Global Exec Update - IASB and IFRS IC Update - 24 May 2022 - v1 - ID Review - FINAL

Global IFRS Executive
Update 2022
IASB — IFRS IC Update
24 May 2022
Today’s presenters
Luci Wright Annabel Holloway Alessandro Bonatto Roy Linthorst

Executive Director, Senior Manager, Senior Manager, Senior Manager,
Global IFRS Services, London Global IFRS Services, London Global IFRS Services, Milan Global IFRS Services, Rotterdam
The information contained herein is a summary in nature. Viewers should consult their own professional advisors to address th eir
individual circumstances and concerns.
Page 2 Global IFRS Executive Update 2022

Today’s objectives
• Identify the new IFRS Standards, amendments and

interpretations (IFRS pronouncements) in issue as of 31 March
2022 and effective for periods beginning in 2022 and thereafter
• Identify the status of the IASB’s active projects and maintenance
projects (since our November 2021 update)
• Identify the various IFRS Interpretations Committee (IFRS IC)
decisions and (tentative) agenda decisions (since our November
2021 update)

Today’s agenda
• Accounting considerations for the war in Ukraine

• Hyperinflation
• Insurance contracts
• Presentation and Disclosure
• Status of IASB’s projects
• IFRS Interpretations Committee updates
• Sustainability Reporting
• Summary

Polling question 1
What do you think will be your clients’ biggest challenge as they plan
their 30 June interim financial statements?
A. Dealing with the impacts from the war in Ukraine

B. Hyperinflation
C. Impairment of assets
D. Whether they will continue to operate as going concern
E. I do not know/none of the above

Accounting
considerations for
the war in Ukraine

Accounting considerations for the war in Ukraine
• Read and share our latest IFRS publication with your teams
and clients: Applying IFRS Accounting considerations for
the war in Ukraine (Updated March 2022)
• Key A&A Topic Page created on EY Atlas
• Importance of adequate disclosures in order to provide
users with a better understanding of the financial impact.

Hyperinflation

Hyperinflation
• Read and share our latest IFRS publication with your

teams and clients: IFRS Developments Hyperinflationary
economies (Updated April 2022)
• Key A&A Topic Page created on EY Atlas
• Turkey should be considered hyperinflationary as
at 30 June 2022 and thereafter

Debrief: Polling question 1
What do you think will be your clients’ biggest challenge as they plan
their 30 June interim financial statements?
A. Dealing with the impacts from the war in Ukraine

B. Hyperinflation
C. Impairment of assets
D. Whether they will continue to operate as going concern
E. I do not know/none of the above

IFRS 17 Insurance
Contracts

IFRS 17 Amendment
Initial Application of IFRS 17 and IFRS 9 — Comparative Information
1 January 2022 = IFRS 17 transition date 1 January 2023 = Initial application of IFRS 9/17
Insurance liabilities: Comparative information restated,

Insurance liabilities: IFRS 17
as required by IFRS 17
Financial assets — choice between:

• No restatement of comparatives Keep IAS 39 information from
2022 financial statements Financial assets: IFRS 9
• Restate 2022 information, but only for assets not derecognised
before 1/1/2023
Before IFRS 17 Amendment After IFRS 17 Amendment — “Classification Overlay”

Potential lack of comparability between the first year of application • Option on an instrument-by-instrument basis
(2023) and the comparative period (2022): • Based on the expected classification and measurement of that asset on
• Potential accounting mismatches in the 2022 comparative initial application of IFRS 9
information, between insurance liabilities (fully restated under • Choice between the IAS 39 incurred loss approach and the new IFRS 9
IFRS 17) and financial assets (not restated under IFRS 9) impairment model
• Even if the entity elects for a restatement of the comparatives under • Disclosures: the extent of the application of the classification overlay +
IFRS 9: potential mismatches with respect to financial assets that will IFRS 9 impairment requirements. Refer to IAS 1 general requirements
have been derecognised in 2022 + operational challenges for the
production of comparative information

