IASB Update January 2018

The International Accounting Standards Board (IASB) has published its January 2018 edition of Update, which highlights preliminary decisions made at its January 2018 meeting.

Primary Financial Statements

Regarding the requirements for management performance measures, the IASB tentatively decided that:

• that all entities should specify their key performance measures in the financial statements;
• that if any such measure is not specified or defined in IFRS Standards, it should be identified as a management performance measures;
• that the key performance measures identified in the financial statements should include, as a minimum, the key performance measures communicated in the annual report;
• that if a management performance measure does not fit in the statement(s) of financial performance, a separate reconciliation should be disclosed in the notes between the management performance measure and the most appropriate measure specified or defined in IFRS Standards;
• that there should be no specific constraints on management performance measures provided in a separate reconciliation;
• that the following disclosures should be required for each management performance measure (including a management performance measure presented as a subtotal in the statement(s) of financial performance):
  • a description of why the management performance measure provides management’s view of performance, including an explanation of how the management performance measure has been calculated and why
  • sufficient explanation, if there is a change in how the management performance measure is calculated during the year, to help users understand the reasons for and effect of the change
• not to require a five-year historical summary showing the calculation of the management performance measure;
• that the reconciliation between the management performance measure and the most appropriate measure specified or defined in IFRS Standards should be provided separately from the operating segment information disclosed in accordance with IFRS 8 Operating Segments. However, entities would not be prohibited from also including management performance measures within the operating segment information. Furthermore, the following disclosures would be required:
  • an explanation of how the management performance measure differs from the total of the measures of profit or loss for the reportable segments
  • if none of the management performance measures fits into the operating segment information, an explanation of why this is the case;
• not to specify in IFRS Standards that the management performance measures are not measures specified or defined in IFRS Standards.

Regarding presentation of the share of profit or loss of ‘integral’ associates and joint ventures, the IASB tentatively decided that:

• entities should present the results of ‘integral’ associates and joint ventures separately from those of ‘non-integral’ associates and joint ventures; and
• the project’s first due-process document should:
  • use the proposed definition of ‘income/expenses from investments’ (from the November 2017 Board meeting) as the basis for the split between integral and non-integral investments in associates or joint ventures, and include a non-exhaustive list of indicators that could be used in making this distinction.
  • propose the presentation in the statement(s) of financial performance of the share of profit or loss of integral associates or joint ventures as a line item above the ‘income/expenses from investments’ category and require a new subtotal above that line item.
  • discuss the alternative approaches considered by the Board for presenting the share of the profit or loss of integral associates and joint ventures, both within and outside the ‘income/expenses from investments’ category, and the Board’s reasons for rejecting those approaches.  All 14 Board members agreed.   

Financial Instruments with Characteristics of Equity

The IASB tentatively decided to:

• issue a Discussion Paper seeking views on how to account for instruments issued by an entity that give the entity the option to limit the claim on available resources (e.g. through settling the instrument by delivering a fixed number of shares), and in particular whether such an instrument could be analysed as an equity host and embedded derivative; and
• raise a question in the Discussion Paper about whether and how the attribution requirements may help provide information about complex payoffs if the embedded derivative is not separated from the equity host contract.

Taxation in fair value measurements (IAS 41 Agriculture)

The IASB agreed with the IFRS Interpretations Committee proposal to amend IAS 41 to remove the requirement for entities to exclude cash flows for taxation when measuring the fair value of biological assets using a present value technique.  It tentatively decided that entities apply the amendment to fair values measured after the effective date, with earlier application permitted.

Goodwill and Impairment (IAS 36 Impairment of Assets)

The board tentatively decided to:

• consider removing the requirement to exclude from the value in use calculation required by IAS 36 those cash flows resulting from a future restructuring or a future enhancement; and
• consider removing the explicit requirement to use pre-tax inputs to calculate value in use and to disclose the pre-tax discount rates used.  Instead an entity would be required to use internally consistent assumptions about cash flows and discount rates, and to disclose the discount rate actually used.

The full copy of IASB Update is available from the IASB web site here.