IFRS Core Tools

IFRS Update of
standards and
interpretations in issue
at 31 December 2021
 Contents
Introduction 2
Section 1: New pronouncements issued as at 31 December 2021 4
Table of mandatory application 4
IFRS 17 Insurance Contracts 5
Interest Rate Benchmark Reform – Phase 2 –
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 7
Covid-19-Related Rent Concessions beyond 30 June 2021 – Amendments to IFRS 16 9
Reference to the Conceptual Framework – Amendments to IFRS 3 10
Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 10
Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37 11
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture –
Amendments to IFRS 10 and IAS 28 11
Classification of Liabilities as Current or Non-current - Amendments to IAS 1 12
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2 13
Definition of Accounting Estimates - Amendments to IAS 8 14
Deferred Tax related to Assets and Liabilities arising from a Single Transaction -
Amendments to IAS 12 14
Improvements to International Financial Reporting Standards 15
Section 2: Items not taken onto the IFRS Interpretations Committee’s agenda in Q4 2021 16
Section 3: Active IASB projects 19

1 IFRS Update of standards and interpretations in issue at 31 December 2021

 Introduction

Entities reporting under International Financial Reporting A table comparing mandatory application for different year ends
Standards (IFRS) continue to face a steady flow of new standards is presented at the beginning of Section 1. In the table, the
and interpretations. The resulting changes range from significant pronouncements are presented in order of their effective dates.
amendments of fundamental principles to some minor changes Note that many pronouncements contain provisions that would
from the annual improvements process (AIP). They will affect allow entities to adopt in earlier periods.
different areas of accounting, such as recognition, measurement,
presentation and disclosure. When a standard or interpretation has been issued, but has yet
to be applied by an entity, IAS 8 Accounting Policies, Changes in
Some of the changes have implications that go beyond matters Accounting Estimates and Errors requires the entity to disclose
of accounting, also potentially impacting the information systems any known (or reasonably estimable) information relevant to
of many entities. Furthermore, the changes may impact business understanding the possible impact that the new pronouncement
decisions, such as the creation of joint arrangements or the will have on the financial statements, or indicate the reason for
structuring of particular transactions. not doing so. The table at the beginning of Section 1 is helpful in
identifying the pronouncements that fall within the scope of this
The challenge for preparers is to gain an understanding of what disclosure requirement.
lies ahead.
Section 2 provides a summary of the agenda decisions published
Purpose of this publication in the IFRIC Update1 since 1 October 2021. For agenda decisions
published before 1 October 2021, please refer to previous
This publication provides an overview of the upcoming changes
editions of IFRS Update. In some agenda decisions, the IFRS IC
in standards and interpretations (pronouncements). It also
refers to the existing pronouncements that provide adequate
provides an update on selected active projects. It does not
guidance. These agenda decisions provide a view on the
attempt to provide an in-depth analysis or discussion of the
application of the pronouncements and fall within ‘other
topics. Rather, the objective is to highlight key aspects of these
accounting literature and accepted industry practices’ in
changes. Reference should be made to the text of the
paragraph 12 of IAS 8. IFRS standards are required to be applied
pronouncements before taking any decisions or actions.
reflecting the explanatory material contained in agenda
decisions.
This publication consists of three sections:

Section 3 summarises the key features of selected active

Section 1 provides a high-level overview of the key requirements
projects of the IASB. The ‘Key projects’ addressed are those
of each pronouncement issued by the International Accounting
initiated with the objective of issuing new standards and those
Standards Board (IASB or the Board) and the IFRS Interpretations
involving overarching considerations across a number of
Committee (IFRS IC) as at 31 December 2021 that will be
standards. ‘Other projects’ include proposed amendments with
effective for the first-time for reporting periods ended at that
narrower applicability. Generally, only those projects that have
date or thereafter. This overview provides a summary of the
reached the exposure draft stage are included, but, in selected
transitional requirements and a brief discussion of the potential
cases, significant projects that have not yet reached the
impact that the changes may have on an entity’s financial
exposure draft stage are also highlighted.
statements.

1
The IFRIC Update is available on the IASB’s website at http://www.ifrs.org/news-and-
events/updates/ifric-updates/

IFRS Update of standards and interpretations in issue at 31 December 2021 2

IFRS Core Tools
EY’s IFRS Core Tools2 provide the starting point for assessing the Good Group (International) Limited is supplemented by illustrative
impact of changes to IFRS. Our IFRS Core Tools include a number financial statements that are aimed at specific sectors and
of practical building blocks that can help the user to navigate the circumstances. These include:
changing landscape of IFRS. In addition to IFRS Update, EY’s IFRS
Core Tools include the publications described below. • Good Group (International) Limited – Alternative Format
• Good Group (International) Limited – Agriculture:
International GAAP® Disclosure Checklist
Supplement to Illustrative Consolidated Financial
Our 2021 edition of International GAAP® Disclosure Checklist Statements
captures disclosure requirements applicable to periods ended
31 December 2021, and disclosures that are permitted to be • Good First-time Adopter (International) Limited
adopted early. Our 2021 edition of International GAAP® • Good Investment Fund Limited (Equity)
Disclosure Checklist for Interim Condensed Financial Statements
captures disclosure requirements applicable to interim reports of • Good Investment Fund Limited (Liability)
entities with a year-end of 30 June 2022, and disclosures that • Good Real Estate Group (International) Limited
are permitted to be adopted early. These disclosure requirements
are for all pronouncements issued as at 31 August 2021. This • Good Mining (International) Limited
tool assists preparers to comply with the presentation and • Good Petroleum (International) Limited
disclosure requirements of IFRS in their interim and year-end
IFRS financial statements. Previous editions of this tool for earlier • Good Bank (International) Limited
period ends are available on EY’s IFRS Core Tools webpage. • Good Insurance (International) Limited

Good Group (International) Limited • Good Life Insurance (International) Limited

Good Group (International) Limited is a set of illustrative financial • Good General Insurance (International) Limited
statements, incorporating presentation and disclosure
requirements that are in issue as at 30 June 2021 and effective Also available from EY:
for the year ended 31 December 2021. Good Group
Other EY publications
(International) Limited – Illustrative interim condensed financial
statements for the period ended 30 June 2021, based on IFRS in References to other EY publications that contain further details
issue at 28 February 2021, supplements Good Group and discussion on these topics are included throughout the IFRS
(International) Limited – Illustrative financial statements. Among Update, all of which can be downloaded from our website.2
other things, these illustrative financial statements can assist in
understanding the impact accounting changes may have on the International GAAP® 20213
financial statements. Our International GAAP® 2021 is a comprehensive guide to
interpreting and implementing IFRS.4 It includes pronouncements
mentioned in this publication that were issued prior to
September 2020, and it provides examples that illustrate how
the requirements of those pronouncements are applied.

