Management Commentary – International Accounting Standards Board

Date recorded: Nov 20, 2019

At its meeting on November 20, 2019, the IASB met to discuss how the revised IFRS Practice
Statement should explain what an entity’s business model is. The Board tentatively decided
that the Practice Statement should, in explaining ‘business model’, refer to:
1. value the entity creates for itself. The Practice Statement should also make clear that
the notion of value created for an entity is related to the entity’s ability to generate cash
flows;

2. the link between an entity’s business model and the entity’s stated purpose;

3. the elements of the business model—that is, its inputs, processes and outputs; and

4. a business model being a matter of fact and observable through an entity’s actions.

The Board also tentatively decided that the Practice Statement should require an entity’s
management to discuss indirect wider consequences or impacts of the operation of the en-
tity’s business model if those impacts could affect the entity’s ability to generate cash flows
in the future. At a future meeting the Board will discuss the objective of describing an en-
tity’s business model in management commentary and possible guidance on the types of in-
formation about the entity’s business model that should be included in management com-
mentary.

iasplus.com/en-ca/meeting-notes/international-accounting-standards-board/2019/iasb-
update-november-19-20-2019/management-commentary-international-accounting-
standards-board
PSALM to run after nearly P34B bad accounts in power sector
February 24, 2020 | 12:07 am

STATE-LED Power Sector Assets and Liabilities Management Corp. (PSALM) will “vigorously”
go after independent power producer administrators (IPPAs) with delinquent accounts
amounting to P33.62 billion, the Finance department said on Sunday.

DoF Undersecretary for Legal Affairs Bayani H. Agabin said in a press release that Finance
Secretary Carlos G. Dominguez III, who chairs PSALM, had ordered the agency to initiate
collection cases versus former IPPAs that have existing unpaid dues.

In 2019, PSALM collected a total of P70.41 billion from IPPAs, or private entities that
manage the output from the energy conversion the power purchase agreements that
National Power Corp. (Napocor) entered into with the independent power producers.

IPPAs are appointed through public bidding conducted by PSALM, a corporation created by
law to privatize the power generation assets of Napocor that were built during the crippling
energy crisis in the 1990s.

The Department of Finance (DoF) identified a unit of San Miguel Corp., South Premiere
Power Corp. (SPPC), as having the highest unpaid account at P23.94 billion as of Dec. 31,
2019. SPPC administers the capacity of the Ilijan gas-fired power plant in Batangas City.

In a pending case before the Regional Trial Court of Mandaluyong City, SPPC is asserting
another formula for computing its payables to PSALM. The case has been pending since
September 2015.

Other companies with existing delinquent accounts include Unified Leyte Strips of Energy’s
IPPAs with Good Friends Hydro Resources Corp., which got its contract terminated in August
2017, and has unpaid dues of P1.21 billion, as well as the Waterfront Mactan Casino Hotel,
Inc. that had its contract terminated in October last year, owing PSALM P87.74 million.
The DoF quoted PSALM President Irene Joy Besido-Garcia as saying that if the agency is not
able to collect the “hefty financial obligations” from delinquent accounts, it will be forced to
contract new borrowings to liquidate Napocor’s maturing debts.

She described the new borrowings as a “vicious cycle that will result in PSALM absorbing
additional interests and other finance charges.”

The other IPPAs that PSALM is calling out to pay are Filinvest Development Corp. (FDC)
Utilities, Inc. for the Unified Leyte Strips of Energy contract and FDC Misamis Power Corp.
for the capacity of Mindanao I and II Geothermal Power Plants, by P1.17 billion and P2.63
billion, respectively.

Vivant-Sta. Clara Northern Renewables Generation Corp. (Northern Renewables),

administering the IPPA agreement for the Bakun Hydroelectric Power Plant in Ilocos Sur,
also has an unpaid obligation of P4.19 billion,according to the DoF.

“PSALM expects to collect additional payments from Northern Renewables this 2020 in view
of a settlement agreement they had submitted to the court,” it added.