Presentation
and Disclosure

Exposure Draft — Non-current Liabilities with Covenants
Proposed amendments to IAS 1 Presentation of Financial Statements (November 2021)
Background
Current wording January 2020 Amendments (effective 1 January 2023)
69 An entity shall classify a liability as current when: 69 An entity shall classify a liability as current when:
a) … a) …
b) … b) …
c) … c) …
d) It does not have an unconditional right to defer d) It does not have the right at the end of the reporting
settlement of the liability for at least twelve period to defer settlement of the liability for at least
months after the reporting period. … twelve months after the reporting period.
An entity shall classify all other liabilities as non-current. An entity shall classify all other liabilities as non-current.
72A…If the right to defer settlement is subject to the entity
complying with specified conditions, the right exists at the
end of the reporting period only if the entity complies with
those conditions at the end of the reporting period. …

Exposure Draft — Non-current Liabilities with Covenants (continued)
Proposed amendments to IAS 1 Presentation of Financial Statements (November 2021)
Proposals
Clarify that covenants that an entity

must comply with within twelve months
1 after the reporting period do not affect
Clarify that an entity does not have
the assessment of right to defer settlement
the right to defer settlement if the liability
of a liability for at least twelve months “… the right could become repayable within 12 months:
to defer a) At the discretion of the counterparty or
settlement third party (e.g., when callable by lender
for at least without cause)
3
12 months …” or
b) If an uncertain future event or
outcome occurs (or does not occur)
and its occurrence (or non-occurrence)
Require separate presentation of Next steps? is unaffected by the entity’s future
non-current liabilities subject to Comment deadline: actions (e.g., financial guarantee)
2 covenants within twelve months 21 March 2022
after the reporting period Proposed effective date:
1 January 2024

Polling question 2
Do you think the proposals in the Exposure Draft on non-current

liabilities will have a significant impact on any of your clients?
A. Yes
B. No
C. I do not know/not applicable

Exposure Draft Supplier Finance
Proposed amendments to IAS 7 & IFRS 7 (November 2021)
Background
December 2020 • Presentation of liabilities

IFRS IC AD Supplier Finance Arrangements • As part of ‘trade and other payables’
when similar nature and function to trade
payables
• Separately when relevant to an
How to present liabilities and understanding of the entity’s ﬁnancial
cash flows relating to supplier position
finance arrangements? • Presentation of cash flows
• Presentation of liabilities in statement of
financial position will help to determine
the classification of cash flows
• Disclosures
What information is an entity
• IFRS 7: Liquidity risks
required to disclose?
• IAS 7: Changes in liabilities from
financing activities
• IAS 1: Significant judgements and other
relevant information

Exposure Draft Supplier Finance (continued)
Proposed amendments to IAS 7 & IFRS 7 (November 2021)
Proposals
• IAS 7 • IFRS 7 Comment

deadline:
Statement of Cash Flows Financial Instruments Disclosures 28 March 2022
Changes in liabilities arising Factors that an entity might

from financing activities: consider in providing a description
• Non-cash changes from supplier of how it manages liquidity risk
finance arrangements include
• Whether the entity has supplier
finance arrangements that
Supplier finance arrangements: • It can access to meet liquidity
needs
• Information that enable users to
assess the effects on the entity’s • Provide entity with extended
liabilities and cash flows (for each payment terms and/or suppliers
supplier finance arrangement) with early payment terms

Overview of new
pronouncements

Overview of new pronouncements
New pronouncements effective for periods beginning on or after 1 January 2022

2022 2023
Reference to the Conceptual Framework (Amendments to IFRS 3 Business Combinations) ✓
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) ✓
Onerous Contracts — Costs of Fulfilling a Contract (Amendments to IAS 37) ✓
Annual Improvements Process (AIP): 2018—2020 cycle* ✓
* Amendments to: IFRS 1 (Subsidiary as a first-time adopter), IFRS 9 (Fees in the ‘10 per cent’ test for derecognition of financial liabilities), IAS 41 (Taxation in
fair value measurements), and IFRS 16 Illustrative Example 13

Overview of new pronouncements (continued)
New pronouncements effective for periods beginning on or after 1 January 2023

2022 2023
IFRS 17 Insurance Contracts ✓
Classification of Liabilities as current or non-current (Amendments to IAS 1)** ✓
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) ✓
Definition of Accounting Estimates (Amendments to IAS 8) ✓
Deferred Tax related to Assets and Liabilities arising from a Single Transaction —
✓
(Amendments to IAS 12)
** In July 2021, the Board tentatively decided to defer the effective date of the 2020 amendments to no earlier than 1 January 2024.

