Hello and Happy Summer!
After the intense months of April and May with the IASB releasing IFRS 18 and IFRS 19, June provided some much-needed breathing room – at least regarding IFRS developments 😉 As the heat settles in across the northern hemisphere, we’ll be taking a summer break. Expect the next issue of Reporting Period to arrive in your inboxes in early September.
Here are the IFRS highlights covered in this edition:
- Latest real-life examples of Pillar Two disclosures under IAS 12.
- SEC’s views on IFRS 19.
- A brief history of pension accounting under IFRS.
- Reward for failure (aka: auditor’s remuneration).
- … and more!
Let’s dive in.
Note: You’re currently reading an older issue from the archive, so all links have been removed.
Technical Publications
Review of Pillar Two disclosures
EY’s latest publication on Pillar Two disclosures showcases examples from both annual and interim financial statements. For background information on the Pillar Two reform and related IAS 12 requirements, please refer to KPMG’s summary and PWC’s implementation tracker.
SEC’s views on IFRS 19
With IFRS 19 published in May, allowing reduced disclosures for non-public entities, it’ll be interesting to see whether local jurisdictions will be comfortable endorsing this new standard. The SEC was the first to react, stating that foreign issuers filing IFRS financial statements prepared under the reduced disclosure framework should strongly consider adding more disclosures than those required by IFRS 19.
IFRS Interpretations Committee Meeting
The Committee’s June meeting addressed the classification of cash flows related to margin calls on derivatives in the statement of cash flows. These derivatives involve buying or selling commodities at a fixed price in the future and require daily payments reflecting fair value fluctuations.
The Committee reviewed findings from various respondents, which indicated limited diversity in classification practices. The differences in classification were mainly due to variations in contractual terms, usage purposes, and business activities, rather than inconsistent application of IAS 7.
Consequently, the Committee concluded that the matter described in the request does not have a widespread effect and did not provide any application guidance in its agenda decision. If you’d like to learn more about this issue, please refer to the staff paper prepared for the meeting.
Work in Progress at the IASB
Equity method
At its June meeting, the IASB finalised all open matters concerning planned clarifications on the equity method. If you can’t wait for the exposure draft, you can refer to this working summary of the IASB’s tentative decisions taken so far.
Next milestone: Exposure draft proposing amendments to IAS 28 and IFRS 12 (expected in Q3 2024).
Provisions
While revising the Conceptual Framework for Financial Reporting in 2018, the IASB addressed the issue of determining if and when an obligation contingent on an entity’s future actions constitutes a present obligation and should be considered a liability. The current project on provisions aims to integrate these concepts into IAS 37, potentially replacing IFRIC 21 Levies with new application requirements within IAS 37.
At its June meeting, the IASB resolved the remaining outstanding issues, and we should see an exposure draft later this year. For more information, please refer to the project page.
Next milestone: Exposure draft proposing amendments to IAS 37 and likely a withdrawal of IFRIC 21 (expected in Q4 2024).
Miscellany
A short history of pension accounting
Peter Clark shares the history of the development of IAS 19 in the late ’90s on his blog. As the project manager who led to the publication of IAS 19, Peter is uniquely qualified to tell this story. Heads up: familiarity with the underlying accounting concepts is required to fully appreciate his insights!
Rewarding failure: an analysis of audit deficiencies and partner pay
The UK’s audit industry has faced intense scrutiny following high-profile corporate collapses such as Carillion, Thomas Cook, and BHS. These events revealed significant deficiencies in audit practices. Despite record partner pay at large accounting firms responsible for auditing many of the UK’s largest companies, there is a striking disconnect between poor audit performance and high remuneration.
A report by the Audit Reform Lab at the University of Sheffield explores the concept of ‘reward for failure’ within the Big 4 accounting firms and identifies the structural conditions that allow these issues to persist.
European Single Access Point
Accountancy Europe has taken a first look at the European Single Access Point (ESAP) legislation. ESAP will be a centralised EU-wide platform for financial and sustainability information disclosed by companies. The legislation mandates the European Securities and Markets Authority (ESMA) to establish and operate ESAP by July 2027. While it promises better access to centralised financial data, with three years remaining until its launch, it’s probably too early for any meaningful forecasts.
That’s all for this edition of Reporting Period. Enjoy your summer, and I’ll be back with more updates in September!
Thank you for being a subscriber.
Best regards,
Marek