2 3
EY’s Core Tools are available on http://www.ey.com/en_gl/ifrs-technical- International GAAP® is a registered trademark of Ernst & Young LLP (UK).
resources. 4
https://www.wiley.com/en-gb/International+GAAP+2021-p-9781119772453.

3 IFRS Update of standards and interpretations in issue at 31 December 2021

 Section 1: New pronouncements issued as at 31 December 2021

Table of mandatory application

First time applied in annual periods ending on the last day of these months**

New pronouncement Page Effective date* Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Covid-19-Related Rent Concessions beyond 30 June 2021 –

9 1 Apr 2021*** 2022 2022 2022 2021 2021 2021 2021 2021 2021 2021 2021 2021
Amendment to IFRS 16

Interest Rate Benchmark Reform – Phase 2 – Amendments to

7 1 Jan 2021 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2021
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

Reference to the Conceptual Framework – Amendments to

10 1 Jan 2022 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2022
IFRS 3

Property, Plant and Equipment: Proceeds before Intended Use

10 1 Jan 2022 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2022
– Amendments to IAS 16

Onerous Contracts – Costs of Fulfilling a Contract –

11 1 Jan 2022 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2022
Amendments to IAS 37

AIP IFRS 1 First-time Adoption of International Financial

15 1 Jan 2022 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2022
Reporting Standards – Subsidiary as a first-time adopter

AIP IFRS 9 Financial Instruments – Fees in the ’10 per cent’

15 1 Jan 2022 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2022
test for derecognition of financial liabilities

AIP IAS 41 Agriculture – Taxation in fair value measurements 15 1 Jan 2022 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2023 2022

IFRS 17 Insurance Contracts 5 1 Jan 2023 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2023

Classification of Liabilities as Current or Non-current -

12 1 Jan 2023 **** 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2023
Amendments to IAS 1

Definition of Accounting Estimates - Amendments to IAS 8 14 1 Jan 2023 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2023

Disclosure of Accounting Policies - Amendments to IAS 1 and

13 1 Jan 2023 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2023
IFRS Practice Statement 2

Deferred Tax related to Assets and Liabilities arising from a

14 1 Jan 2023 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2023
Single Transaction – Amendments to IAS 12

Sale or Contribution of Assets between an Investor and its

Associate or Joint Venture - Amendments to IFRS 10 and 11 Note 1
IAS 28

* Effective for annual periods beginning on or after this date.

** Assuming that an entity has not early adopted the pronouncement according to specific provisions in the standard, interpretation or amendment.
*** Earlier application is permitted, including in financial statements not yet authorised for issue at 31 March 2021.
**** In July 2021, the Board tentatively decided to defer the effective date of the 2020 amendments to no earlier than 1 January 2024.
Note 1: In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting.

IFRS Update of standards and interpretations in issue at 31 December 2021 4

IFRS 17 Insurance Contracts • Certain changes in the expected present value of future
cash flows are adjusted against the CSM and thereby
Effective for annual periods beginning on or after 1 January
recognised in profit or loss over the remaining coverage
2023
period

Background • The effect of changes in discount rates will be reported in

either profit or loss or other comprehensive income,
In May 2017, the IASB issued IFRS 17 Insurance Contracts, a
determined by an accounting policy choice
comprehensive new accounting standard for insurance contracts
covering recognition and measurement, presentation and • The presentation of insurance revenue and insurance
disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance service expenses in the statement of comprehensive
Contracts. income based on the concept of services provided during
the period
In June 2020, the IASB issued amendments to IFRS 17. These • Amounts that are paid to a policyholder in all
amendments included changing the effective date to 2023. circumstances, regardless of whether an insured event
occurs (non-distinct investment components) are not
In September 2017, the Board established a Transition Resource presented in the income statement, but are recognised
Group (TRG) for IFRS 17 to analyse implementation-related directly on the balance sheet
questions. The TRG met four times and while no further meetings
• Insurance services results (earned revenue less incurred
have been scheduled, the TRG submission process remains open
claims) are presented separately from the insurance
for stakeholders to send in questions they believe meet the TRG
finance income or expense
submission criteria.
• A loss-recovery component of the asset for the remaining
Scope coverage of a group of reinsurance contracts held is
IFRS 17 applies to all types of insurance contracts (i.e., life, non- determined and recorded in profit or loss when an entity
life, direct insurance and re-insurance), regardless of the type of recognises a recovery of a loss on initial recognition of an
entities that issue them, as well as to certain guarantees and onerous group of underlying issued contracts as well as for
financial instruments with discretionary participation features. A subsequent measurement of the recovery of those losses
few scope exceptions will apply.
• Entities should present separately in the statement of
Key requirements financial position, the carrying amounts of portfolios of
insurance contracts issued that are assets and those that
The overall objective of IFRS 17 is to provide an accounting
are liabilities, with the same requirement applying to
model for insurance contracts that is more useful and consistent
for insurers. portfolios of reinsurance contracts held
• Extensive disclosures to provide information on the
In contrast to the requirements in IFRS 4, which are largely based recognised amounts from insurance contracts and the
on grandfathering previous local accounting policies, IFRS 17 nature and extent of risks arising from these contracts
provides a comprehensive model for insurance contracts,
covering all relevant accounting aspects. The core of IFRS 17 is
the general model, supplemented by:

• A specific adaptation for contracts with direct participation

features (the variable fee approach)
• A simplified approach (the premium allocation approach)
mainly for short-duration contracts
The main features of the new accounting model for insurance
contracts are as follows:

• The measurement of the present value of future cash

flows, incorporating an explicit risk adjustment,
remeasured every reporting period (the fulfilment cash
flows)
• A Contractual Service Margin (CSM) that is equal and
opposite to any day one gain in the fulfilment cash flows of
a group of contracts, representing the unearned profit of
the insurance contracts to be recognised in profit or loss
based on insurance contract services provided over the
coverage period.

