Final Comment Letter - Agenda Consultation

| Project listed by the RFI | IASB proposed scope per RFI | Header 1 | Header 2 | |----------|----------| | Data 1 | Data 2 |

| Standard | Aspect IASB (International Accounting Standards Board) is considering revisions to its IFRS standards related to climate change risks and intangible assets.”

Okay, that seems good. I will structure the diagram data points with a header explaining the diagram, then lists for the content.

The ** for bold in the list of priorities from the diagram will make it clear. Final check on the custom IDs: - Only for numbered sections/paragraphs. - Format {: #section-N } for headings, class="section__global-number" for paragraphs. - For hierarchical numbers: use dashes (e.g., #section-2-1). - For (a), (b) etc: use dashes (e.g., #section-3-a). - Include "overview" or other descriptive text in the ID if necessary for uniqueness, as per Example 6. - "1. 2024/25 highlights" → ## 1. 2024/25 highlights {: #section-1-2024-25-highlights } - My current numbering is simple: A1, A2, 1, 3, 4, 5, 6, 7. - For Appendix 1 and Appendix 2, I've used {: #appendix-1 } and {: #appendix-2 }. - For A1, A2 etc., I'll use <a class="section__global-number" href="#paragraph-A1" id="paragraph-A1">A1</a>.

I've ensured to use markdown="1" for all HTML block elements containing markdown. Table container div is applied. No --- or *** for decorative lines, only the one I added as a separator for readability. All footnotes collected at the end. No duplicate title.

Let's double-check the paragraph numbering strategy for the "A" series. A1, A2, A3, A4, A5, A6, A7, A8, A9, A10, A11, A12, A13, A14, A15, A16 are all distinct, top-level points within the Appendices. The instruction says "For numbered paragraphs: Create self-linking anchor tags". This fits these A-series items. So, <a class="section__global-number" href="#paragraph-A1" id="paragraph-A1">A1</a>The current allocation... is the correct approach.

For nested lists like A2 a) (i), the <ol markdown="1" type="a"> and <ol markdown="1" type="i"> already handle the numbering and hierarchy. I don't need to add specific <a id=""> tags to the a) or (i) list items, as these are part of a larger numbered list item (A2). The numbering within the HTML ordered list handles their unique identification. The anchor is for the top-level point A2.

The formatting of the address block and signature block should be preserved as plain text, or paragraphs. I will just leave them as paragraphs.

The contact info in the footer appears on almost every page. I should only include it once at the very end.

UK Endorsement Board
email: [email protected]
website: www.endorsement-board.uk
UK Endorsement Board | 8th Floor | 125 London Wall | London | EC2Y 5AS

This information is found on page 1, 14, 15. I will put it once at the very end, after footnotes.

One specific instruction about headings: "If a heading is exactly "ACME Corporation", convert it to a bold paragraph (ACME Corporation) instead of a heading." I see "IASB's Third Agenda Consultation" on page 1, but it's part of a sentence. "Intangible Assets" appears as bold text within a sentence on page 3. Same for "Statement of Cash Flows" on page 4, and "Financial Instruments", "Consolidated Financial Statements", "Operating Segments", "General Presentation and Disclosures ED" on page 9. These are proper nouns, not headings, so they are correctly left as bold within the paragraph.

The title exclusion rule: "Request for Information: Third Agenda Consultation" is the document title. It appears on Page 1. My markdown should start with the address details, then "Dear Dr Barckow", then the main body paragraphs. It should not have ## Request for Information: Third Agenda Consultation.

The first use of this phrase in body text: "We welcome the opportunity to respond to the IASB's Third Agenda Consultation." - This is fine to keep as bolded text, as it's not a heading and it's part of the content.

I've got the overall structure down. I will now assemble the full markdown.Dr Andreas Barckow IASB Chair International Accounting Standards Board 7 Westferry Circus Canary Wharf London E14 4HD

21 September 2021

Dear Dr Barckow

The UK Endorsement Board (UKEB) is responsible for endorsement and adoption of IFRS for use in the UK and therefore is the UK's National Standard Setter for IFRS. The UKEB also leads the UK's engagement with the IFRS Foundation (Foundation) on the development of new standards, amendments and interpretations. This letter forms part of those influencing activities and is intended to contribute to the International Accounting Standards Board's (IASB) due process. The views expressed by the UKEB in this letter are separate from, and will not necessarily affect the conclusions in, any endorsement and adoption assessment on new or amended International Accounting Standards undertaken by the UKEB.

There are currently approximately 1,600 listed entities in the UK[^1] using IFRS Standards. In addition, unlisted companies have the option to use IFRS and a significant number take up this option.

