This presentation was made by Françoise Flores, IASB, at the 19th OECD Senior Financial Management and Reporting Officials Symposium held at the OECD Conference Centre, Paris, on 4-5 March 2019

1. IFRS® Foundation
The views expressed in this presentation are those of the presenter, not necessarily those of the
International Accounting Standards Board or the IFRS Foundation.
Copyright © 2018 IFRS Foundation. All rights reserved
IASB Update
Françoise Flores, IASB member
OECD, Paris, 4 March 2019

2. 22017-2018 significant events
Disclosures – case study report
Supporting implementation
of IFRS 17
Conceptual Framework
Financial Instruments with Characteristics of Equity
Erkki Liikanen

3. 3Next steps on IFRS 17
• The Board will continue to consider whether any concerns and implementation
challenges indicate there might be a need to amend IFRS 17. Any amendments
would need to meet the following criteria:
Relevance and
faithful representation
Comparability Understandability Consistency
1 Avoid significant loss of useful information for users
2 Not unduly disrupt implementation processes under way
• Ongoing activities to support IFRS 17 implementation
Not risk undue delays in the effective date of IFRS 17

4. 4
Overview of 2018 implementation
support activities
23addressed by
Committee
28
topics
discussed
agenda decisions
with explanatory
material
amendments or
additions to IFRS
Standards
21
2
6 Committee meetings held in 2018.
Committee provided
feedback on proposed
amendments3
1Work in progress
1 No evidence that matter
has widespread effect

5. 5Active projects
Project Next Milestones When
Primary Financial Statements Discussion Paper or Exposure Draft H2 2019
Disclosure Initiative—Targeted Standards-
level Review of Disclosures
Exposure Draft
Management Commentary Exposure Draft H1 2020
Rate-regulated Activities
Discussion Paper or Exposure Draft
Out for comment
H2 2019
Dynamic Risk Management (DRM) Core Model H2 2019
Interbank Offered Rate (IBOR) Moved to standard setting Fastrack
Business Combinations under Common
Control
Discussion Paper H2 2019
Goodwill and Impairment Discussion Paper or Exposure Draft H2 2019
Financial Instruments with Characteristics of
Equity Out for comment
Pension Benefits that Depend on Asset
Returns
Review Research H2 2019
Extractive Activities Review Research

6. 6Research pipeline
Projects starting in coming months Remaining pipeline projects
(to start in 2019 - 2020)
• Provisions
• Variable and Contingent
Consideration
• SMEs that are subsidiaries
• Equity Method
• Pollutant Pricing Mechanisms
• High Inflation: Scope of IAS 29

7. 7Post-implementation reviews
Completed
—no action
Completed Future PIRs
IFRS 8 IFRS 3
IFRS 13
IFRS 10, 11, 12
IFRS 5

8. Financial Instruments with
Characteristics of Equity

9. 9
Financial Instruments with Characteristics of
Equity (FICE)
• IAS 32 works well for most financial instruments, but
challenges applying it to complex financial instruments
• limited information available to investors about equity
instruments
• no clear rational for classification
Challenges
• articulate classification principles—clear rationale
• limit changes to IAS 32
• propose additional information through presentation and
disclosure
Response

10. 10
FICE—the Board’s preferred approach to
classification
Can the issuer be required to
pay cash or to hand over
another financial asset before
liquidation?
Has the issuer promised a return to
the instrument’s holder regardless
of the issuer’s own performance or
share price?
A financial instrument issued by an entity is a financial liability if the answer is yes
to one or both of the following questions
Otherwise, it is an equity instrument
Amount featureTiming feature

11. 11FICE—Discussion Paper
Amount feature
Timing feature
contains obligation for
an amount
independent of the
entity’s available
economic resources
contains no obligation
for an amount
independent of the
entity’s available
economic resources
transfer of economic
resources required at a
specified time other than
at liquidation
Liability Liability
transfer of economic
resources required only at
liquidation
Liability Equity
present income and
expenses from this
type of financial
liabilities in OCI
attribute P&L and
OCI to derivative
equity instruments to
show value transfers

12. Better Communication in
Financial Reporting

13. 13Central theme of our work
Information outside
financial statements
Primary
Financial
Statements
Disclosure
Initiative
Management
Commentary
IFRS TaxonomyDelivery
Content
Better Communication in Financial Reporting
Financial statements

