Hello!
Welcome to Reporting Period – your ultimate IFRS update!
As the summer draws to a close, I hope you’ve had a refreshing break and are prepared for new accounting endeavours. You might recall that Reporting Period took a breather this summer, so we’ll be going over the July and August updates today:
- IASB introduces amendments to IAS 21 concerning non-exchangeable currencies.
- IASB and EY refresh their respective publications on the impact of climate-related matters on IFRS financial statements.
- KPMG examines the accounting implications of carbon offsets and net-zero commitments.
- IASB is ready to roll out two new IFRS standards next year.
- … and more.
Let’s dive in.
Note: You’re currently reading an older issue from the archive, so all links have been removed.
Amendment to IAS 21 concerning non-exchangeable currencies
The IASB has issued amendments to IAS 21 that will require companies to provide more information in their financial statements when a currency cannot be exchanged into another currency, an issue that wasn’t previously covered. The amendments are effective for annual reporting periods beginning from 1 January 2025, with early application permitted.
These amendments are available to premium subscribers at IFRS.org.
Learn more:
- IASB’s webcast.
- Deloitte’s publication.
Technical Publications
Climate-related considerations in IFRS financial statements
The IASB has updated its educational material to assist companies in assessing climate-related issues during financial statements preparations. EY, perhaps motivated by this move, also updated their publication on this subject.
To note, in March 2023, the IASB initiated a project to explore whether and how financial statements can better communicate information about climate-related risks. Find out more in this press release.
Accounting for carbon offsets and net-zero commitments
Companies around the world are mitigating their carbon footprints. While some are under compulsory government initiatives, others are procuring carbon credits or offsets. Given that there aren’t any accounting standards or IFRS interpretations addressing accounting for these offsets, KPMG’s recent publication examines possible approaches.
On committing to net-zero targets (for instance, by 2050), companies signify their intent to drastically cut down on greenhouse gas emissions, compensating any residual emissions with the aforementioned offsets. Curious about the accounting implications of such commitments? KPMG’s publication sheds light on this.
Financial reporting in times of economic volatility
With soaring inflation and interest rates globally, financial reporting will inevitably be impacted. The latest EY’s publication offers invaluable insights into these challenges.
Applying IFRS in the real estate industry
PWC’s recent release addresses the accounting challenges faced by the real estate sector under IFRS. At 113 pages, you might want to have your coffee ready! A small heads-up: even though it’s dated May 2023, it was actually released in July. Don’t worry, it didn’t slip under my radar! 😉
Work in Progress at the IASB
Primary financial statements
Background: This project aims to improve the comparability and transparency of companies’ performance reporting, focusing on the statement of profit or loss. The main proposals are to:
- Require additional defined subtotals in the statement of profit or loss.
- Require disclosures about management performance measures.
- Strengthen requirements for disaggregating information.
Take a look at this useful project overview prepared by the IASB technical staff.
The IASB finalised its deliberations during the July meeting. The replacement for IAS 1 is set to be unveiled in the first half of 2024.
During the meeting, the IASB concluded its discussion on transition and effective date:
- The new IFRS will be required for annual periods from 1 January 2027. Early application will be permitted.
- Retrospective application will be required.
- Each of the required headings and subtotals in the new IFRS will have to be presented in the condensed interim financial statements in the first year of application.
- Entities will be required to disclose a reconciliation between each line item in the statement of profit or loss presented under IAS 1 and each line item presented under the new IFRS.
Read more on the project’s page.
Next milestone: New IFRS Standard replacing IAS 1 (expected in H1 2024).
Subsidiaries without public accountability – disclosures
Background: The IASB plans to permit eligible subsidiaries to apply IFRS Standards with reduced disclosures. This new IFRS will be part of the ‘core set’ of IFRSs, i.e. different from IFRS for SMEs. This snapshot summarises IASB proposals from the exposure draft.
In their July meeting, IASB wrapped up its decision-making discussions, with a new IFRS Standard set to be introduced in H1 2024.
Furthermore, during the meeting, the IASB concluded that:
- Eligible subsidiaries will be permitted to apply the new IFRS on 1 January 2027.
- Early application will be permitted.
Read more on the project’s page.
Next milestone: New IFRS Standard (expected in H1 2024).
Business combinations – disclosures, goodwill and impairment
Background: The IASB is working on amendments to IAS 36 and IFRS 3 with respect to accounting for goodwill and disclosure requirements about business combinations. In late 2022, the IASB decided not to reintroduce amortisation of goodwill. IASB member Rika Suzuki provided rationale for this decision along with a project update in this article.
This month’s discussion:
- Effectiveness of the impairment test.
- Disclosure requirements for subsidiaries without public accountability.
Read more on the project’s page.
Next milestone: Exposure draft proposing amendments to IAS 36 and IFRS 3 (expected in H1 2024).
Equity method
Background: The equity method is a method of accounting for investments in associates and joint ventures applied primarily in consolidated financial statements. The IASB seeks to clarify several application issues raised with the IFRS Interpretations Committee. See this summary of the IASB’s tentative decisions taken as of July 2023.
This month’s discussion:
- Impairment of investments in associates.
Read more on the project’s page.
Next milestone: Exposure draft proposing amendments to IAS 28 (expected in H2 2024).
Other topics
The IASB also discussed the following topics:
- Extractive activities. Next milestone: Decision on the project direction (expected in Q3 2023).
- Dynamic risk management. Next milestone: Exposure draft proposing amendments to IFRS 9 (expected in 2025).
Miscellany
EY’s IFRS manual now available as a PDF
Great news! EY’s highly-regarded International GAAP IFRS manual is now accessible as a PDF, and there’s no need to register. Just a heads-up, it’s a sizable file at 142 MB. A big thank you to EY for offering this resource at no cost.
Join the IFRS Advisory Council
The IFRS Foundation is on the hunt for seven new faces to join their IFRS Advisory Council. This council, boasting 56 representatives from varied sectors and regions, plays a strategic advisory role. Considering there are only two gatherings yearly, this could be an ideal chance for direct involvement in the standard-setting process. Full details in this press release.
Who exactly are ‘investors’?
We frequently refer to ‘investors’, emphasising the significance of top-tier financial information under IFRS. Yet, who exactly are these investors?
Deferred tax or future tax?
Peter Clark debunks several misconceptions about deferred tax and probes how IAS 12 plays an important role in financial reporting. A heads-up: this is for the IFRS aficionados!
That’s all for this issue of Reporting Period. Did you like it? I’d love to hear your feedback.
Thank you for being a subscriber.
Best regards,
Marek