We welcome the opportunity to respond to the IASB's Third Agenda Consultation. We performed both desk-based research and outreach with our stakeholders to develop our views and to assess their implications for the IASB's future work plan. Our comments on the IASB's Request for Information (RFI) summarise that work and outreach. For detailed responses to the questions in the RFI please see appendix 1 to this letter.

IASB's strategic direction and balance of activities

1At a strategic level we recommend that the IASB reallocates resource to ensure that it:

1. retains sufficient flexibility in its workplan to address the interaction between IFRS and any future international sustainability standards developed by its proposed sister Board, the International Sustainability Standards Board (ISSB). As a minimum, we think this will need to include co-ordination with the ISSB on any areas of overlap;
2. allocates more resource to its work on digital financial reporting. This work should explore how advances in technology are changing the way investors
3. consume information and assess the extent to which any changes are needed to the IFRS taxonomy and the way in which the Board writes Standards;
4. resources the above priorities by
   1. Pausing the Second Comprehensive Review of IFRS for SMEs. The IASB's mission is to develop Standards that bring transparency, accountability and efficiency to financial markets around the world, and we recommend that in a time of resource constraint, the most pressing projects underpinning this core mission are prioritised.
   2. Pausing the Management Commentary project. Whilst we recognise the potential for this project to develop user-relevant disclosures in high-priority areas such as climate-related risk and intangibles, we note that as a Practice Statement it is non-mandatory, and that it is important to develop an understanding of whether any of its requirements are likely to be incorporated in the work of the ISSB before continuing to progress this project.
   3. Rationalising the Extractive Activities project by considering which aspects could be addressed by focusing on disclosure, which aspects could be addressed within a larger project on intangibles, and which aspects through educational material.

Our recommendations are in line with the rising influence on corporate reporting of ESG[^2] and sustainability[^3] reporting as well as the increasing use of technology in the production and consumption of corporate reports[^4]. We anticipate that these influences will continue to increase over the IASB's coming work cycle.

Priority projects

3Our desk-based research and initial outreach with stakeholders clearly identified three high-priority projects for IASB's next work cycle. The projects address emerging corporate reporting issues which should be prioritised in order for Standards to remain relevant. The projects are climate-related risks, intangibles, and statement of cash flows and related matters.

4We recommend that the projects address user information needs and are scoped as follows:

1. Climate-related risks – our outreach identified that the scope of this project should build on the IASB's previous work in this area and should consist of a cross-standard review to identify and resolve any potential areas of interaction between IFRS and future sustainability standards on climate-related risk.[^5] In addition to the potential amendments to IAS 1 and IAS 36 to capture long-dated climate-related risks identified in the RFI, this would include consideration of, for example, implications for IFRS 9 Financial Instruments of the classification of ESG bonds; implications for IFRS 10 Consolidated Financial Statements of whether renewable energy funds meet the investment entity criteria; and implications for IFRS 8 Operating Segments of changes in the regulatory environment due to climate-related risk.
2. Intangible assets – intangible assets play a larger role in the global economy today than they have ever done before. Latest UK Office for National Statistics data show that investment in intangible assets exceeds investment in tangible assets for UK businesses.[^7] Our outreach with stakeholders also indicated that intangible asset reporting is a key area for development. A comprehensive review of IAS 38 Intangible Assets is necessary to address the extent to which it captures relevant information on intangibles, including crypto-currencies, pollutant pricing mechanisms, software, and development costs, particularly in relation to value creation through scientific and technological innovation. The project should also consider whether more relevant information would be provided if intangible assets held for investment or for trading, such as crypto-currencies or pollutant pricing mechanisms, were addressed within the scope of other IFRS Standards.
3. Statement of cash flows – understanding cash performance is fundamental, especially as business activities and related activities become more complex. Our stakeholders, in particular investors, advised us that recent events have once again reiterated the need for a comprehensive review of IAS 7 Statement of Cash Flows. The concepts and principles in IASB's existing projects on presentation and disclosure should be considered as part of the review of IAS 7 Statement of Cash Flows and applied where appropriate. The project should also address whether a statement of cash flows is necessary for banks, and if so whether one specifically for banks should be developed, and whether the definition of cash and cash equivalents should be updated.

Thematic approach

5Where projects impact multiple Standards, we suggest that IASB applies a thematic approach, whereby amendments to all relevant Standards are addressed as part of the same project and an overarching objective. This approach allows for more consistency across Standards and has potential for greater efficiency in the Standard-setting process.