5 IFRS Update of standards and interpretations in issue at 31 December 2021

Transition Good Life Insurance (International) Limited (November 2021)
IFRS 17 is effective for reporting periods starting on or after EYG No. 010140-21Gbl
1 January 2023, with comparative figures required. Early
application is permitted, provided the entity also applies IFRS 9 Insurance Accounting Alert (July 2021) EYG no. 006570-21Gbl
Financial Instruments on or before the date it first applies IFRS 17.
Applying IFRS 17: A closer look at the new Insurance Contracts
The Board decided on a retrospective approach for estimating Standard (June 2021) EYG No. 005427-21Gbl
the CSM on the transition date. However, if full retrospective
application, as defined by IAS 8 for a group of insurance IASB issues amendments to IFRS 17 (June 2020)
contracts, is impracticable, an entity is required to choose one of EYG No. 004475-20Gbl
the following two alternatives:
Good General Insurance (International) Limited (November 2020)
• Modified retrospective approach - based on reasonable and EYG No. 007724-20Gbl
supportable information available without undue cost and
effort to the entity, certain modifications are applied to the Fourth meeting of the IASB’s IFRS 17 Transition Resource Group
extent full retrospective application is not possible, but still (April 2019) EYG No. 001926-19Gbl
with the objective to achieve the closest possible outcome
to retrospective application Third technical discussion of the IASB’s IFRS 17 Transition
• Fair value approach - the CSM is determined as the positive Resource Group (October 2018) EYG No. 011564-18Gbl
difference between the fair value determined in accordance
with IFRS 13 Fair Value Measurement and the fulfilment Second technical discussion of the IASB’s IFRS 17 Transition
cash flows (any negative difference would be recognised in Resource Group (May 2018) EYG No. 02735-183Gbl
retained earnings at the transition date)
First technical discussion of the IASB’s IFRS 17 Transition
Both the modified retrospective approach and the fair value Resource Group (February 2018) EYG No. 00865-183Gbl
approach provide transitional reliefs for determining the grouping
of contracts. If an entity cannot obtain reasonable and supportable
information necessary to apply the modified retrospective
approach, it is required to apply the fair value approach.

Impact
IFRS 17, together with IFRS 9, will result in profound changes
to the accounting in IFRS financial statements for insurance
companies. This will have a significant impact on data, systems
and processes used to produce information for financial reporting
purposes. The new model is likely to have a significant impact on
the profit and total equity of some insurance entities, resulting in
increased volatility compared to today’s models. Key performance
indicators will also likely be affected.

Finalisation of the amendment to IFRS 17

In December 2021, the IASB amended IFRS 17 to add a transition
option for a “classification overlay” to address possible accounting
mismatches between financial assets and insurance contract
liabilities in the comparative information presented on initial
application of IFRS 17.

If an entity elects to apply the classification overlay, it can only

do so for comparative periods to which it applies IFRS 17 (i.e.,
from transition date to the date of initial application of IFRS 17).

Other EY publications
Insurance Accounting Alert (December 2021)
EYG no. 010712-21Gbl

IFRS Update of standards and interpretations in issue at 31 December 2021 6

Interest Rate Benchmark Reform – Phase 2 – Amounts accumulated in the cash flow hedge reserve are
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and deemed to be based on the RFR. The cash flow hedge reserve is
IFRS 16 released to profit or loss in the same period or periods in which
Effective for annual periods beginning on or after 1 January the hedged cash flows based on the RFR affect profit or loss.
2021
For the IAS 39 assessment of retrospective hedge effectiveness,
Key requirements on transition to an RFR, entities may elect on a hedge-by-hedge
basis, to reset the cumulative fair value changes to zero. This
In August 2020, the IASB published Interest Rate Benchmark
relief applies when the exception to the retrospective assessment
Reform – Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4
ends.
and IFRS 16. With publication of the phase two amendments, the
IASB has completed its work in response to IBOR reform. The amendments provide relief for items within a designated
group of items (such as those forming part of a macro cash flow
The amendments provide temporary reliefs which address the hedging strategy) that are amended for modifications directly
financial reporting effects when an interbank offered rate (IBOR) required by IBOR reform. The reliefs allow the hedging strategy
is replaced with an alternative nearly risk-free interest rate (RFR). to remain and not be discontinued. As items within the hedged
group transition at different times from IBORs to RFRs, they will
Practical expedient for changes in the basis for determining the be transferred to sub-groups of instruments that reference RFRs
contractual cash flows as a result of IBOR reform as the hedged risk.
The amendments include a practical expedient to require As instruments transition to RFRs, a hedging relationship may
contractual changes, or changes to cash flows that are directly need to be modified more than once. The phase two reliefs apply
required by the reform, to be treated as changes to a floating each time a hedging relationship is modified as a direct result of
interest rate, equivalent to a movement in a market rate of IBOR reform. The phase two reliefs cease to apply once all
interest. Inherent in allowing the use of this practical expedient is changes have been made to financial instruments and hedging
the requirement that the transition from an IBOR benchmark rate relationships, as required by IBOR reform.
to an RFR takes place on an economically equivalent basis with
no value transfer having occurred. Separately identifiable risk components
The amendments provide temporary relief to entities from having
Any other changes made at the same time, such as a change in
to meet the separately identifiable requirement when an RFR
the credit spread or maturity date, are assessed. If they are
instrument is designated as a hedge of a risk component. The
substantial, the instrument is derecognised. If they are not
relief allows entities upon designation of the hedge, to assume
substantial, the updated effective interest rate (EIR) is used to
that the separately identifiable requirement is met, provided the
recalculate the carrying amount of the financial instrument, with
entity reasonably expects the RFR risk component to become
any modification gain or loss recognised in profit or loss.
separately identifiable within the next 24 months.
The practical expedient is also required for entities applying
Additional disclosures
IFRS 4 that are using the exemption from IFRS 9 (and, therefore,
apply IAS 39 Financial Instruments: Recognition and IFRS 7 Financial Instruments: Disclosures includes the following:
Measurement) and for IFRS 16 Leases, to lease modifications • How the entity is managing the transition to RFRs, its
required by IBOR reform. progress and the risks to which it is exposed arising
from financial instruments due to IBOR reform
Relief from discontinuing hedging relationships
• Disaggregated by each significant IBOR benchmark,
The amendments permit changes required by IBOR reform to be quantitative information about financial instruments that
made to hedge designations and hedge documentation without have yet to transition to RFRs
the hedging relationship being discontinued. Permitted changes
• If IBOR reform has given rise to changes in the entity’s
include redefining the hedged risk to reference an RFR and
risk management strategy, a description of these changes
redefining the description of the hedging instruments and/or the
hedged items to reflect the RFR. Entities are allowed until the end
Transition
of the reporting period, during which a modification required by
IBOR reform is made, to complete the changes. The amendments are mandatory, with earlier application
permitted. Hedging relationships must be reinstated if the
Any gains or losses that could arise on transition are dealt hedging relationship was discontinued solely due to changes
with through the normal requirements of IFRS 9 and IAS 39 required by IBOR reform and it would not have been
to measure and recognise hedge ineffectiveness. discontinued if the phase two amendments had been applied
at that time. While application is retrospective, an entity is not
required to restate prior periods.

