The following is a summarised update of the main discussions and tentative decisions taken by the IASB at its meeting on 17-18 July 2018.  

For more details and comprehensive information on the IASB’s discussion see:

Rate-regulated Activities

The Board tentatively decided:

  • An entity should:
    • estimate future cash flows using either the ‘most likely amount’ method or the ‘expected value’ method, depending on which method the entity concludes would better predict the amount of the cash flows arising from a particular timing difference; and
    • apply the same method consistently from the origination of the timing difference until its reversal.

The determination of whether to consider the outcome of each timing difference separately or together with one or more other timing difference should be based on the approach that would better predict the amount of the resulting future cash flows.

  • When a regulatory agreement does not provide explicit compensation for the effects of time between the origination and reversal of a timing difference, an entity should use judgement to determine whether the financing component of the timing difference is significant based on the entity’s facts and circumstances. If the entity concludes that:
    • the financing component is not significant, discounting the future cash flows is not required. 
    • the financing component is significant, the entity should use a ‘reasonable rate’ to discount the estimated future cash flows and recognise any loss in profit or loss immediately.

When a financing component is explicit, an entity should measure the regulatory asset by discounting the estimated future cash flows using the interest rate or return rate established by the regulatory agreement for those cash flows. However, that requirement would not apply where clear evidence shows that the regulatory interest rate or return rate is set at a level that provides an excess or deficit in compensation because of an identifiable event or decision.  In this circumstance, an entity should recognise the excess or deficit in compensation in the period in which the identifiable event or decision occurs.

  • The accounting model being developed to provide users of financial statements with useful information about those rights and obligations that are created by defined rate regulation should:
    • adopt the treatment required by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to account for changes in estimated future cash flows.
      • The effect of a change in estimated future cash flows should be recognised prospectively in profit or loss in the period of change if the change affects only the period, or the period of change and future periods if the change affects both.
      • If the change gives rise to a change in a regulatory asset, the change should be recognised by adjusting the carrying amount of the related asset in the period of change.
      • When a regulator changes the interest rate or return rate used to compensate an entity for the period between the origination and reversal of a timing difference, the entity should measure the outstanding regulatory asset balance using the revised interest rate or return rate to discount the estimated future cash flows; and recognise any resulting change in the carrying amount of the regulatory asset in the period of change.
    • apply the same measurement requirements for regulatory liabilities and assets.

Goodwill and Impairment Research Project

The Board tentatively decided:

  • not to pursue the objective of removing the differences between accounting requirements for internally generated intangible assets and those for intangible assets acquired in a business combination.
  • To explore whether disclosures could be improved to enable investors to assess more effectively whether a business combination was a good investment decision and whether the acquired business is performing after the acquisition as was expected at the time of the acquisition.
  • To pursue improving the calculation of value in use by removing from IAS 36 Impairment of Assets:
    • the restriction that excludes from the calculation cash flows that are expected to result from a future restructuring or from a future enhancement.
    • the requirement to use pretax inputs in the calculation.
  • To retain the existing model for impairment testing in IAS 36, instead of changing it to focus on assessing whether the carrying amount of acquired goodwill is recoverable.
  • In pursuing the objective of simplifying the accounting for goodwill:
    • not to consider requiring an entity to write off goodwill immediately on initial recognition.
    • to explore whether to reintroduce amortization of goodwill.
    • to pursue possible relief from the mandatory annual quantitative impairment testing of goodwill.
  • To issue a discussion paper as the next step.

Costs considered in assessing whether a contract is onerous (IAS 37)—possible narrow-scope standard-setting

The Board discussed the Committee’s recommendation to propose a narrow-scope amendment to IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The proposed amendment relates to the assessment of whether a contract is onerous, and would:

  • specify that the ‘cost of fulfilling’ a contract in paragraph 68 of IAS 37 comprises the ‘costs that relate directly to the contract’;
  • provide examples of costs that do, and do not, relate directly to a contract to provide goods or services.
  • make no new requirements for entities to disclose information about onerous contracts.
  • make specific transition requirements for entities already reporting using IFRS Standards. Such entities would be required to apply a ‘modified retrospective’ approach whereby they would apply the proposed amendments to contracts existing at the date of initial application—the beginning of the annual reporting period in which the entity first applies the amendments.
  • make no specific transition requirements for entities adopting IFRS Standards for the first time.



7 January 2019

DP/2018/1 - Financial Instruments with Characteristics of Equity



On 12 July 2018, RSM International submitted a letter of comments to the IFRS Board on: