Beyond the GAAP - April 2019

Nonetheless, this gives Beyond the GAAP an opportunity to update readers on the texts expected between now and the end of the year, and to warn that after the calm will come the storm, if we can describe the nine exposure drafts planned for May and June that way. Two of these will have been published by the time you receive this newsletter. There are also a number of draft texts in the pipeline for the second half of the year, some of which may have a very structuring impact in the short to medium term.

IFRS 17 deliberations reach an end

During its April 2019 meeting, the IASB concluded its deliberations on amendments to IFRS 17 on insurance contracts (see our ‘A Closer Look’studies in previous editions of Beyond the GAAP) and authorised its staff to start the drafting of the exposure draft. The IASB has also confirmed that it intends to amend the effective date of IFRS 17, deferring it to annual periods beginning on or after 1 January 2022 and extending by a year the option to continue to apply IAS 39 (subject to conditions) to the financial instruments of insurers. Early application of the amended IFRS 17 will be permitted. Following this meeting, the Due Process Oversight Committee (DPOC) approved the reduction of the consultation period from 120 to 90 days. The exposure draft is expected to be published at the end of June.

The IASB also took the opportunity to:

• discuss a list of topics (“sweep issues”) that had been prepared by the staff and which directly related to recent deliberations. Most of these will not lead to any further amendments (see agenda paper 2C);
• endorse some minor amendments to IFRS 17 which will probably be addressed via the annual IFRS improvements process, rather than by inclusion in the IFRS 17 exposure draft due to appear in June (see agenda papers 2D and 2E). 

Finally, the Transition Resource Group for IFRS 17 (TRG), the discussion forum for IFRS 17 implementation issues which has already met four times since February 2018, held its final session on 4 April. Topics considered by the TRG include insurance contracts with a financing component (see agenda paper 1). It also reviewed various issues submitted which did not meet the criteria for inclusion in its agenda, or which are already being addressed by other, parallel, IASB initiatives, such as the future exposure draft (see agenda paper 2). No new TRG meetings are planned at this stage.

IFRS Foundation proposes amendments to the Due Process Handbook

On 30 April, the IFRS Foundation published an exposure draft proposing amendments to the Due Process Handbook. This handbook sets out the procedures applying to the IASB, its Interpretations Committee (the IFRS IC) and their staff. The amendments are essentially intended to align some of these procedures with the practices that have developed since the handbook was last revised in 2013. It nevertheless contains two new proposals concerning the possibility for the IASB, like the IFRS IC, to issue agenda decisions, and confirming that IFRS taxonomy work is subject to the oversight of the IFRS Foundation’s Due Process Oversight Committee (DPOC), the body responsible for oversight and control of all the organisation’s procedures.

The main amendments concern the following topics:

• Impact assessments: the amendments aim to clarify the fact that impact assessments are conducted throughout the standard-setting process, although it is only at the final publication stage that a formal report on the impacts of a standard is published (for important standards ), or that the effect analysis is embedded in the basis for conclusions (for other texts). The purpose of these studies is to demonstrate that the new texts improve the quality of financial statements and are justifiable, taking into consideration costs to produce the information. These analyses also take account of the impact of new texts in terms of their contribution to financial stability
• Agenda decisions: a number of amendments are proposed in this area: clarification of their role to establish that agenda decisions do not amend, and therefore do not have the same status as, IFRS standards, but provide explanations about the implementation of IFRS standards in order to improve consistency in their application;an implementation delay to confirm last month’s announcements on the need for entities to have sufficient time to apply agenda decisions; o allowing the IASB to use this procedure, under the same consultation conditions, to address application questions for new standards (for example, submitted by any transition resource groups it has set up), without usurping the role of the Interpretations Committee 

IASB publishes exposure draft ahead of IBOR rate reform

On 3 May 2019, the IASB published an exposure draft of IFRS 9 and IAS 39 amendments aiming to provide a temporary exemption to the requirement to take into account the hedge accounting impacts of the potential replacement of IBOR rates (no consideration in the assessment of the high probability of a future transaction, or of the forecast effectiveness of the hedging relationship), given the uncertainties surrounding the general conditions of this reform (timetable and practical details). This exemption would apply to contracts affected by the IBOR reform before the effective change of their reference rate. The exposure draft proposes the mandatory application of these amendments to all hedging relationships concerned by the IBOR reform, which would be retrospective for current reporting periods from 1 January 2020. Early application should nevertheless be possible, subject to endorsement by the European Union. Given the urgent nature of this matter, the consultation period has been reduced to 45 days.

IASB stakeholder consultations resume from May 2019

After a period of intense work and consultations between 2007 and 2015, the IASB’s stakeholders have got used to a period of quiet in recent years, in terms of calls for comments on draft texts. Logically enough, the projects that were deferred or remained incomplete during this period have now begun to arrive. But other subjects, raised during the 2015 work programme consultation or arising from the application of recent or long-standing standards, are starting to emerge. As a result, no fewer than eight exposure drafts are expected over the next two months, and some rather important – even structurally significant – discussion papers are expected in the second half of the year