6A thematic approach would be effective for the climate-related risk and intangibles projects outlined above and we note that a similar approach has been deployed by IASB in the Disclosure Initiative project. We illustrate a thematic approach to the climate-related risk and intangibles projects in Appendix 2.

7In addition, high-priority projects could be grouped by a theme, for example on the theme of retaining relevance. A unifying theme could provide a consistent focus for project scoping and for stakeholder communications.

If you would like to discuss these comments, please contact the project team at [email protected].

Yours sincerely

Pauline Wallace Chair UK Endorsement Board

• Appendix 1 Response to questions in IASB's Request for Information Third Agenda Consultation
• Appendix 2 Illustration of thematic approach

Appendix 1: Questions on Third Agenda Consultation

Question 1: Strategic direction and balance of the Board's activities

The Board's main activities include:

• developing new IFRS Standards and major amendments to IFRS Standards;
• maintaining IFRS Standards and supporting their consistent application;
• developing and maintaining the IFRS for SMEs Standard;
• supporting digital financial reporting by developing and maintaining the IFRS Taxonomy;
• improving the understandability and accessibility of the Standards; and
• engaging with stakeholders.

Paragraphs 14-18 and Table 1 provide an overview of the Board's main activities and the current level of focus for each activity. We would like your feedback on the overall balance of our main activities.

Should the Board increase, leave unchanged or decrease its current level of focus for each main activity? Why or why not? You can also specify the types of work within each main activity that the Board should increase or decrease, including your reasons for such changes.

Should the Board undertake any other activities within the current scope of its work?

A1The current allocation of resource across IASB's main activity areas is broadly appropriate.

A2However, we recommend that IASB:

1. Within its activity on new IFRS, major amendments, and maintenance and consistent application:
   1. Retains sufficient flexibility in its workplan to address the interaction between IFRS and any future international sustainability standards developed by its proposed sister Board, the International Sustainability Standards Board (ISSB).
   2. Incorporates a more visible and structured research programme so that responses are developed in real-time for emerging issues. Collaborating with NSS may be an efficient way of achieving this.
2. Allocates more resource to digital reporting in order to
   1. Support the strategic development of digital reporting, since it is anticipated that digital production and consumption of financial information will become more prevalent over the IASB's next work cycle; and
   2. Ensure the robustness of the IFRS taxonomy, in order to maximise comparability. An SEC staff analysis of IFRS reporters submitting SEC returns for fiscal years 2018 to 2020 showed 41% use of custom tags on line items in the financial statements and notes in 2018, rising to 43% in 2020. Comparable data for US GAAP reporters showed that the use of custom tags on line items in the financial statements and notes was much lower, at 18% in 2018 rising to 20% by 2020.[^8]
3. Allocates more resource to the priorities identified above by
   1. Pausing the Second Comprehensive Review of IFRS for SMEs. The IASB's mission is to develop Standards that bring transparency, accountability and efficiency to financial markets around the world, and we recommend that in a time of resource constraint, the most pressing projects underpinning this core mission are prioritised. No UK investors or preparers have identified the IFRS for SMEs as currently requiring a comprehensive review. Our outreach indicated strong interest from UK preparers in the IASB's Reduced Disclosures for Subsidiaries Without Public Accountability project, due to anticipated cost savings and reductions in complexity. Given the IASB's resource constraints, we recommend waiting until the impact of the Reduced Disclosures for Subsidiaries Without Public Accountability project on the number and make-up of users of the IFRS for SMEs is more fully understood before continuing with the Second Comprehensive Review of IFRS for SMEs. This would allow the Second Comprehensive Review of IFRS for SMEs to focus on the needs of those stakeholders for whom it continues to be relevant.
   2. Pausing the Management Commentary project. Whilst we recognise the potential for this project to develop user-relevant disclosures in high-priority areas such as climate-related risk and intangibles, we note that as a Practice Statement it is non-mandatory and that it is important to develop an understanding of whether any of its requirements are likely to be incorporated in the work of the ISSB before continuing progress on this project.
   3. Rationalising the Extractive Activities project by considering which aspects could be addressed by focusing on disclosure, which aspects could be addressed within a larger project on intangibles, and which aspects through educational material.

Question 2: Criteria for assessing the priority of financial reporting issues that could be added to the Board's work plan

Paragraph 21 discusses the criteria the Board proposes to continue using when assessing the priority of financial reporting issues that could be added to its work plan.

Do you think the Board has identified the right criteria to use? Why or why not?

Should the Board consider any other criteria? If so, what additional criteria should be considered and why?

A3We broadly agree that the Board has identified the right criteria to use in assessing the priority of financial reporting issues that could be added to its work plan. However, we recommend some changes below.

