IFRS 18 Presentation and Disclosure in Financial Statements (effective date 1 January 2027)—Illustration of extended timeline
Annex 1: [Draft] Endorsement Criteria Assessment structure and outline contents
[Draft] Endorsement Criteria Assessment: IFRS 18 Presentation and Disclosure in Financial Statements—proposed structure and outline contents
Executive summary: To provide a summary of key points covered as part of the DECA
Section 1: Legislative framework and our approach to the assessment * Purpose of [Draft] Endorsement Criteria Assessment (DECA) * UK statutory requirements * Approach to the endorsement criteria: * Technical accounting criteria * UK long term public good * True and fair view principle * Scope of the adoption assessment
Section 2: Description of IFRS 18 * Background, context and objectives * Overview of IASB's project – key purpose and objectives: * High-level picture of current accounting in the UK under IAS 1 * Description of IFRS 18's main accounting requirements: * High-level description of the main principles * Presentation requirements * Disclosure requirements * Transition requirements * Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 23
Section 3: Technical accounting criteria assessment * Detailed analysis against the technical accounting criteria only in relation to significant issues (an exceptions-based approach) on a topic-by-topic basis. * 'Significant issues' from preliminary assessment [For each significant issue, the following is expected to be covered:
[Draft] Endorsement Criteria Assessment: IFRS 18 Presentation and Disclosure in Financial Statements—proposed structure and outline contents * Introduction and description of the issue * IFRS 18 requirements * Accounting impact * Analysis against the technical accounting criteria] * Overall conclusion on whether IFRS 18 meets the technical accounting criteria
Section 4: UK long term public good assessment * Structure of the assessment: The assessment is performed at the level of IFRS 18 as a whole * Overview of long term public good assessment—purpose and approach * Will IFRS 18 improve the quality of financial reporting? * Discussion of improvements introduced by IFRS 18 and comparison with UK current practices * Costs and benefits of applying IFRS 18 * Overview of expected costs and benefits of IFRS 18 and explanation of the approach used for this assessment * Detailed costs and benefits for preparers, users, auditors, regulators and other stakeholders * Summary of costs and benefits for stakeholders * Likely effect on the economy of the UK * Consideration of the consequences of not adopting the standard * Overall conclusion on UK long term public good
Section 5: True and fair view assessment * Structure of the assessment: The assessment is performed at the level of IFRS 18 as a whole * Interaction with other UK-adopted international accounting standards * Assessment * Overall conclusion
Conclusion * [Draft] adoption decision
Does the Standard lead to a significant change in accounting practice? * This Standard is likely to lead to a significant change in accounting practice and therefore meet the criteria for a post-implementation review under Regulation 11 in SI 2019/685
Glossary
Appendix B: Sustainability Update
ISSB meetings
February 2024 meeting - update
B1The ISSB met on 21 February 2024, in New York City, USA, to discuss:
- Criteria for assessing the priority of new research and standard setting projects to be added to the work plan 24.
- Developing educational material in relation to materiality 25.
Criteria for assessing new research and standard setting projects
B2The ISSB decided to modify the approach as set out in the ISSB Agenda Consultation to incorporate the concept of interoperability. The ISSB will now also consider the work of other standard setters as their work plan develops.
Developing educational material on materiality
B3The ISSB discussed the concept of materiality in the context of the requirements in IFRS Sustainability Disclosure Standards and the scope of information to which the concept of materiality was applied. No decisions were made.
March 2024 meeting - update
B4The ISSB met on 13 March 2024, in Frankfurt, Germany, to discuss:
- ISSB Consultation on Agenda Priorities—Strategic direction and balance of the ISSB’s activities 26.
Consultation on Agenda Priorities
B5The ISSB discussed the number and scope of new research and standard-setting projects for the two-year work plan. The ISSB tentatively decided to begin new research and standard-setting projects, support the implementation of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures and to enhance the SASB Standards.
B6The ISSB noted that most respondents to the Agenda Consultation had recommended that the highest priority for the ISSB should be the establishment of a global baseline of sustainability reporting. The ISSB tentatively agreed to place a high level of focus on supporting the implementation of IFRS S1 and IFRS S2 and to place a 'slightly lower level of focus' on enhancing the SASB Standards and on beginning new research and standard-setting projects.