According to its report, PSALM’s average cost of borrowing for last year was 5.07%, with
total revenues collected reaching P98.3 billion, leaving P422.2 billion worth of remaining
debt from Napocor that PSALM needs to raise money for.

The DoF said a failure to meet the P33.62-billion collection target this year would translate
into an annual borrowing cost of P1.7 billion, which could have been used to fund
government programs.

The delinquent accounts are part of the P95 billion that IPPAs and other industry players
such as electric cooperatives owe to PSALM, including the receivables it inherited from
Napocor, according to Ms. Garcia. — Beatrice M. Laforga

https://www.bworldonline.com/psalm-to-run-after-nearly-p34b-bad-accounts-in-power-
sector/
IASB Chair discusses the future of financial reporting

On November 5, 2019, the International Accounting Standards Board (IASB) released a

speech given at the Eumedion Annual Symposium, where IASB Chair Hans Hoogervorst
discussed the Board’s projects on primary financial statements (PFS), management
commentary and sustainability reporting. Mr. Hoogervorst began with an overview of the
PFS project and provided comments related to new subtotals, such as operating profit and
profit before financing and tax. He also discussed the need for greater transparency and
discipline in the use of non-GAAP measures. Next, Mr. Hoogervorst commented on
management commentary to provide broader financial information, such as the impact of
intangible assets. In addition, the project will revise the Practice Statement to accommodate
the increase in interest in sustainability reporting. Lastly, he agreed with the Eumedion’s
green paper, Towards a global standard-setter for non-financial reporting, which called for
the need for consolidation in non-financial reporting.

iasplus.com/en-ca/news/part-i-ifrs/copy4_of_11/iasb-chair-speech-financial-reporting
On the board’s agenda: The front line of ESG disclosure: The board’s role
Published on: Nov 15, 2019
Rapidly changing global market trends in technology, the role of business in society, the ef-
fects of climate change, and other areas, have a significant impact on value creation. In re-
sponse to these changes, companies and investors are taking a wider view of the opportuni-
ties and risks associated with businesses, particularly those related to the interdependent
nature of businesses and the reliance of companies on people and natural resources to sus-
tain and grow their businesses. To make informed decisions and evaluate how companies
manage these risks and opportunities, stakeholder demands for more transparent, compa-
rable, and reliable information on companies’ environmental, social, and governance (ESG)
risks and performance have never been greater—and the corporate community is taking no-
tice.
The Business Roundtable recently released a statement on corporate purpose,1 signed by
over 180 CEOs who committed to leading their companies for the benefit of all stakeholders
—customers, employees, suppliers, communities, and shareholders. For board members,
the statement underscored that directors need to understand the environmental and social
impacts on the business strategy and risk profile of the companies they serve. Corporate re-
sponse to the increasing risks and opportunities that ESG presents, along with the growing
market expectation for a better understanding of how ESG protects and drives value for an
organization, has already resulted in a dramatic increase in disclosure. As companies con-
tinue to navigate this landscape, they will be called upon to provide even greater trans-
parency in response to demands from stakeholder groups such as investors, customers, pol-
icy makers and regulators, and employees.
This issue of On the board’s agenda explores developments influencing companies to im-
prove transparency on ESG topics, and to consider the avenue for disclosure to most effec-
tively meet the information needs of investors and other stakeholders.
This publication was released by our US firm.
1
 Business Roundtable, Statement on the Purpose of a Corporation

https://www.iasplus.com/en-ca/publications/publications/2019/on-the-board2019s-
agenda-the-front-line-of-esg-disclosure-the-board2019s-role
European Commission publishes consultation on the revision of the Non-Financial Reporting
Directive