Do you think the proposals in the Exposure Draft on non-current

liabilities will have a significant impact on any of your clients?
A. Yes
B. No

Status of IASB’s
projects

Status of IASB’s research projects
Research projects Current activity Next milestone Expected date

Business Combinations Discussion paper
Decide project direction —
under Common Control feedback
Dynamic Risk Management Core model outreach Decide project direction May 2022
Extractive Activities Review research Decide project direction July 2022
Equity Method Research programme Decide project direction —
Discussion Paper
Goodwill and Impairment Decide project direction H2 2022
feedback
Post-implementation Review of Request for information

Feedback statement June 2022
IFRS 10, IFRS 11 and IFRS 12 feedback
Post-implementation Review of Request for information

Feedback statement H2 2022
IFRS 9-Classification and Measurement feedback

Status of IASB’s standard-setting projects
Standard-Setting projects Current activity Next milestone Expected date

Disclosure initiative — Subsidiaries
Exposure Draft feedback Decide project direction June 2022
without Public Accountability
Disclosure initiative — Targeted

Exposure Draft Exposure Draft feedback May 2022
Standards-level Review of Disclosures
Financial Instruments with

Drafting Exposure Draft —
Characteristics of Equity
Primary Financial Statements Exposure Draft feedback IFRS Standard —
Rate-regulated Activities Exposure Draft feedback IFRS Standard —
Management Commentary Exposure Draft feedback Decide project direction —
Second Comprehensive Review of the

Drafting Exposure Draft Q3 2022
IFRS for SMEs Standard

Status of IASB’s maintenance projects
Narrow-scope amendments Current activity Next milestone Expected date

Lack of Exchangeability
Exposure Draft feedback Decide project direction July 2022
Lease liability in a Sale and Leaseback Decide project direction IFRS Amendment Q3 2022
Supplier Finance Arrangement Exposure Draft Exposure Draft feedback June 2022
Provisions — Targeted Improvements Review Research Decide project direction —
Non-current liabilities with Covenants

Exposure Draft Exposure Draft feedback June 2022

IFRS Interpretations
Committee updates

IFRS IC agenda decisions and tentative agenda decisions: November 2021,
February, March and April 2022
Standard Description Decision
IFRS 16 Economic Benefits from Use of a Windfarm Final
IFRS 9/IAS 20 TLTRO III Transactions Final
IAS 7 Demand Deposits with Restrictions on Use Final
IFRS 9 Cash Received via Electronic Transfer as Settlement for a Financial Asset Tentative
IFRS 9/16 Lessor forgiveness of lease payments Tentative
IAS 37 Negative low emission vehicle credits Tentative
IFRS 15 Principal versus Agent: software reseller Tentative
IAS 32/IFRS 3 SPAC: Accounting for warrants at acquisition Tentative
IAS 32 SPAC: Classification of public shares as financial liabilities or equity Tentative
IFRS 17 Transfer of insurance coverage under a group of annuity contracts Tentative

Agenda Decision: TLTRO III Transactions
TLTRO III refers to the third phase of There is diversity in practice on the accounting treatment of TLTRO III
the European Central Bank Targeted financial liabilities by banks, particularly on the following:
Longer-term Refinancing Operations,
which was launched in 2019: Do TLTRO III conditions include an element of a grant in the scope of IAS 20
(Accounting for Government Grants and Disclosure of Government Assistance)?
• The scheme includes attractive
conditions to stimulate bank lending • Is the TLTRO III rate below ‘market interest rates’?
to the real economy and the
• Does the ECB meet the definition of a ‘government’ in IAS 20?
conditions of TLTRO III have been
improved several times over 2020 If IAS 20 is applicable, is it possible to revise the amount identified as a grant in the
and 2021 following situations:
• The amount banks can borrow, and • Changes in estimate of the bank’s lending performance that have an impact on the
the rate depend on the banks’ final interest rate?
lending performance as determined • Amendments to the scheme by the ECB?
at the end of the scheme period
If IAS 20 is not applicable, can TLTRO III tranches be analysed as ‘variable rate’
(with a retrospective application of
financing transactions?
the rate to the entire financing
period) • Can ECB decisions to modify the applicable rate be considered as the refixing of a
floating rate? (IFRS 9.B5.4.5)
As a result, in 2021, ESMA submitted • Does a change in the estimate of the bank’s lending performance result in a catch-
a request to the IFRS IC to clarify the up adjustment in P&L? (IFRS 9.B5.4.6)
accounting treatment
• This applies the effective interest rate (EIR) guidance in IFRS 9