7 IFRS Update of standards and interpretations in issue at 31 December 2021

Other EY publications
Applying IFRS: IBOR Reform (Updated December 2021)
EYG No. 010781-21Gbl

Good Bank (International) Limited (December 2021)

EYG No. 010822-21Gbl.

IFRS Developments Issue 174: IASB completes its IBOR reform

programme (September 2020) EYG No. 006164-20Gbl

IFRS Developments Issue 152: IBOR reform: publication of the

phase one amendments and commencement of phase two
(September 2019) EYG No. 004361-19Gbl

EY has also published a series of videos on the accounting

impacts of the IBOR reform which is available on
www.ey.com/ifrs and the EY media platform on
ey.mediaplatform.com:

• ‘Global IFRS video: Applying IFRS - IBOR reform - Year-end

considerations, December 2021’
• ‘Global IFRS video: Applying the IBOR reform amendments
in practice, November 2020’
• ‘Global IFRS video: IBOR reform – IASB publishes final
phase two amendments, September 2020’

IFRS Update of standards and interpretations in issue at 31 December 2021 8

Covid-19-Related Rent Concessions beyond Impact
30 June 2021 – Amendments to IFRS 16 The amendment to IFRS 16 will provide relief to lessees for
Effective for annual periods beginning on or after 1 April 2021 accounting for rent concessions from lessors specifically arising
from the covid-19 pandemic. While lessees that elect to apply the
Key requirements practical expedient do not need to assess whether a concession
constitutes a modification, lessees still need to evaluate the
In March 2021, the Board amended the conditions of the
appropriate accounting for each concession as the terms of the
practical expedient in IFRS 16 that provides relief to lessees from
concession granted may vary.
applying the IFRS 16 guidance on lease modifications to rent
concessions arising as a direct consequence of the covid-19
Other EY publications
pandemic.
Applying IFRS: Accounting for covid-19 related rent concessions
As a practical expedient, a lessee may elect not to assess (Updated April 2021) EYG No. 003315-21Gbl
whether a covid-19 related rent concession from a lessor is a
Applying IFRS: IFRS accounting considerations of the Coronavirus
lease modification.
pandemic (Updated April 2021) EYG No. 03649-21Gbl
A lessee that makes this election accounts for any change in
lease payments resulting from the covid-19 related rent
IFRS Developments Issue 189: IASB extends relief for COVID-19
concession the same way it would account for the change under
related rent concessions (April 2021) EYG No. 002950-21Gbl
IFRS 16, if the change were not a lease modification.

Following the amendment, the practical expedient now applies to

rent concessions for which any reduction in lease payments
affects only payments originally due on or before 30 June 2022,
provided the other conditions for applying the practical expedient
are met.

Transition
Lessees will apply the amendment retrospectively, recognising
the cumulative effect of initially applying it as an adjustment to
the opening balance of retained earnings (or other component of
equity, as appropriate) at the beginning of the annual reporting
period in which they first apply the amendment. In the reporting
period in which a lessee first applies the 2021 amendment, the
lessee will not be required to disclose the information required by
paragraph 28(f) of IAS 8.

In accordance with paragraph 2 of IFRS 16, a lessee is required

to apply the relief consistently to eligible contracts with similar
characteristics and in similar circumstances, irrespective of
whether the contract became eligible for the practical expedient
before or after the amendment.

9 IFRS Update of standards and interpretations in issue at 31 December 2021

Reference to the Conceptual Framework – Property, Plant and Equipment: Proceeds before
Amendments to IFRS 3 Intended Use – Amendments to IAS 16
Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January
2022 2022

Key requirements Key requirements

In May 2020, the IASB issued Amendments to IFRS 3 Business The amendment prohibits entities from deducting from the cost
Combinations - Reference to the Conceptual Framework. The of an item of property, plant and equipment (PP&E), any
amendments are intended to replace a reference to a previous proceeds of the sale of items produced while bringing that asset
version of the IASB’s Conceptual Framework (the 1989 to the location and condition necessary for it to be capable of
Framework) with a reference to the current version issued in operating in the manner intended by management. Instead, an
March 2018 (the Conceptual Framework) without significantly entity recognises the proceeds from selling such items, and the
changing its requirements. costs of producing those items, in profit or loss.

The amendments add an exception to the recognition principle of Transition

IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses The amendment must be applied retrospectively only to items of
arising for liabilities and contingent liabilities that would be within PP&E made available for use on or after the beginning of the
the scope of IAS 37 Provisions, Contingent Liabilities and earliest period presented when the entity first applies the
Contingent Assets or IFRIC 21 Levies, if incurred separately. The amendment.
exception requires entities to apply the criteria in IAS 37 or
IFRIC 21, respectively, instead of the Conceptual Framework, to There is no transition relief for first-time adopters.
determine whether a present obligation exists at the acquisition
date.

At the same time, the amendments add a new paragraph to

IFRS 3 to clarify that contingent assets do not qualify for
recognition at the acquisition date.

