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INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) LATEST DECISIONS SUMMARY

Primary Financial Statements

• Not to develop a singled consolidated list of aggregation and disaggregation characteristics. Instead, the Board asked its staff to continue working on the proposals for improving disaggregation in the financial statements, which may include illustrating how different characteristics could be used to aggregate or disaggregate financial information without overriding specific aggregation or disaggregation requirements in individual IFRS.
• Not to introduce thresholds or rebuttable presumptions for aggregating or disaggregating financial information. Also, the board asked its staff to explore developing principle-based guidance that would encourage greater disaggregation of large residual or ‘other’ balances in the financial statements.
• To develop a principle for determining the location of financial information in the primary financial statements or the notes.

Proposal to improve the analysis of expenses by function or by nature required by IAS 1

• To add to the requirements in IAS 1 the following factors to consider in deciding whether by-function or by-nature methodology provides the most useful information about financial performance:
• which method provides the best information about the key components or drivers of profitability;
• which method most closely matches how management reports internally to the board or key decision makers and the way the business is run;
• peer industry practice; and
• whether the allocation of expenses to functions would be so arbitrary that it would not provide a sufficiently faithful representation of the composition of an entity’s functions. In such cases, a ‘by-nature’ method should be used.
• To require additional information on the nature of the expense when an entity provides an analysis of expenses using a by-function methodology.

Outstanding issues on management performance measures and adjusted earnings per share

• To further expand the list of subtotals/totals in paragraph 81A of IAS 1 Presentation of Financial Statements that would not be considered as management performance measures to include commonly used subtotals, such as profit before tax, profit from continuing operations, and gross profit defined as revenue less cost of sales.
• That entities should not be required to disclose adjusted earnings per share when an entity has more than one management performance measure.

Disclosure Initiative – Targeted Standards-level Review of Disclosures

• Base all disclosure requirements on one or more specific disclosure objectives. These objectives should explain why the information is useful to the primary users of financial statements, and what these users are expected to do with the information.
• Draft all disclosure requirements so they explicitly state the underlying objective(s) and clearly link each item of information with the related objective(s)

Rate-regulated Activities

• That the measurement of regulatory assets should reflect estimates of the future cash flows that the assets will generate. These cash flows should include amounts that result from:
the cost of assets used and operating expenses incurred;
any margins on the operating expenses incurred; and
any interest on the operating expenses incurred or returns on the cost of assets used.
• That the measurement of regulatory assets should reflect changes in the estimates of the future cash flow generated by those assets.
• The discount rate established at initial recognition should remain unchanged during the subsequent measurement of the regulatory assets.

Goodwill and Impairment

• Not to develop a document that would seek feedback solely about using the unrecognised headroom of a cash-generating unit (or group of units) as an additional input in the impairment testing of goodwill.
• To pursue including in the value in use calculation expected cash flows from future restructuring and future performance enhancements that management is more likely than not to undertake.

IFRS 16 Leases – Lease Incentives – Annual Improvement