A4We recommend that two of the IASB's criteria are redrafted:

1. There is a risk that application issues are captured by the second criterion: 'whether there is a deficiency in the way companies report the type of transaction or activity in financial reports.' We do not think that this is the IASB's intention. We recommend that this criterion is redrafted as 'whether there is a deficiency in the way companies report the type of transaction or activity and whether that deficiency can be remedied through standard setting.'
2. The third criterion considers: 'the type of companies the matter is likely to affect, including whether the matter is more prevalent in some jurisdictions than in others.' This suggests that some sectors and jurisdictions will be prioritised over others. Our view is that prevalence should be considered across all sectors and jurisdictions. We therefore recommend that this criterion is redrafted as 'the extent to which the matter is prevalent across jurisdictions and sectors.'

A5We recommend that an additional criterion is added. This criterion should assess whether the project is expected to remain relevant when it reaches implementation stage. The addition of this criteria will prevent projects of limited long-term relevance being added to the work plan.

A6We recommend that the first criterion is redrafted in consultation documents so that it is consistent with the wording in the IASB's due process handbook, and refers to 'users' rather than 'investors.'[^9]

Question 3: Financial reporting issues that could be added to the Board's work plan

Paragraphs 24-28 provide an overview of financial reporting issues that could be added to the Board's work plan.

What priority would you give each of the potential projects described in Appendix B—high, medium or low—considering the Board's capacity to add financial reporting issues to its work plan for 2022 to 2026 (see paragraphs 27–28)? If you have no opinion, please say so. Please provide information that explains your prioritisation and whether your prioritisation refers to all or only some aspects of the potential projects. The Board is particularly interested in explanations for potential projects that you rate a high or low priority.

Should the Board add any financial reporting issues not described in Appendix B to its work plan for 2022 to 2026? You can suggest as many issues as you consider necessary taking into consideration the Board's capacity to add financial reporting issues to its work plan for 2022 to 2026 (see paragraphs 27–28). To help the Board analyse the feedback, when possible, please explain: the nature of the issue; and why you think the issue is important.

A7The chart below illustrates our recommended prioritisation of potential projects and is based on feedback from our outreach with UK stakeholders and our own desk-based research. The highest priority projects are closest to the centre.

A8The three highest priority projects are: climate-related risks, intangible assets, and statement of cash flows and related matters. These projects relate to emerging corporate reporting issues which need to be addressed in order for Standards to remain relevant to the business environment over the coming decade.

A9We recommend that these projects are scoped as follows:

1. Climate-related risks
   1. As proposed by IASB, amendments to IAS 1 and IAS 36 to ensure long-dated impacts of climate-related risk are captured in the financial statements.
   2. In addition, to identify and address potential areas of interaction between IFRS and future sustainability standards on climate-related risks[^10]; for example, implications for IFRS 9 Financial Instruments of the classification of ESG bonds; implications for IFRS 10 Consolidated Financial Statements of whether renewable energy funds meet the investment entity criteria and implications for IFRS 8 Operating Segments of changes in the regulatory environment due to climate-related risk. Appendix 2 illustrates the potential scope of this project.
2. Intangibles As proposed by IASB, a comprehensive review of IAS 38. Specifically, this review should address:
   1. The extent to which IAS 38 captures relevant information on intangibles, including those which are becoming more prevalent, such as crypto-currencies, pollutant pricing mechanisms, software, and development costs, and;
   2. Whether separate standards addressing non-financial assets would provide more relevant information where intangibles such as crypto-currencies and emissions trading rights are held for investment and trading.
3. Statement of cash flows As specified by IASB, a comprehensive review of IAS 7. Specifically, this should address whether:
   1. Concepts and principles from IASB's existing projects on presentation and disclosure should be applied to IAS 7, for example, building on the General Presentation and Disclosures ED work on the statement of profit or loss, a review of statement of cash flows categories could improve comparability; and
   2. A statement of cash flows is necessary for banks, and if so whether one specifically for banks should be developed; and
   3. The definition of cash and cash equivalents should be updated.

A10We propose that the pollutant pricing mechanisms and crypto-currency projects are addressed within the intangibles project. Appendix 2 illustrates the potential scope of this project.

A11For the climate-related risk and intangibles projects, which involve multiple Standards, we recommend that a thematic approach is taken, whereby the impact across multiple Standards is considered as part of the same project. This approach supports consistency across Standards and potential efficiencies in the standard-setting process. See Appendix 2 for an illustration of the thematic approach.

A12Our stakeholder outreach and research work highlighted that the remaining projects set out in the IASB's Agenda Consultation are low priority. We include our rationale below: