IASB Update December 2017

This IASB Update highlights preliminary decisions of the International Accounting Standards Board (Board). The Board's final decisions on IFRS® Standards, Amendments and IFRIC® Interpretations are formally balloted as set forth in the Due Process Handbook of the IFRS Foundation and the IFRS Interpretation Committee. 

The Board met on Wednesday 13 and Thursday 14 December 2017 at the IFRS Foundation's offices in London.


The topics, in order of discussion, were:

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Primary Financial Statements (Agenda Paper 21)

The Board met on 13 December 2017 to discuss:

  1. the objective of introducing a management performance measure into the financial statements and possible locations for the presentation and disclosure of that measure; and
  2. some improvements to the statement of cash flows.

Objective of, and suitable locations for, the management performance measure (Agenda Paper 21A)

The Board tentatively decided that entities should be required to identify a management performance measure and:

  1. present that measure as a subtotal in the statement(s) of financial performance, if it fits in the Board's proposed structure for the statement(s) and satisfies the requirements in IAS 1 Presentation of Financial Statements for subtotals.
  2. otherwise provide the management performance measure in a separate reconciliation of that measure with a measure that is defined in IFRS Standards.

Thirteen Board members agreed with this decision. One member was absent.

Classification of interest and dividends in the statement of cash flows (Agenda Paper 21C)

For non-financial entities, the Board tentatively decided to:

  1. remove from IAS 7 Statement of Cash Flows options for the classification of interest and dividends paid and of interest and dividends received and prescribe a single classification for each of these items. Thirteen Board members agreed with this decision. One member was absent.
  2. clarify that:
    1. cash flows arising from interest incurred on financing activities should be classified as financing cash flows. Thirteen Board members agreed with this decision. One member was absent.
    2. cash flows arising from interest paid that is capitalised as part of the cost of an asset should be classified as financing cash flows. Thirteen Board members agreed with this decision. One member was absent.
    3. cash flows arising from dividends paid should be classified as financing cash flows. Thirteen Board members agreed with this decision. One member was absent.
  3. amend the definition of ‘investing activities' in IAS 7 to clarify that interest and dividends received should be classified as investing cash flows. Twelve Board members agreed and one Board member disagreed with this decision. One member was absent.

Initial thoughts on other targeted improvements to the statement of cash flows (Agenda Paper 21D)

The Board tentatively decided:

  1. to require a consistent subtotal as the starting point for the indirect reconciliation of cash flows from operating activities.  This subtotal should be ‘profit before investing, financing and income tax'. Thirteen Board members agreed with this decision. One member was absent.
  2. not to align the operating section of the statement of cash flows with a corresponding section in the statement(s) of financial performance. Thirteen Board members agreed with this decision. One member was absent.
  3. not to make any other further improvements to the statement of cash flows, besides the improvements mentioned in (a) and (b) above. Ten Board members agreed and three Board members disagreed with this decision. One member was absent.

Next steps

The Board will continue its discussions about targeted improvements to the statement(s) of financial performance at a future meeting. These discussions will include:

The Board will consider the classification in the statement of cash flows of dividends received from investments in associates and joint ventures when it discusses whether the profit or loss of integral associates and joint ventures should be part of the income or expenses from investments in the statement(s) of financial performance.

Disclosure Initiative—Principles of Disclosure (Agenda Paper 11)

The Board met on 13 December 2017 to receive a preliminary summary of comment letters received on the Disclosure Initiative—Principles of Disclosure Discussion Paper.

The Board was not asked to make any decisions.

Next steps

In the first quarter of 2018, the Board will receive a detailed summary of all feedback received on the Discussion Paper and make decisions about next steps on the project.

Goodwill and Impairment (Agenda Paper 18)

The Board met on 14 December 2017 to discuss whether there are ways to improve the application of IAS 36 Impairment of Assets.

The Board tentatively decided to consider improving the application of IAS 36 by using the unrecognised headroom (the excess of the recoverable amount over the carrying amount) of a cash‑generating unit (or groups of units) as an additional input in the impairment testing of goodwill. Eleven Board members agreed and three disagreed with this decision.

The Board tentatively decided to consider introducing requirements for the entity to disclose:

  1. each year, information about the headroom in a cash-generating unit (or groups of units) to which goodwill is allocated for impairment testing;
  2. a breakdown of goodwill by past business combination, explaining why the carrying amount of goodwill is recoverable; and
  3. the reasons for paying a premium that exceeds the value of the net identifiable assets acquired in a business combination, key assumptions or targets supporting the purchase consideration and a comparison of actual performance with those assumptions or targets.

Twelve Board members agreed and two disagreed with this decision.

The Board tentatively decided against pursuing the following approaches, which it had considered in past meetings:

  1. providing relief from the mandatory annual quantitative impairment testing of goodwill;
  2. allowing goodwill to be tested for impairment at the entity-level or at the level of reportable segments;
  3. requiring disclosure of the payback period of an investment in a business combination; and
  4. changing the current requirement of using higher of value in use and fair value less costs of disposal to using a single method as the sole basis for determining the recoverable amount of an asset (or a cash‑generating unit).

