Hey everyone,
I hope you all had a fantastic summer! We took a well-deserved break in August, so even if you’ve been away from your inbox since early July, you’re all caught up with IFRS updates. You’re welcome 😉
While we were soaking up the sun, there were some notable developments:
- The IASB released 11th volume of annual improvements to IFRS.
- EY published an in-depth technical analysis of IFRS 18.
- The IASB proposed eight examples illustrating application of IFRS to climate-related uncertainties.
- … and more.
Let’s dive in.
Note: You’re currently reading an older issue from the archive, so all links have been removed.
IASB issues Annual Improvements to IFRS
The IASB has issued the 11th edition of annual improvements to IFRS. As a quick reminder, these annual improvements are part of the IASB’s ongoing process to maintain and enhance IFRS. The amendments made through this process either clarify the wording of an IFRS Standard or correct minor oversights or conflicts between existing requirements. Although the amendments are unrelated, they are grouped together and presented in a single document.
Here’s a summary of the amendments:
IFRS 1: Hedge accounting by a first-time adopter. Paragraphs B5–B6 have been amended to align more closely with IFRS 9 requirements, and cross-references have been added to enhance the clarity of IFRS 1.
IFRS 7: Gain or loss on derecognition. Paragraph B38 was amended to:
- replace an outdated reference to paragraph 27A of IFRS 7 with a reference to paragraphs 72–73 of IFRS 13, and
- substitute the phrase ‘inputs that were not based on observable market data’ with ‘unobservable inputs’ to maintain consistency with IFRS 13.
IFRS 7: Disclosure of deferred difference between fair value and transaction price. Paragraph IG14 was amended to ensure consistency with paragraph 28 and the concepts in IFRS 9 and IFRS 13.
IFRS 7: Credit risk disclosures. Paragraph IG20B was simplified to better explain the aspects of the requirements that are not illustrated.
IFRS 9: Lessee derecognition of lease liabilities. Paragraph 2.1(b)(ii) now includes a cross-reference to paragraph 3.3.3, clarifying that when a lease liability has been extinguished in accordance with IFRS 9, the lessee should apply paragraph 3.3.3 and recognise any resulting gain or loss in profit or loss.
IFRS 9: Transaction price. Paragraph 5.1.3 was amended to replace ‘their transaction price (as defined in IFRS 15) with ‘the amount determined by applying IFRS 15’, resolving an inconsistency between paragraph 5.1.3 and IFRS 15.
IFRS 10: Determination of a ‘de facto agent’. Paragraph B74 was amended with less conclusive language, clarifying that the relationship described is just one where judgement is required to determine whether a party is acting as a de facto agent.
IAS 7: Cost method. The term ‘cost method’ was replaced with ‘at cost’ in paragraph 37.
Learn more in Deloitte’s publication.
The Annual Improvements to IFRS Accounting Standards—Volume 11 is available only to premium IFRS.org subscribers at this time. However, these amendments will be integrated into the consolidated IFRS Accounting Standards in 2025, at which point all registered users will have access. They are effective from 2026, with early application permitted.
Technical Publications
EY’s analysis of IFRS 18
EY has finally released its technical publication on IFRS 18, becoming the last of the Big 4 firms to do so. The wait was worth it, as this comprehensive 94-page analysis dives deep into the changes introduced by IFRS 18 and includes a range of illustrative examples.
If you missed the publications by PwC, KPMG, and Deloitte, you can find all the links in the May edition of Reporting Period.
Accounting implications of geopolitical conflicts
Geopolitical risks and uncertainties due to international conflicts and related sanctions have become increasingly significant. These factors impact not only the directly affected regions but also the global business landscape, leading to supply chain disruptions, market volatility, payment risks, and rising commodity costs.
PWC’s latest publication addresses the accounting implications of these geopolitical challenges. Please note that this publication is available exclusively in HTML format. To navigate, use the menu on the left for desktops or the bookmark icon on mobile devices. No login is required (at least not the last time I checked).
Work in Progress at the IASB
Climate-related (and other) uncertainties in the financial statements
As part of its ongoing project, the IASB has released an Exposure Draft proposing eight examples illustrating how to apply IFRS requirements when reporting the effects of climate-related and other uncertainties in the financial statements.
These examples cover areas such as materiality judgements, disclosures about assumptions and estimation uncertainties, and disaggregation of information. The IASB has clarified that the principles and requirements illustrated in these examples also apply to other types of uncertainties beyond climate change.
Learn more in Deloitte’s publication and a related KPMG’s guide Are you clear on climate reporting in the financial statements?
Next milestone: The Exposure Draft is open for comment until 28 November 2024.
Translating financial information into hyperinflationary currencies
The IASB has issued an Exposure Draft Translation to a Hyperinflationary Presentation Currency. These narrow-scope amendments to IAS 21 would apply where an entity’s presentation currency is from a hyperinflationary economy, while its functional currency is from a non-hyperinflationary economy.
Learn more in Deloitte’s publication.
Next milestone: The Exposure Draft is open for comment until 22 November 2024.
Review of IFRS 9 impairment requirements concluded
The IASB has completed its post-implementation review (PIR) of the impairment requirements in IFRS 9 and found no fundamental. However, there are two follow-up matters to be addressed in the future:
Credit risk disclosures:
- Adding more specific disclosure requirements to IFRS 7.
- Reducing the disclosure burden for entities with no significant exposure to credit risk.
Amortised cost accounting:
- Deciding when to account for changes in expected cash flows as a modification, derecognition, write-off or as expected credit losses.
- Determining whether to present a modification gain or loss as part of the impairment expense or separately.
- How to present a loss from writing-off a financial asset in the statement of profit or loss.
- How to account for the recovery of amounts after a financial asset has been written off.
Learn more in the project summary.
That’s all for this edition of Reporting Period. Your feedback is invaluable, so feel free to reply directly to this email with any thoughts and comments.
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Best regards,
Marek