Transition
The amendments must be applied prospectively. Earlier
application is permitted if, at the same time or earlier, an entity
also applies all of the amendments contained in the Amendments
to References to the Conceptual Framework in IFRS Standards
(March 2018).

Impact
The amendments are intended to update a reference to
the Conceptual Framework without significantly changing
requirements of IFRS 3. The amendments will promote
consistency in financial reporting and avoid potential confusion
from having more than one version of the Conceptual Framework
in use.

Other EY publications
IFRS Developments Issue 169: Amendments to IFRS 3 –
Reference to the Conceptual Framework (May 2020) EYG No.
003151-20Gbl

IFRS Update of standards and interpretations in issue at 31 December 2021 10

Onerous Contracts – Costs of Fulfilling a Contract – Sale or Contribution of Assets between an Investor
Amendments to IAS 37 and its Associate or Joint Venture – Amendments
Effective for annual periods beginning on or after 1 January to IFRS 10 and IAS 28
2022 In December 2015, the IASB decided to defer the effective
date of the amendments until such time as it has finalised any
Key requirements amendments that result from its research project on the equity
In May 2020, the IASB issued amendments to IAS 37 Provisions, method. Early application of the amendments is still permitted.
Contingent Liabilities and Contingent Assets to specify which
costs an entity needs to include when assessing whether a Key requirements
contract is onerous or loss-making. The amendments address the conflict between IFRS 10
Consolidated Financial Statements and IAS 28 Investments in
The amendments apply a ‘directly related cost approach’. Associates and Joint Ventures in dealing with the loss of control
The costs that relate directly to a contract to provide goods or of a subsidiary that is sold or contributed to an associate or joint
services include both incremental costs (e.g., the costs of direct venture.
labour and materials) and an allocation of costs directly related
to contract activities (e.g., depreciation of equipment used to The amendments clarify that a full gain or loss is recognised
fulfil the contract as well as costs of contract management and when a transfer to an associate or joint venture involves a
supervision). General and administrative costs do not relate business as defined in IFRS 3. Any gain or loss resulting from the
directly to a contract and are excluded unless they are explicitly sale or contribution of assets that does not constitute a business,
chargeable to the counterparty under the contract. however, is recognised only to the extent of unrelated investors’
interests in the associate or joint venture.
Transition
The amendments must be applied prospectively to contracts for Transition
which an entity has not yet fulfilled all of its obligations at the The amendments must be applied prospectively. Early application
beginning of the annual reporting period in which it first applies is permitted and must be disclosed.
the amendments (the date of initial application). Earlier
application is permitted and must be disclosed. Impact
The amendments are intended to eliminate diversity in practice
Impact
and give preparers a consistent set of principles to apply for
The amendments are intended to provide clarity and help ensure such transactions. However, the application of the definition of
consistent application of the standard. Entities that previously a business is judgemental and entities need to consider the
applied the incremental cost approach will see provisions definition carefully in such transactions.
increase to reflect the inclusion of costs related directly to
contract activities, whilst entities that previously recognised
contract loss provisions using the guidance from the former
standard, IAS 11 Construction Contracts, will be required
to exclude the allocation of indirect overheads from their
provisions. Judgement will be required in determining which
costs are ‘directly related to contract activities’, but we believe
that guidance in IFRS 15 Revenue from Contracts with Customers
will be relevant.

11 IFRS Update of standards and interpretations in issue at 31 December 2021

Classification of Liabilities as Current or Non- considered settlement for the purpose of classification of
current - Amendments to IAS 1 liabilities as current or non-current, with one exception.

Effective for annual periods beginning on or after 1 January In cases where a conversion option is classified as a liability or
2023 part of a liability, the transfer of equity instruments would
constitute settlement of the liability for the purpose of
Key requirements classifying it as current or non-current. Only if the conversion
option itself is classified as an equity instrument would
In January 2020, the Board issued amendments to paragraphs
settlement by way of own equity instruments be disregarded
69 to 76 of IAS 1 Presentation of Financial Statements to
when determining whether the liability is current or non-
specify the requirements for classifying liabilities as current
current.
or non-current.
Unchanged from the current standard, a rollover of a borrowing
The amendments clarify: is considered the extension of an existing liability and is
therefore not considered to represent ‘settlement’.
• What is meant by a right to defer settlement
Transition and impact
• That a right to defer must exist at the end of the reporting
period Many entities will find themselves already in compliance with
the amendments. However, entities need to consider whether
• That classification is unaffected by the likelihood that an some of the amendments may impact their current practice.
entity will exercise its deferral right Entities need to carefully consider whether there are any
• That only if an embedded derivative in a convertible liability aspects of the amendments that suggest that terms of their
is itself an equity instrument, would the terms of a liability existing loan agreements should be renegotiated. In this
not impact its classification context, it is important to highlight that the amendments
must be applied retrospectively.
Right to defer settlement Proposed amendments
The Board decided that if an entity’s right to defer settlement of In November 2021, the Board published an exposure draft in
a liability is subject to the entity complying with specified which it proposed that if a right to defer settlement for at least
conditions, the entity has a right to defer settlement of the twelve months is subject to an entity complying with conditions
liability at the end of the reporting period if it complies with after the reporting date, those conditions do not affect whether
those conditions at that date. the right to defer settlement exists at the reporting date for
the purpose of classifying a liability as current or non-current.
Existence at the end of the reporting period Additional presentation and disclosure requirements would be
The amendments also clarify that the requirement for the right applicable in such circumstances, including presenting non-
to exist at the end of the reporting period applies regardless of current liabilities that are subject to covenants to be complied
whether the lender tests for compliance at that date or at a with within twelve months after the reporting period, separately
later date. in the statement of financial position.
Furthermore, the Board proposed to defer the effective date to
Management expectations no earlier than 1 January 2024 (from 1 January 2023).
IAS 1.75A has been added to clarify that the ‘classification of a
Comments are due to be received by the Board by 21 March
liability is unaffected by the likelihood that the entity will
2022.
exercise its right to defer settlement of the liability for at least
twelve months after the reporting period’. That is, Other EY publications
management’s intention to settle in the short run does not IFRS Developments Issue 198: Classification of non-current
impact the classification. This applies even if settlement has liabilities with covenants – proposed amendments (November
occurred when the financial statements are authorised for 2021) EYG No. 010247-21Gbl
issuance.
IFRS Developments Issue 159: Amendments to classification of
liabilities as current or non-current (Updated July 2020)
Meaning of the term ‘settlement’
EYG No. 000391-20Gbl
The Board added two new paragraphs (paragraphs 76A and
76B) to IAS 1 to clarify what is meant by ‘settlement’ of a
liability. The Board concluded that it was important to link the
settlement of the liability with the outflow of resources of the
entity.
Settlement by way of an entity’s own equity instruments is