B7The ISSB also tentatively decided to pursue connectivity between the ISSB and International Accounting Standards Board (IASB) respective requirements as a 'core' activity. Interoperability and stakeholder engagement were also noted as fundamental to and incorporated in the work of the ISSB. In addition, the ISSB agreed to allow some flexibility in its work plan to cater for emerging issues and to allow for engagement with the IASB as necessary.
B8The ISSB supported the idea of a potential post implementation review for IFRS S1 and IFRS S2 but tentatively decided that a conceptual framework project should not be pursued in the initial work plan.
B9The ISSB staff will present an analysis and recommendations on the number and scope of new projects to be added to the work plan at a future meeting for ISSB discussion and decisions.
IFRS Foundation updates
B10The Due Process Oversight Committee met on 29 February 2024 and was provided with an update on ISSB activities 27 and material to support the application of ISSB standards 28.
B11The Global Preparer Forum (GPF) 29 met on 1 March 2024 and was provided with an update from the Climate-related and Other Uncertainties in the Financial Statements project team on the draft examples for discussion at the IASB March 2024 meeting.
B12The forum was also provided with an update from the ISSB on 2024 priorities. The key implementation priorities were noted as achieving interoperability and connectivity with financial statements and the key adoption priorities were working with jurisdictions and encouraging voluntary adoption. The priority for the future ISSB workplan was to finalise decisions in H1 2024 and then the ISSB would agree the research projects.
B13The IFRS Foundation Monitoring Board 30 reaffirmed the importance of ongoing oversight of the standard-setting activities and governance of the IFRS Foundation. The Monitoring Board noted the importance of connectivity between the financial statements and sustainability-related disclosures, while ensuring mutual independence and balanced resource allocation for their standard setting process. The Board also reconfirmed that robust due process is the core function of the IFRS Foundation and encouraged continued efforts in this area.
B14The ISSB Sustainability Standards Advisory Forum (SSAF) 31 met on 11 March 2024 when SSAF members discussed connectivity and the ISSB agenda priorities. In relation to connectivity, members advised that there was confusion amongst stakeholders about the term 'interoperability', the scope of a potential ISSB project on integration in reporting and the connections between the ISSB and IASB. Members asked for the distinction to be made clearer, and for the roles and responsibilities of the boards to be clarified within the due process.
B15Several SSAF members noted that understanding the future roadmap of the ISSB standards was likely to be a key factor for jurisdictions considering adoption and that further clarity was required.
B16SSAF members also noted that some jurisdictions had expressed reservations about the SASB Standards, while others had indicated that they may not include them in the adoption of ISSB standards. SSAF members recommended that the ISSB develop an approach to manage this situation.
B17A member referred to the IOSCO Monitoring Board brief and noted that the Inaugural ISSB Adoption Guide 32 approach was helpful but considered public statements regarding classification by adoption status required further discussion with regulators prior to finalisation.
B18The ISSB Transition Implementation Group (TIG) 33 met on 15 March 2024. TIG discussions are intended to support application and do not change or add requirements to the ISSB standards. The TIG provided guidance on the application of paragraph 29(b)−(c) of IFRS S2 34 and whether revisions applied only to estimated amounts that were metrics or to all estimated amounts disclosed.
Other international updates
B19The US Securities and Exchange Commission (SEC) has passed the new climate rule after considering more than 24,000 comment letters. The final rule excludes the requirement for entities to report on Scope 3 Greenhouse Gas emissions and requires large entities to report on material operational emissions.
