PUBLICATIONS AND ANNOUNCEMENTS
IAS 19 amended for plan amendment, curtailment or settlement
On 7 February 2018, the IASB issued an amendment which is effective from 1 January 2019, with early application permitted. The amendments specify how companies remeasure a defined benefit plan when a change - an amendment, curtailment or settlement - to a plan takes place during a reporting period. Under the amended standard, a company is required to use the updated assumptions from this remeasurement to determine current service cost and net interest for the remainder of the reporting period after the change to the plan. By requiring the use of updated assumptions, the amendments are expected to provide useful information to users of financial statements.
INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) LATEST DECISIONS SUMMARY
The following is a summarised update of the main discussion and tentative decisions taken by the IASB at its meeting on 20-22 February 2018.
For more details and comprehensive information on the IASB’s discussion see: https://www.ifrs.org/news-and-events/updates/iasb-updates/february-2018/
Disclosure Initiative: Principles of Disclosure
The Board discussed the comments received on the Discussion Paper Disclosure Initiative—Principles of Disclosure. The Board will make decisions about the next steps in the project at its meeting in March 2018.
Primary Financial Statements
- The Board discussed a clarification of the proposals for management performance measures (MPMs) and whether a separate presentation is required of the investing cash flows distinguishing between ‘integral’ and ‘non-integral’ associates and joint ventures in the statement of cash flows.
- The Board requested the staff to develop a simplified approach to management performance measures (MPMs) for a future meeting.
- The Board did not discuss the agenda paper that seeks the Board’s view on requirements for management-defined adjusted earnings per share measures.
- The Board tentatively decided to propose:
- separate presentation of (i) the cash flows that arise between an entity and its ‘integral’ associates and joint ventures and (ii) the cash flows that arise between an entity and its ‘non-integral’ associates and joint ventures. The split between ‘integral’ and ‘non-integral’ associates and joint ventures would be the same for the statement of cash flows as for the statement(s) of financial performance.
- the separate presentation of the investing cash flows of ‘integral’ and ‘non-integral’ associates and joint ventures should be within the ‘investing activities’ section of the statement of cash flows.
The Board will continue its discussions of these topics at a future meeting.
Dynamic Risk Management
The Board discussed the asset profile - one of the core areas of the dynamic risk management accounting model.
The Board asked the staff to continue developing the model:
- to set qualifying criteria for items within the asset profile;
- to allow for designation on a portfolio basis;
- to allow for designation of a percentage of a portfolio, provided conditions are met;
- to preclude voluntary de-designation;
- to require de-designation when certain events take place; and
- to require formal documentation.
Also, the Board requested the staff to consider additional de-designation events to ensure consistency with the above mentioned qualifying criteria.
The Board will discuss the target profile as described in the model at a future meeting.
Business Combination under Common Control
The Board discussed the Business Combinations under Common Control research project.
The Board tentatively decided to use the acquisition method set out in IFRS 3 Business Combinations as the starting point in its analysis of transactions within the scope of the project.
The Board expects to continue its discussion on the methods of accounting for such transactions within the scope of the project at future meetings.
The Board received an update on its research programme since the last meeting in September 2017. A list of the Board’s active research projects is available at https://www.ifrs.org/projects/work-plan/. The Board expects to receive the next update on its research programme in around three or four months.
The Board received an update on the first meeting of the Transition Resource Group (TRG) for IFRS 17 Insurance Contracts held on 6 February 2018, and the educational activities on IFRS 17 conducted with investors and analysts from mid-May 2017 to the end of January 2018. The Board was not asked to make any decisions.
The TRG meeting summary is available at https://www.ifrs.org/news-and-events/2018/02/february-2018-trg-for-ifrs-17-meeting-summary-and-podcast-available/.
Discussion Papers and Exposure Drafts
The Board discussed a background paper on discussion papers and exposure drafts. This discussion will inform the Board’s future decisions on whether to publish a discussion paper or exposure draft for the projects on primary financial statements, goodwill and impairment, and rate-regulated activities. The Board has not made decisions at this point, but will decide which documents to publish as it develops the projects.
The Board discussed the possible accounting model being developed for activities subject to ‘defined rate regulation’ to identify what unit of account would provide the most useful information to users of IFRS financial statements, the model’s focus on the incremental rights and obligations arising from a regulatory agreement of the type under discussion, and to assess whether the incremental rights and obligations meet the definitions of an asset and a liability in the Conceptual Framework for Financial Reporting.
The Board tentatively decided that:
- the accounting model will use as its unit of account the individual timing differences that create the incremental rights and obligations arising from the regulatory agreement.
- the present regulatory right—to charge a rate increased by an amount as a result of past events—meets the definition of an asset in the Conceptual Framework.
- the present regulatory obligation—to provide goods or services at a rate reduced by an amount as a result of past events—meets the definition of a liability in the Conceptual Framework.
The Board will discuss proposals for the scope and recognition requirements of the model before deciding whether to publish an Exposure Draft or a Discussion Paper as the next consultation document for the project.