Agenda Decision: TLTRO III Transactions (continued)
The IFRS IC reached a decision in February 2022, which the IASB confirmed in March 2022
Application of IAS 20 Application of the EIR Disclosures
• A bank should assess whether the fair value of a • Considering how to reflect • Banks need to provide the
TLTRO III tranche at initial recognition differs from conditionality in the information required by
the transaction price and that the consideration contractual interest rate IAS 20.39 regarding
received is for more than just the financial liability. If when applying the government grants and
this is the case, the difference would be treated as a effective interest method, government assistance if
government grant in IAS 20 if the bank concludes for both initial recognition they determine IAS 20 is
that the ECB meets the definition of government and: and subsequent applicable
• The interest rate charged on the TLTRO III tranche measurement is a broader • Banks should also disclose
is a below-market interest rate (IAS 20.10A), or matter, which it should not information that includes
analyse solely in the significant accounting
• The loan is a forgivable loan (IAS 20.3 and 10)
context of TLTRO III policies and
• IAS 20.10A only applies to initial measurement. So if tranches management’s
the grant is deemed to be a below-market rate as
• The IASB will consider this assumptions and
covered by IAS 20.10A, only the initial difference is
matter as part of the post- judgements in applying its
in the scope of IAS 20 and subsequent measurement
implementation review of accounting policies that
is entirely covered by IFRS 9
the classification and have the most significant
• These assessments require judgement based on the measurement effect on the amounts
specific facts and circumstances. requirements in IFRS 9 recognised in the
financial statements

Polling question 3
Have any of your banking clients accessed the Targeted Longer-Term

Refinancing Operations (TLTRO) III scheme?
A. Yes
B. No

Agenda Decision: Demand Deposits with Restrictions on Use (IAS 7)
Q Does an entity classify demand deposits as cash

and cash equivalents if use of the asset is
subject to third party contractual restriction?
Restrictions on the use of a demand deposit

arising from a contract with a third party do
not result in the deposit not being cash,
unless the restrictions change the nature of
the deposit in a way that it would not meet
the definition of cash in IAS 7.
A
Agenda Decision: Demand Deposits with Restrictions on Use (IAS 7) (continued)
Cash comprises cash on hand An entity is required to classify

and demand deposits cash or cash equivalent as
current “unless the asset is An entity is required to
restricted from being disclose
exchanged or used to settle a • Components of cash and
liability for at least twelve cash equivalents
months after the reporting
period” • Information about
“significant cash and cash
equivalent balances held by
the entity that are not
available for use by the
group”

Tentative Agenda Decision: Principal versus Agent — Software Reseller
Fact pattern
The reseller of standard software licences has a distribution agreement with a software manufacturer to
sell licences to customers:
• The reseller provides pre-sales advice before the sale to identify the type and number of software
licences that would meet the customer’s needs
• The software licences are issued in the customer’s name
• If the customer orders the incorrect type or number of software licences, they can return the licences
to the reseller, but the reseller cannot return the licences to the software developer or sell them on to
other customers
• The reseller has discretion in pricing the software licences
Question
• In applying IFRS 15, is the reseller of software licences a principal or an agent?

Tentative Agenda Decision: Principal versus Agent — Software Reseller
(continued)
• Applicable requirements in IFRS 15 — Principal versus Agent considerations
Identifying the specified goods or services to be provided to the customer
Assessing whether an entity controls each specified good or service before that good or service is transferred to the customer
• Assessing indicators of whether the entity is a principal or agent

• Assessing whether the entity obtains control of a (IFRS 15.B37)
good or another asset from the other party before it • Primary responsibility
transfers to the customer (IFRS 15.B34 and B35A) • Inventory risk
• Discretion in establishing the price
The IFRS IC:
• Noted that an entity needs to identify the specified goods or services and assess whether it controls them before they are
transferred to the customer
• Observed that the pre-sales advice the reseller provides is not an implicit promise and concluded the specified good or service is
each standard software licence in this fact pattern
• Observed that the conclusion depends on the specific facts and circumstances, and that judgement is required for this assessment,
but did not conclude