Footnotes
Footnotes
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The UK's statutory requirements for adoption of international accounting standards are set out in The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 no. 685 (the Regulations, or SI 2019/685) ↩↩
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See the link to the IASB's Feedback Statement on the 2015 Agenda Consultation. ↩↩
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The response was from the Financial Reporting Council (FRC) because it was submitted before the UKEB had a Chair and a Board. ↩↩
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The IASB PFS team met with the Investor Advisory Group (IAG) on 3 October 2022; with the Preparer Advisory Group (PAG) on 31 October 2022; and with the Accounting Firms and Institutes Advisory Group (AFIAG) on 3 November 2022. The feedback received was reported back to the UKEB at its November 2022 meeting. ↩↩
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The IASB shared this draft for editorial review in line with the requirements in paragraph 3.32 of the IASB Handbook. We informed this to the Board in agenda paper 5 for the 21 September 2023 meeting. ↩↩
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The Secretariat met with the IAG on 27 November 2023; with the PAG on 31 October 2023; and with the AFIAG on 2 November 2023. The feedback received was reported back to the Board at its November 2023 meeting. ↩↩
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See paragraph A8. ↩
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The Secretariat has organised an education session for the UKEB Financial Instruments Working Group (FIWG) with the participation of IASB staff in April 2024 to obtain views on the requirements of IFRS 18. ↩
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The information in this table is based on UKEB's advisory group meeting summary (meetings with PAG on 31 October 2023; and with AFIAG on 2 November 2023). The IAG did not raise major concerns on the requirements. ↩
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The Secretariat's preliminary work indicates that industries in which associates, and joint ventures are more likely to be considered within an entity's main business activities are insurance, automobile, mining and real estate. ↩
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For example, in the extractive industry, employee benefits could be capitalised into a drilling rig. This rig could be used to explore for oil and then be depreciated and/or impaired. This could make it very difficult for entities to keep track of the original debit. This is the reason why the IASB decided to provide application guidance to clarify that the amounts disclosed need not be the amounts recognised as an expense for the period. For example, they could include amounts that have been recognised as part of the carrying amount of an asset in the period. ↩
-
The nature of an operating expense could be changed or lost, for example, as a result of intercompany transactions. ↩
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Endorsement issues are those that would present challenges as to whether the requirements meet the technical accounting criteria; the long-term public good criteria (e.g. they could lead to costs which greatly outweighed the benefits achieved or they would not be likely to be conducive to the long term public good in the UK); and/or the true and fair view assessment (see paragraph A45(b)). ↩
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For example, where the requirements in IFRS 18 are difficult to put into practice. ↩
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For example, where the requirements in IFRS 18 are found to be unclear and not well understood and/or where questions emerge on how they should be interpreted and applied to specific scenarios/cases. ↩
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The Secretariat is currently liaising with Quoted Companies Alliance (QCA) for the organisation of this webinar. ↩
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SI 2019/685 requires an assessment of whether "the standard meets the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management" [regulation 7(1)(c)]. In this paper we refer to these criteria collectively as the technical accounting criteria. ↩
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SI 2019/685 requires an assessment of whether the standard is not contrary to the principle that an undertaking's accounts must give a true and fair view of the undertaking's assets, liabilities, financial position and profit or loss [regulation 7(1)(a)(i)]. Similar criteria are set out in regulation 7(1)(a)(ii) in respect of consolidated accounts. ↩
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SI 2019/685 requires an assessment of whether the standard is likely to be conducive to the long term public good in the UK [regulation 7(1)(b)]. ↩
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Mandatory pronouncements are International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs), Interpretations and mandatory application guidance. Non-mandatory guidance includes the basis for conclusions, dissenting opinions, implementation guidance and illustrative examples, together with the IFRS practice statements. This categorisation is set out in the introduction to the IASB yearly bound volumes. ↩
-
UKEB calculation based on London Stock Exchange Group (LSEG) and Eikon data, May 2023. This calculation includes companies listed on the Main market as well as on the Alternative Investment Market (AIM). ↩
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UKEB estimate based on FAME (company information in the UK and Ireland produced by the Bureau Van Dijk, a Moody's analytics company), Company Watch financial analytics and other proprietary data. ↩
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IFRS 18 will change the title of IAS 8 from 'Accounting Policies, Changes in Accounting Estimates and Errors' to 'Basis of Preparation, Accounting Policies, Changes in Accounting Estimates and Errors'. ↩
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Criteria for assessing the priority of new research and standard setting projects to be added to the work plan ↩
-
Supporting implementation of IFRS S1 and IFRS S2 Developing educational material on materiality ↩
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ISSB Consultation on Agenda Priorities—Strategic direction and balance of the ISSB´s activities ↩
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Due Process Oversight Committee - Update on ISSB technical activities (29 February 2024) ↩
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Due Process Oversight Committee - Material to support the application of ISSB Standards (29 February 2024) ↩
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IFRS Global Preparers Forum (March 2024) ↩
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The IFRS Foundation Monitoring Board reaffirmed the importance of ongoing oversight of the standard-setting activities and governance of the IFRS Foundation (IOSCO 4 March 2024) ↩
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Sustainability Standards Advisory Forum March 2024 ↩
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The jurisdictional journey towards globally comparable information for capital markets (2024) ↩
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Transition Implementation Group on IFRS S1 and IFRS S2 (March 2024) ↩
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These paragraphs in IFRS 2 relate to the amount and percentage of assets or business activities vulnerable to climate-related transition risks, and the amount and percentage of assets or business activities vulnerable to climate-related physical risks ``` ↩