IFRS Update of standards and interpretations in issue at 31 December 2021 12

Disclosure of Accounting Policies - Amendments to Transition
IAS 1 and IFRS Practice Statement 2 Earlier application of the amendments to IAS 1 is permitted as
Effective for annual periods beginning on or after 1 January long as this fact is disclosed.
2023
Since the amendments to the PS provide non-mandatory
Key requirements guidance on the application of the definition of material to
accounting policy information, the Board concluded that
In February 2021, the Board issued amendments to IAS 1 and
transition requirements and an effective date for these
IFRS Practice Statement 2 Making Materiality Judgements (the
amendments were not necessary.
PS), in which it provides guidance and examples to help entities
apply materiality judgements to accounting policy disclosures.
Impact

The amendments aim to help entities provide accounting policy The amendments may impact the accounting policy disclosures
disclosures that are more useful by: of entities. Determining whether accounting policies are
material or not requires use of judgement. Therefore, entities
• Replacing the requirement for entities to disclose their are encouraged to revisit their accounting policy information
‘significant’ accounting policies with a requirement to disclosures to ensure consistency with the amended standard.
disclose their ‘material’ accounting policies
Entities should carefully consider whether ’standardised
And information, or information that only duplicates or summarises
the requirements of the IFRSs’ is material information and, if
• Adding guidance on how entities apply the concept of not, whether it should be removed from the accounting policy
materiality in making decisions about accounting policy disclosures to enhance the usefulness of the financial
disclosures statements.
Replacement of the term ‘significant’ with ‘material’
Other EY publications
In the absence of a definition of the term ‘significant’ in IFRS, the
Board decided to replace it with ‘material’ in the context of IFRS Developments Issue 187: The Disclosure Initiative - IASB
disclosing accounting policy information. ‘Material’ is a defined amends the accounting policy requirements (February 2021)
term in IFRS and is widely understood by the users of financial EYG No. 001327-21Gbl
statements, according to the Board.

In assessing the materiality of accounting policy information,

entities need to consider both the size of the transactions, other
events or conditions and the nature of them.

Examples of circumstances in which an entity is likely to consider

accounting policy information to be material have been added.

Disclosure of standardised information

Although standardised information is less useful to users than
entity-specific accounting policy information, the Board agreed
that, in some circumstances, standardised accounting policy
information may be needed for users to understand other
material information in the financial statements. In those
situations, standardised accounting policy information is
material, and should be disclosed.

The amendments to the PS also provide examples of situations

when generic or standardised information summarising or
duplicating the requirements of IFRS may be considered material
accounting policy information.

13 IFRS Update of standards and interpretations in issue at 31 December 2021

Definition of Accounting Estimates - Amendments Deferred Tax related to Assets and Liabilities arising
to IAS 8 from a Single Transaction - Amendments to IAS 12
Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January
2023 2023

Key requirements Key requirements

In February 2021, the Board issued amendments to IAS 8, in In May 2021, the Board issued amendments to IAS 12, which
which it introduces a new definition of ‘accounting estimates’. narrow the scope of the initial recognition exception under
IAS 12, so that it no longer applies to transactions that give rise
The amendments clarify the distinction between changes in to equal taxable and deductible temporary differences.
accounting estimates and changes in accounting policies and
the correction of errors. Also, they clarify how entities use Determining the tax base of assets and liabilities
measurement techniques and inputs to develop accounting The amendments clarify that where payments that settle
estimates. a liability are deductible for tax purposes, it is a matter of
judgement (having considered the applicable tax law) whether
Changes in accounting estimates such deductions are attributable for tax purposes to the liability
The amended standard clarifies that the effects on an accounting recognised in the financial statements (and interest expense)
estimate of a change in an input or a change in a measurement or to the related asset component (and interest expense). This
technique are changes in accounting estimates if they do not judgement is important in determining whether any temporary
result from the correction of prior period errors. differences exist on initial recognition of the asset and liability.

The previous definition of a change in accounting estimate Changes to the initial recognition exception
specified that changes in accounting estimates may result from Under the amendments, the initial recognition exception does
new information or new developments. Therefore, such changes not apply to transactions that, on initial recognition, give rise
are not corrections of errors. This aspect of the definition was to equal taxable and deductible temporary differences. It only
retained by the Board. applies if the recognition of a lease asset and lease liability
(or decommissioning liability and decommissioning asset
Illustrative examples component) give rise to taxable and deductible temporary
The amendments include two illustrative examples to help differences that are not equal.
stakeholders understand how to apply the new definition of
accounting estimates. Nevertheless, it is possible that the resulting deferred tax
assets and liabilities are not equal (e.g., if the entity is unable
Transition to benefit from the tax deductions or if different tax rates apply
The amendments apply to changes in accounting policies and to the taxable and deductible temporary differences). In such
changes in accounting estimates that occur on or after the start cases, which the Board expects to occur infrequently, an entity
of the effective date. Earlier application is permitted. would need to account for the difference between the deferred
tax asset and liability in profit or loss.
Impact
Transition
The amendments are intended to provide preparers of financial
statements with greater clarity as to the definition of accounting An entity should apply the amendments to transactions that
estimates, particularly in terms of the difference between occur on or after the beginning of the earliest comparative
accounting estimates and accounting policies. Although the period presented. In addition, at the beginning of the earliest
amendments are not expected to have a material impact on comparative period presented, it should also recognise a
entities’ financial statements, they should provide helpful deferred tax asset (provided that sufficient taxable profit is
guidance for entities in determining whether changes are to be available) and a deferred tax liability for all deductible and
treated as changes in estimates, changes in policies, or errors. taxable temporary differences associated with leases and
decommissioning obligations.
Other EY publications Other EY publications
IFRS Developments Issue 187: The IASB defines accounting IFRS Developments Issue 191: IASB clarifies deferred tax
estimates (February 2021) EYG No. 001259-21Gbl accounting for leases and decommissioning obligations (May
2021) EYG No. 004619-21Gbl

IFRS Update of standards and interpretations in issue at 31 December 2021 14

Improvements to International Financial Reporting Standards
Key requirements
The IASB’s annual improvements process deals with non-urgent, but necessary, clarifications and amendments to IFRS.