Have any of your banking clients accessed the Targeted Longer-Term

Refinancing Operations (TLTRO) III scheme?
A. Yes
B. No

Sustainability
Reporting

Polling question 4
Do your clients provide any Climate or other sustainability-type

disclosures, and where?
A. No, not at all

B. Yes, but in a separate sustainability report
C. Yes, in the management commentary
D. Yes, in the financial statements themselves

The International Sustainability Standards Board (ISSB)
The Foundation has so far announced the

The ISSB was established by the IFRS
appointment of the ISSB’s Chair (Emanuel
Foundation (the Foundation) in November 2021
Faber) and Vice-Chair (Sue Lloyd) and is
with the aim to develop, in the public interest, a
expected to announce the appointment of a
comprehensive global baseline of sustainability
further six Board members during 2022
disclosures for the financial markets
The ISSB will

The Foundation Constitution has been amended
have a global
to provide the framework for the formation of
and multi-
the ISSB under the governance structure of the
location
Foundation
presence

The ISSB — the first two proposed Standards
The first two proposed Standards (EDs) were published for consultation on 31 March 2022 (comment
deadline is 29 July 2022)
IFRS S1 General
Requirements for
Disclosure of IFRS S2 Climate-
Sustainability- related Disclosures
related Financial
Information

IFRS S1 – General Requirements for Disclosure of Sustainability-related
Financial information
• Core content centres around and is consistent with main pillars of the
TCFD recommendations – governance, strategy, risk management and
metrics and targets
• Information provided must ‘enable an assessment of the effects of
sustainability-related risks and opportunities on a company's enterprise
value’
• Concept of materiality based on the entity – that is, requires information
that is material for a company and that could reasonably be expected to
influence decisions that investors would make when assessing enterprise
value
• Intended to serve as overarching framework for sustainability-related
disclosures complemented by other IFRS Sustainability Disclosure
Standards
Equivalent to IFRS Accounting
Standards IAS 1 Presentation of
Financial Statements and IAS 8
Accounting Policies, Changes in
Accounting Estimates and Errors

IFRS S1 – General Requirements for Disclosure of Sustainability-related
Financial information (continued)
• Key features of the proposed requirements:
Emphasises need for consistency and connections between financial statements and
sustainability reporting by requiring companies to:
(1) explain linkages in information and
(2) use consistent assumptions when relevant
Requires financial statements and sustainability disclosures to be published at the same

time
Facilitates application in different jurisdictions by:

(1) not specifying a particular location for sustainability information and
(2) allowing additional information to be provided

IFRS S2 — Climate-related Disclosures
• Similar to S1, core content centres around and is consistent with main
pillars of the TCFD recommendations – governance, strategy, risk
management and metrics and targets
• Requires disclosure of information about climate-related physical and
transition-related risks, as well as opportunities.
• Includes climate-related industry-based requirements (Appendix B) that
build from existing SASB standards and metrics
• Covers 11 sectors with changes to SASB standards intended to
internationalise metrics
• Financed emissions disclosures have been added

IFRS S2 — Climate-related Disclosures (continued)
• Key features of the proposed requirements include the disclosure of:
Transition planning
Includes details on climate-related targets set by entities as well as the use of
carbon offsets to achieve targets • Proposed
requirements
require entities to
“refer to and
Climate resilience consider
applicability of”
Specifies the use of scenario analysis to assess climate resilience but also allows cross-industry
for “alternative method or technique” that has to be explained if an entity is metrics and
unable to use scenario analysis industry-based
metrics (Appendix
B) associated with
a particular
Scope 1—3 emissions
disclosure topic
Requirement to disclose GHG emissions for direct operations and purchased
electricity (Scope 1 and 2 respectively), as well as emissions along the value
chain (Scope 3)

Debrief polling question 4
Do your clients provide any Climate or other sustainability-type

disclosures, and where?
A. No, not at all

B. Yes, but in a separate sustainability report
C. Yes, in the management commentary
D. Yes, in the financial statements themselves