14. Primary Financial Statements

15. 15Overall project objective
Objective of the Primary Financial Statements project
Targeted improvements to the primary financial statements with a
focus on the statement(s) of financial performance
Statement(s) of
financial
performance
Statement of
financial position
Statement of cash
flows
Primary Financial Statements
Statement of
changes in equity

16. 16Stakeholder feedback and key project proposals
Introduce defined subtotals in
the statement(s) of financial
performance
Proposals to improve
disaggregation
Proposals on Management
Performance Measures
Users
Users
Preparers
Non-GAAP measures can provide
useful information, but transparency
needs to be improved
I need flexibility to tell my company’s
story
There is insufficient disaggregation in
financial statements
Statements of financial
performance are not sufficiently
comparable between different
companies
Users

17. 17
Defined subtotals
—illustration for general corporates (by nature)
17Revenue 16,500
Changes in inventories of finished goods and work in progress -1,000
Raw material and consumables used -6,000
Employee benefits expense -4,000
Impairment of property, plant and equipment -500
Depreciation expense -1,200
Amortisation expense -800
Operating profit 3,000
Share of profit of integral joint ventures and associates 500
Operating profit and share of profit or loss of integral associates and joint ventures 3,500
Changes in the fair value of financial assets 250
Dividend income 50
Share of profit of non-integral joint ventures and associates 100
Profit before financing and income tax 3,900
Interest income from cash and cash equivalents 100
Expenses from financing activities -1000
Unwinding of discount -100
Profit before tax 2,900




18. 18Management performance measures (1)
I need flexibility to tell my company’s story
Preparers
If entities identify MPMs, information about those MPMs is required to
be disclosed in the notes.
Tentative
Board
decisions
No specific constraints on the calculation of MPMs.
Entities are required to identify a measure (or measures) of profit that, in
management’s view, communicates the financial performance of the entity.
This measure will often be a subtotal or total specified by IFRS Standards,
but could be a management performance measure (MPM) that
complements those subtotals or totals.

19. 19Management performance measures (2)
Non-GAAP measures can provide useful
information, but transparency needs to be improved
Users
• Disclose a reconciliation in the notes between the MPM and the
most directly comparable subtotal/total specified by IFRS Standards
• Disclose the effect on tax and non-controlling interests
separately for each reconciling item
• Explain any differences between MPMs and segment measures
• Describe why the MPMs provide management’s view of
performance and how they have been calculated
• Label MPMs in a clear and understandable way
• Explain any changes over time in calculation of MPMs
Tentative
Board
decisions

20. 20Disaggregation
Principles of disaggregation in
the financial statements
Consider expanding the list of
required minimum line items in
the primary financial
statementsProposals to improve
disaggregation of expenses by
nature / by function Consider illustrative examples
for the primary financial
statements for a small number
of industries
Users
There is insufficient disaggregation in the financial statements
Guidance on unusual or infrequent
items

21. Disclosure Initiative

22. 22Disclosure Initiative—the problem
• The Board has identified three main concerns about disclosures in financial
statements:
– not enough relevant information
– too much irrelevant information
– ineffective communication
enabling
preparer
judgement
improved
disclosure
requirements
improved
disclosures &
better
communication

23. 23Disclosure Initiative projects
Completed projects
Amendments to
IAS 1 and IAS 7
Disclosure Initiative
Preparing
Project
Summary
Case Studies
Materiality
Practice
Statement
Active projects
Accounting
Policy
Disclosures
Principles of
Disclosure
Targeted
Standards-level
Review of
Disclosures
Definition of
Material

24. 24Help at hand—Making Materiality Judgements
• provide guidance to companies on making
materiality judgements when preparing financial
statements using IFRS Standards
Purpose
• ‘one-stop shop’ for all the requirements on
materiality in IFRS Standards
• additional practical guidance and examples
Content
Next Step
• guidance on which accounting policies to disclose

25. 25Help at hand—disclosure case studies
• demonstrate that better communication is already
possible
• inspire others to improve communication
Purpose
• focuses on the seven principles of effective
communication from the Principles of Disclosure
Discussion Paper
• shows how companies disclosed information before
and after enhancing communication in their financial
statements
• describes how companies improved the way they
communicate (the process)
Content

26. 26Principles of Disclosure
• identify disclosure issues.
Objective
• added a project on targeted standards-level review of
disclosures.
• added a project to help entities apply materiality judgments to
accounting policy disclosure.
• consider broader implications of technology for financial
communication in the Board’s Technology Initiative.
• consider performance measures topic in the Board’s Primary
Financial Statements project.
Main outcomes