2018-2020 cycle (issued in May 2020)

The following is a summary of the amendments from the 2018-2020 annual improvements cycle:

IFRS 1 First-time Adoption of Subsidiary as a first-time adopter

International Financial Reporting
• The amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to
Standards
measure cumulative translation differences using the amounts reported in the parent’s
consolidated financial statements, based on the parent’s date of transition to IFRS, if no
adjustments were made for consolidation procedures and for the effects of the business
combination in which the parent acquired the subsidiary. This amendment is also applied
to an associate or joint venture that elects to apply paragraph D16(a) of IFRS 1.
• An entity applies the amendment for annual reporting periods beginning on or after
1 January 2022. Earlier application is permitted.

IFRS 9 Financial Instruments Fees in the ’10 per cent’ test for derecognition of financial liabilities
• The amendment clarifies the fees that an entity includes when assessing whether the
terms of a new or modified financial liability are substantially different from the terms of
the original financial liability. These fees include only those paid or received between the
borrower and the lender, including fees paid or received by either the borrower or lender
on the other’s behalf. There is no similar amendment proposed for IAS 39.
• An entity applies the amendment to financial liabilities that are modified or exchanged on
or after the beginning of the annual reporting period in which the entity first applies the
amendment.
• An entity applies the amendment for annual reporting periods beginning on or after
1 January 2022. Earlier application is permitted.

Illustrative Examples Lease incentives

accompanying
• The amendment removes the illustration of payments from the lessor relating to leasehold
IFRS 16 Leases
improvements in Illustrative Example 13 accompanying IFRS 16. This removes potential
confusion regarding the treatment of lease incentives when applying IFRS 16.

IAS 41 Agriculture Taxation in fair value measurements

• The amendment removes the requirement in paragraph 22 of IAS 41 that entities exclude
cash flows for taxation when measuring the fair value of assets within the scope of IAS 41.
• An entity applies the amendment to fair value measurements on or after the beginning of
the first annual reporting period beginning on or after 1 January 2022. Earlier application is
permitted.

15 IFRS Update of standards and interpretations in issue at 31 December 2021

 Section 2: Items not taken onto the IFRS
Interpretations Committee’s agenda in Q4 2021

Certain items deliberated by the IFRS IC are published within the ‘Interpretations Committee agenda decisions’ section of the IASB’s
IFRIC Update. Agenda decisions are issues that the IFRS IC decides not to add to its agenda and include the reasons for not doing so.
For some of these items, the IFRS IC includes further information and explanatory material about how the standards should be applied.
This guidance does not constitute an interpretation, but rather, provides additional information on the issues raised and the IFRS IC’s
views on how the standards and current interpretations are to be applied. Before an agenda decision is published, the Board is asked
whether it objects to the agenda decision. If four or more Board members object, the agenda decision will not be published and the
Board decides how to proceed.

Whilst agenda decisions (including any explanatory material contained within them) do not add to or change requirements in IFRS
standards, the explanatory material derives its authority from IFRS standards. Accordingly, an entity is required to apply IFRS
standards, reflecting the explanatory material in an applicable agenda decision.

The table below summarises the topics that the IFRS IC decided not to take onto its agenda for the period from 1 October 2021 (since
the previous edition of IFRS Update) to 31 December 2021. For agenda decisions published before 1 October 2021, please refer to
previous editions of IFRS Update. All items considered by the IFRS IC during its meetings, as well as the full text of its conclusions, can
be found in the IFRIC Update on the IASB’s website.5

According to the IFRS IC, ’the process for publishing an agenda decision might often result in explanatory material that provides new
information that was not otherwise available and could not otherwise reasonably have been expected to be obtained. Because of this,
an entity might determine that it needs to change an accounting policy as a result of an agenda decision. The Board expects that an
entity would be entitled to sufficient time to make that determination and implement any change (for example, an entity may need to
obtain new information or adapt its systems to implement a change).’

Final date considered Issue Summary of reasons given for not adding the issue to the IFRS IC’s agenda

October 2021 Non-refundable Value The IFRS IC received a request about how a lessee accounts for any non-
Added Tax on Lease refundable value added tax (VAT) charged on lease payments. In the fact pattern
Payments (IFRS 16 described in the request:
Leases) a. the lessee operates in a jurisdiction in which VAT is charged on goods and
services. A seller includes VAT in an invoice for payment issued to a
purchaser. In the case of leases, VAT is charged when an invoice for payment
is issued by a lessor to a lessee.
b. the applicable legislation:
i. requires a seller to collect VAT and remit it to the government; and
ii. generally allows a purchaser to recover from the government VAT
charged on payments for goods or services, including leases.
c. because of the nature of its operations, the lessee can recover only a portion
of the VAT charged on purchased goods or services. This includes VAT
charged on payments it makes for leases. Consequently, a portion of the VAT
the lessee pays is non-refundable.
d. lease agreements require the lessee to make payments to the lessor that
include amounts related to VAT charged in accordance with the applicable
legislation.
The request asked whether, in applying IFRS 16, the lessee includes non-
refundable VAT as part of the lease payments for a lease.
Outreach conducted by the IFRS IC and comment letters on the IFRS IC’s tentative
agenda decision provided limited evidence:
a. that non-refundable VAT on lease payments is material to affected lessees;
and
b. of diversity in the way lessees in similar circumstances account for non-
refundable VAT on lease payments.
The IFRS IC has therefore not received evidence that the matter has widespread
effect and has, or is expected to have, a material effect on those affected.