Questions

One minute recap

Summary
• Identify the new IFRS Standards, amendments and

interpretations (IFRS pronouncements) in issue as of 31 March
2022 and effective for periods beginning in 2022 and thereafter
• Identify the status of the IASB’s active projects and maintenance
projects (since our November 2021 update)
• Identify the various IFRS Interpretations Committee (IFRS IC)
decisions and (tentative) agenda decisions (since our November
2021 update)

Resources
• www.ey.com/ifrs
• IFRS Developments
• Applying IFRS
• EY IFRS Core Tools
• IFRS Update
• Good Group illustrative financial statements
• International GAAP® Disclosure Checklist
• EY International GAAP® publication
• Optional:
• EY IFRS podcast series
• EY Videos

Conclusions and next steps
• Resources are available to keep you up to date

• EY resources
• www.ifrs.org
• Begin dialogue of issues with your clients
• Subsequent webcasts:
• IASB/IFRS IC Update: 1 November
• Year-end considerations: 17 November

Thank you
for attending
this virtual
learning
session.

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Global IFRS Executive

Luci Wright Annabel Holloway Alessandro Bonatto Roy Linthorst

Page 2 Global IFRS Executive Update 2022

• Identify the new IFRS Standards, amendments and

Page 3 Global IFRS Executive Update 2022

• Accounting considerations for the war in Ukraine

Page 4 Global IFRS Executive Update 2022

A. Dealing with the impacts from the war in Ukraine

Page 5 Global IFRS Executive Update 2022

Page 6 Global IFRS Executive Update 2022

Page 7 Global IFRS Executive Update 2022

Page 8 Global IFRS Executive Update 2022

• Read and share our latest IFRS publication with your

Page 9 Global IFRS Executive Update 2022

A. Dealing with the impacts from the war in Ukraine

Page 10 Global IFRS Executive Update 2022

Page 11 Global IFRS Executive Update 2022

Insurance liabilities: Comparative information restated,

Financial assets — choice between:

Before IFRS 17 Amendment After IFRS 17 Amendment — “Classification Overlay”

Page 12 Global IFRS Executive Update 2022

Page 13 Global IFRS Executive Update 2022

Page 14 Global IFRS Executive Update 2022

Clarify that covenants that an entity

Page 15 Global IFRS Executive Update 2022

Do you think the proposals in the Exposure Draft on non-current

Page 16 Global IFRS Executive Update 2022

December 2020 • Presentation of liabilities

Page 17 Global IFRS Executive Update 2022

• IAS 7 • IFRS 7 Comment

Changes in liabilities arising Factors that an entity might

Page 18 Global IFRS Executive Update 2022

Page 19 Global IFRS Executive Update 2022

New pronouncements effective for periods beginning on or after 1 January 2022

Reference to the Conceptual Framework (Amendments to IFRS 3 Business Combinations) ✓

Onerous Contracts — Costs of Fulfilling a Contract (Amendments to IAS 37) ✓

Annual Improvements Process (AIP): 2018—2020 cycle* ✓

Page 20 Global IFRS Executive Update 2022

New pronouncements effective for periods beginning on or after 1 January 2023

IFRS 17 Insurance Contracts ✓

Classification of Liabilities as current or non-current (Amendments to IAS 1)** ✓

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) ✓

Definition of Accounting Estimates (Amendments to IAS 8) ✓

Page 21 Global IFRS Executive Update 2022

Do you think the proposals in the Exposure Draft on non-current

Page 22 Global IFRS Executive Update 2022

Page 23 Global IFRS Executive Update 2022

Research projects Current activity Next milestone Expected date

Extractive Activities Review research Decide project direction July 2022

Equity Method Research programme Decide project direction —

Post-implementation Review of Request for information

Post-implementation Review of Request for information

Page 24 Global IFRS Executive Update 2022

Standard-Setting projects Current activity Next milestone Expected date

Disclosure initiative — Targeted

Financial Instruments with

Primary Financial Statements Exposure Draft feedback IFRS Standard —

Rate-regulated Activities Exposure Draft feedback IFRS Standard —

Management Commentary Exposure Draft feedback Decide project direction —

Second Comprehensive Review of the

Page 25 Global IFRS Executive Update 2022

Narrow-scope amendments Current activity Next milestone Expected date