27. 27Targeted Standards-level Review of Disclosures
• help stakeholders improve the usefulness of disclosures for the primary
users of financial statements.
• develop guidance for the Board to use when developing and drafting
disclosure objectives and requirements (as a set of Board decisions).
• not to change the volume of disclosure requirements, although this may
be a consequence.
Objective
• test the draft guidance for the Board by applying it to IAS 19 Employee
Benefits and IFRS 13 Fair Value Measurement.
• publish an exposure draft of amendments to the disclosure
requirements in IAS 19 and IFRS 13, where formal stakeholder
feedback on the draft guidance for the Board will be obtained.
Next steps

28. Management Commentary

29. 29
Management commentary–scope of the Board’s
interest
Wider
Corporate
Reporting
Financial
Reporting
Financial
Statements
Broader
Financial
Reporting
Public Policy
Reporting
Management commentary is a narrative report aimed at primary users of
financial reports that provides context for and additional insight into an
entity’s financial statements.
The Board’s interest lies in financial reporting
Environmental, social and
governance (ESG)
reporting
The Board’s interest remains
within the boundaries of
financial reporting and is
focused on the primary users
of financial reports. The
primary users of financial
reports are defined in the
Conceptual Framework for
Financial Reporting as
existing and potential
investors, lenders and
other creditors.

30. 30Project timeline
The Board establishes the
Consultative Group (CG)
The group will advise the
Board in developing proposals
for revision of the Practice
Statement
Jul 2018
H1 2020
Publish
Exposure Draft
Nov 2017
Revision of the
Practice Statement
added to the Board’s
agenda
Sep 2018
CG meeting - Stream 1
Objective, materiality and
principles Jan 2019
CG meeting - Stream 2
Performance, position and
progress
Apr 2019
CG meeting - Stream 3
Business model, risk, strategy,
and operating environment
Board deliberations
October 2018 onwards

31. Technology Initiative

32. 32IFRS Foundation Technology Initiative
Work streams
Other
develop-
ments
Big data/AI
Automation
Accounting
Consumption of financial
reports
Standard-setting process
Stakeholder engagement
Scoping filter
1. Scoping
2. Strategy development
3. Execution

33. Business Combinations
Under Common Control

34. 34Business Combinations under Common Control34
Business Combinations under Common Control (BCUCC) are
excluded from the scope of IFRS 3 Business Combinations
In practice, companies account for BCUCC using:
acquisition method
as set out in IFRS 3
predecessor method
but there is diversity in practice in
how the method is applied
concerns about the diversity in practice raised by
various interested parties, notably security regulators

35. 35BCUCC—methods of accounting 35
single method
for all transactions
within the scope?
different methods
for different
transactions?
how to choose?
Decision process Alternatives to explore
• acquisition method, as
in IFRS 3?
• predecessor method?
If yes, how to apply it?
which
method?
which
methods?

36. Goodwill and impairment

37. 37
Entities started
implementing
revised version
of IFRS 3
Business
Combinations
2009
2013
The Board sought
stakeholder feedback
on specified matters as
part of the Post-
implementation
Review of IFRS 3
Having reviewed the
stakeholders’ feedback
and academic research,
the Board identified
issues/topics for further
research and follow-up
2015
July 2018
Based on key findings from
research project, the Board
decided to pursue three
objectives for follow-up
work for the project
The Board will continue its
discussions on how to
achieve the objectives the
Board is pursuing for the
project and work towards
issuing a Discussion Paper
2nd half of 2018
Goodwill and Impairment—brief background

38. 38Goodwill and impairment – key research areas
Increase impairment test effectiveness
Simplify impairment test
Improve disclosures
Consider subsuming certain intangibles in
goodwill

39. 39
Goodwill and Impairment
follow-up work objectives—July 2018 Board meeting
Three objectives the Board has decided to pursue for addressing the interrelated
problems identified in the research phase of this project:
Objective A identifying disclosures to enable investors to assess:
• management’s rationale for the business combination
• if the post-acquisition performance of the business combination meets
expectations set at the acquisition date
Objective B simplifying the accounting for goodwill by:
• permitting an indicator-only approach as to whether an impairment test is
required
• exploring whether to reintroduce amortisation of goodwill
Objective C improving the calculation of value in use by permitting:
• cash flow projections that may include future enhancements to the asset
• the use of post-tax inputs in the calculation of value in use
DP H2 2019

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