Eleven Board members agreed and three disagreed with this decision.

The Board tentatively decided that the following possible approaches are outside the scope of the goodwill and impairment research project:

  1. requiring disclosure of a measure of total assets and liabilities for each reportable segment; and
  2. reviewing the drafting of the disclosure requirements in IFRS 3 Business Combinations.

Thirteen Board members agreed and one disagreed with this decision.

The Board tentatively decided not to consider reintroducing amortisation of goodwill.  Eleven Board members agreed and three disagreed with this decision.

Next steps

At future meetings, the Board will:

  1. decide whether the output of the project should be a discussion paper or an exposure draft;
  2. discuss whether to consider subsuming some intangible assets within goodwill in a business combination;
  3. continue to discuss whether to simplify the calculation of value in use by removing:
    1. the explicit requirement to use pre‑tax inputs; and
    2. the prohibition on including estimated cash flows from uncommitted future restructuring and from improving or enhancing an asset's performance.

Rate-regulated Activities (Agenda Paper 9)

The Board met on 14 December 2017 to receive feedback from the Consultative Group for Rate Regulation meeting held on 26 October 2017 and an update on the plan for developing the next consultation document for the project. 

The Board thanked group members for providing valuable information about the operational issues discussed at the meeting.

The Board was not asked to make any decisions.

Next Steps

The Board will discuss proposals for the model being developed for rate-regulated activities along with its scope before deciding whether to publish an Exposure Draft or a Discussion Paper.

Dynamic Risk Management (Agenda Paper 4)

The Board met on 14 December 2017 to discuss the proposed project plan to develop a dynamic risk management accounting model.

Specifically, the Board decided:

  1. to focus first on developing a core model for the most important issues.
  2. to seek feedback on the feasibility of the core model. The manner in which feedback is obtained will be determined at a later date.
  3. to address the non-core issues as a final step.

Fourteen Board members agreed with this decision.

Next steps

The Board will begin technical deliberations by discussing the dynamic risk management asset profile.

Implementation Issues in IFRS Standards

The Board met on 13 and 14 December 2017 to discuss implementation and maintenance projects.

IFRIC® Update (Agenda Paper 12)

The Board received an update on the November 2017 meeting of the IFRS Interpretations Committee (Committee). Details of this meeting were published in the IFRIC® Update. 

Costs considered in assessing whether a contract is onerous (IAS 37)—Interpretations Committee decisions (Agenda Paper 12A)

The Board discussed the Committee's decision to consider a project to clarify the meaning of the term ‘unavoidable costs' in the definition of an onerous contract in IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

The Board was not asked to make any decisions.

Accounting policy changes (amendments to IAS 8)—Sweep issue: transition (Agenda Paper 12B)

The Board discussed transition requirements for Accounting Policy Changes (Amendments to IAS 8).

The Board tentatively decided to propose that entities apply the amendments to IAS 8 to voluntary changes in accounting policies, resulting from agenda decisions, which an entity makes on or after the effective date of the amendments.

All Board members agreed with this decision.

Next steps

The Board plans to issue an exposure draft in the first quarter of 2018.

IFRS 1 First-time Adoption of International Financial Reporting Standards—Subsidiary as a first-time adopter—Possible narrow-scope standard-setting (Agenda Paper 12C)

The Board discussed the Committee's recommendation to propose an amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards.  The proposal would require a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent's date of transition to IFRS Standards (subject to any adjustments made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary).

All Board members agreed with the proposal.

Next steps

The Board will discuss transition and due process steps at a future meeting.

Property, Plant and Equipment: Proceeds before Intended Use (Proposed amendments to IAS 16)—Summary of feedback (Agenda Paper 12D)

The Board discussed a summary of the feedback on the Exposure Draft Property, Plant and Equipment—Proceeds before Intended Use (proposed amendments to IAS 16).

The Board was not asked to make any decisions.

Next steps

The Committee will deliberate the proposed amendments at a future meeting, taking the feedback into account.

Business Combinations under Common Control (Agenda Paper 23)

The Board met on 14 December 2017 to discuss the research project on Business Combinations under Common Control (BCUCC).

Review of related projects (Agenda Paper 23A)

The Board discussed the issues related to the scope of the BCUCC project identified in other Board and IFRS Interpretation Committee projects.

The Board was not asked to make any decisions.

Scope of the project (Agenda Paper 23B)

At the October 2017 meeting, the Board clarified the scope of the project. At the December meeting, the Board tentatively decided that the scope of the project also includes transactions involving transfers of one or more businesses where all of the combining parties are ultimately controlled by the same controlling party or parties, and the transactions are:

  1. preceded by an external acquisition and/or followed by an external sale of one or more of the combining parties; or
  2. conditional on a future sale such as in an initial public offering.

All Board members agreed with this decision.

Methods of accounting (Agenda Paper 23C)

The Board discussed the methods of accounting for transactions within the scope of the BCUCC project.

The Board was not asked to make any decisions.

Next Steps

The Board expects to continue its discussions on the project in early 2018.