Reporting Period - IFRS Developments in October 2023

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I trust this email finds you well and eager for the latest instalment of Reporting Period, your ultimate IFRS update.

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Now, onto this month’s IFRS highlights:

ESMA’s showcase of real-world IFRS disclosures detailing the impact of climate-related risks.
KPMG enhances its IFRS 2 handbook with ESG-related vesting condition guidance.
Latest insights from ESMA’s enforcement decisions on IFRS (mis)application.
The unveiling of the title for IFRS 18.
… 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

The heat is on: real-life examples of climate-related disclosures in IFRS financial statements

The European Securities and Markets Authority (ESMA) has shared a report filled with insightful real-life examples of climate-related disclosures within IFRS financial statements

ESG-related vesting conditions in share-based payments

Navigating share-based payments is increasingly complex with the introduction of ESG-related vesting conditions. KPMG’s revised IFRS 2 handbook provides practical examples and journal entries to address real-world issues encountered during audits.

Latest guidance on IFRS 16

Despite its established presence, IFRS 16 continues to present application challenges. BDO’s latest comprehensive guide is here to assist.

ESMA’s enforcement decisions on IFRS

ESMA continues to provide transparency with extracts from its enforcement database, demonstrating real-world IFRS application issues valuable for all preparers. The latest extract covers:

Earn-out payments related to business combinations;
Classification of a put-option liability related to a business combination;
Recognition and measurement of distribution rights;
Loss of control;
Assessment of control;
Principal vs. agent;
Own-use exemption;
Hedge accounting disclosures;
Disclosures related to leases.

Work in Progress at the IASB

Primary financial statements

The upcoming IFRS 18 Presentation and Disclosure in Financial Statements, which supersedes IAS 1, aims to enhance the comparability and transparency of financial reporting, focusing on the statement of profit or loss. Key changes include:

The introduction of two new subtotals in the P/L statement: ‘operating profit’ and ‘profit before financing and income taxes’.
A requirement for the reconciliation of management-defined performance measures (also known as ‘non-GAAP’ measures) with those specified by IFRS.
Refined guidelines for the aggregation and disaggregation of information within the primary financial statements.
Limited changes to the statement of cash flows, establishing operating profit as a starting point for the indirect method and eliminating options for the classification of interest and dividend cash flows.

IFRS 18 will be effective from 1 January 2027 with early application permitted.

Learn more:

BDO’s publication.
IASB’s project overview.

This month’s discussion: The IASB technical team is drafting IFRS 18, seeking clarification on several aspects from the IASB. Further details are available on the project’s page.

Next milestone: The release of IFRS 18 is expected in Q2 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 September 2023.

This month’s discussion:

Implications of applying the IASB’s tentative decisions to investments in subsidiaries in separate financial statements and in joint ventures.
Possible improvements to disclosure requirements for investments in associates.

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.

This month’s discussion: The drafting of this new IFRS is underway, with key judgemental issues being presented to the IASB for decision-making. Further details are available on the project’s page.

Next milestone: New IFRS Standard (expected in Q2 2024).

Miscellany

FRC’s corporate reporting review

The FRC’s annual corporate reporting review outlines key areas for improvement in IFRS reporting. It’s a valuable resource regardless of your location.

ESMA’s enforcement priorities

ESMA’s enforcement priorities for 2023 will be particularly pertinent for those preparing financial reports within the EU, although the principles are broadly relevant internationally as well.

That concludes this issue of Reporting Period. Did you find it informative? Please share your thoughts, or simply a rating on a scale of 1 to 10, by replying to this email.

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Best regards,
Marek

October 2023