On February 20, 2020, following the launch of the initiative "Revision of the Non-Financial
Reporting Directive", the European Commission (EC) has now opened the consultation itself
for public comment. As reported earlier, Executive Vice President Valdis Dombrovskis of the
EC announced in January 2020 that later this year he would present a renewed sustainable
finance strategy, which would include a revision of the Non-Financial Reporting Directive
(NFRD). The initiative to update the NFRD was launched earlier this month. Today, the EC
launched the consultation itself by publishing a consultation document. In the introduction
to the consultation, the EC makes the following statement: There is inadequate publicly
available information on non-financial issues as: a) reported non-financial information is not
sufficiently comparable or reliable; b) companies do not report all non-financial information
that users think is necessary, and many companies report information that users do not
think is relevant; c) some companies do not report such information; and d) it is hard to find
non-financial information even when it is reported. Companies incur unnecessary and
avoidable costs related to reporting non-financial information. The consultation document
itself contains 45 questions in eight categories: Quality and scope of non-financial
information to be disclosed Standardisation Application of the principle of materiality
Assurance Digitisation Structure and location of non-financial information Personal scope
(which companies should disclose) Simplification and reduction of administrative burdens
for companies "Standardisation" contains questions about whether there should be
common standards for EU companies, what the relation between financial information and
non-financial information should be and which bodies/groups should be involved in setting
these standards (if that should be the case). The consultation document is available on the
EC website (login required). Feedback is requested by May 14, 2020.

iasplus.com/en-ca/news/part-i-ifrs/copy5_of_02/nfrd-consultation
IIRC calls for feedback in the context of the planned revision of its Framework

On February 20, 2020, the International Integrated Reporting Council (IIRC) launched a
revision of the International <IR> Framework and is calling for market feedback on specific
themes that will inform the nature and direction of the revision. The IIRC has identified key
themes around which it invites feedback, outlined in three topic papers on a) business
model considerations, b) responsibility for an integrated report, and c) charting a path
forward. The first two topic papers relate to the current <IR> Framework revision process.
The third topic paper forges ahead with themes shaping the future of corporate reporting,
including extended assurance and the role of technology. Feedback on this paper will inform
the IIRC’s longer-term strategy. Each topic paper separately invites market feedback via an
online survey. Responses are requested by March 20, 2020. Please see the following
additional information on the IIRC website: Press release Access to the three topic papers
and surveys Proposed amendments to the Framework will receive 90-day public exposure
via a consultation draft, launching in May 2020. The revised Framework is due for release at
the end of 2020.

iasplus.com/en-ca/news/part-i-ifrs/copy5_of_02/iirc-framework
 Capital-intensive project ROI: Consider the social impacts

Published on: Dec 05, 2019

Beyond job creation and new tax revenues, companies increasingly need to articulate other
community impacts of their capital investments in new and existing locations. What effects
could bringing social impact measurement into ROI discussions have on decision-making
around location-specific, capital-intensive projects?
We'll discuss:
o What advanced modeling has revealed about how investments can affect communi-
ties.
o Why metrics such as jobs creation, income, and tax revenues alone are insufficient
measures to portray the full community impacts of corporate investment projects.
o How social impact measurement can help build more trust between companies, local
governments, and community stakeholders.
Participants will examine ways social impact measurement can help generate insights to
drive better decision-making.

https://www.iasplus.com/en-ca/dbriefs/us-dbriefs/deloitte-us-dbriefs-webcasts/capital-
intensive-project-roi-consider-the-social-impacts\
Striking the right balance between sustainable development and sustainable debt
On December 19, 2019, the International Monetary Fund Blog (IMFBlog) published a blog on
how over the past two decades, sub-Saharan Africa has made considerable economic
progress: extreme poverty levels have declined by one third; life expectancy has increased
by a fifth; and real per capita income has grown by about 50 percent on average. Yet, sub-
Saharan Africa is still only half-way to meeting the Sustainable Development Goals.

To achieve these goals, sub-Saharan Africa will need financing. One of the ways to access
financing is through borrowing. It makes sense for governments to incur debt if done wisely.
If debt is used to finance projects that boost productivity and living standards, such as
investing in roads, schools, and hospitals—and if governments can recoup enough of the
benefits of these investments to repay the incurred debt—then borrowing is worthwhile.

iasplus.com/en-ca/news/regulations/2019/striking-the-right-balance-between-sustainable-
development-and-sustainable-debt