5
The IFRIC Update is available at http://www.ifrs.org/news-and-events/updates/ifric-updates/

IFRS Update of standards and interpretations in issue at 31 December 2021 16

 Final date considered Issue Summary of reasons given for not adding the issue to the IFRS IC’s agenda

October 2021 Accounting for The IFRS IC received a request about the application of IAS 32 in relation to the
Warrants that are reclassification of warrants. Specifically, the request described a warrant that
Classified as Financial provides the holder with the right to buy a fixed number of equity instruments of
Liabilities on Initial the issuer of the warrant for an exercise price that will be fixed at a future date.
At initial recognition, because of the variability in the exercise price, the issuer
Recognition (IAS 32
in applying paragraph 16 of IAS 32 classifies these instruments as financial
Financial Instruments:
liabilities. This is because for a derivative financial instrument to be classified
Presentation) as equity, it must be settled by the issuer exchanging a fixed amount of cash or
another financial asset for a fixed number of its own equity instruments (‘fixed-
for-fixed condition’). The request asked whether the issuer reclassifies the
warrant as an equity instrument following the fixing of the warrant’s exercise
price after initial recognition as specified in the contract, given that the fixed-for-
fixed condition would at that stage be met.
The IFRS IC observed that IAS 32 contains no general requirements for
reclassifying financial liabilities and equity instruments after initial recognition
when the instrument’s contractual terms are unchanged. The IFRS IC
acknowledged that similar questions about reclassification arise in other
circumstances. Reclassification by the issuer has been identified as one of the
practice issues the Board will consider addressing in its Financial Instruments with
Characteristics of Equity (FICE) project. The IFRS IC concluded that the matter
described in the request is, in isolation, too narrow for the Board or the IFRS IC to
address in a cost-effective manner. Instead, the Board should consider the matter
as part of its broader discussions on the FICE project.

December 2021 Economic Benefits The IFRS IC received a request about whether, applying paragraph B9(a) of
from Use of a IFRS 16, an electricity retailer (retailer) has the right to obtain substantially all the
Windfarm (IFRS 16 economic benefits from use of a windfarm throughout the term of an agreement
Leases) with a windfarm generator (supplier). In the fact pattern described in the request:
a. The retailer and supplier are registered participants in an electricity
market, in which customers and suppliers are unable to enter into
contracts directly with each other for the purchase and sale of
electricity. Instead, customers and suppliers make such purchases and
sales via the market’s electricity grid, the spot price for which is set by
the market operator. The retailer therefore purchases electricity from
the grid.
b. The retailer enters into an agreement with the supplier. The agreement:
i. swaps the spot price per megawatt of electricity the windfarm
supplies to the grid during the 20-year term of the agreement for
a fixed price per megawatt, and is settled net in cash. In effect, the
supplier receives a fixed price per megawatt for the electricity it
supplies to the grid during the period of the agreement and the
retailer settles with the supplier the difference between that fixed
price and the spot prices per megawatt for that volume of
electricity; and
ii. transfers to the retailer all renewable energy credits that accrue
from use of the windfarm.
Paragraph 9 of IFRS 16 states that ‘a contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration’. To control the use of an identified asset for
a period of time, the customer—throughout the period of use—must have both the
right to obtain substantially all the economic benefits from use of the identified
asset and the right to direct the use of that asset (paragraph B9 of IFRS 16).
Paragraph B21 of IFRS 16 specifies that ‘a customer can obtain economic
benefits from use of an asset directly or indirectly in many ways, such as by using,
holding or sub-leasing the asset. The economic benefits from use of an asset
include its primary output and by-products (including potential cash flows derived

17 IFRS Update of standards and interpretations in issue at 31 December 2021

Final date considered Issue Summary of reasons given for not adding the issue to the IFRS IC’s agenda

from these items), and other economic benefits from using the asset that could be
realised from a commercial transaction with a third party’.
The IFRS IC observed that, in the fact pattern described in the request, the
economic benefits from use of the windfarm include the electricity it produces (as
its primary output) and the renewable energy credits (as a by-product or other
economic benefit from use of the windfarm).
The agreement results in the retailer settling with the supplier the difference
between the fixed price and the spot prices per megawatt of electricity the
windfarm supplies to the grid throughout the 20-year term of the agreement.
That agreement, however, conveys neither the right nor the obligation for the
retailer to obtain any of the electricity the windfarm produces and supplies to the
grid. Although the retailer has the right to obtain the renewable energy credits
(which represent a portion of the economic benefits from use of the windfarm),
the retailer does not have the right to obtain substantially all the economic
benefits from use of the windfarm because it has no right to obtain any of the
electricity the windfarm produces throughout the period of the agreement.
The IFRS IC therefore concluded that, in the fact pattern described in the request,
the retailer does not have the right to obtain substantially all the economic
benefits from use of the windfarm. Consequently, the agreement does not contain
a lease.
The IFRS IC concluded that the principles and requirements in IFRS standards
provide an adequate basis for an entity that enters into an agreement as
described in the request to assess whether it has the right to obtain substantially
all the economic benefits from use of an identified asset.
In considering the request, the IFRS IC noted two other agenda decisions that
include explanatory material that may be relevant to the agreement described in
this request:
a. The Agenda Decision Meaning of delivery (IFRS 9 Financial Instruments)
(August 2005); and
b. For entities applying the hedge accounting requirements in IFRS 9 or
IAS 39 Financial Instruments: Recognition and Measurement, the Agenda
Decision Application of the Highly Probable Requirement when a Specific
Derivative is Designated as a Hedging Instrument (IFRS 9 and IAS 39)
(March 2019).

IFRS Update of standards and interpretations in issue at 31 December 2021 18

 Section 3: Active IASB projects

The ability to stay current on the IASB’s standard-setting activities is critical in a sea of change. The following pages summarise key
features of selected active projects of the IASB, along with potential implications of the proposed standards. The ‘Key projects’ are
those initiated with the objective of issuing new standards or that involve overarching considerations across a number of standards.
‘Other projects’ include proposed amendments with narrower applicability. Generally, only those projects that have reached the
exposure draft stage are included, but in selected cases, projects that have not yet reached the exposure draft stage are also
commented on.

Key projects
Better communication in financial reporting The Board has also decided to address research findings relating
to accounting policy disclosures (see page 13 above), the effect
Key developments to date of technology on financial reporting (as part of a broader project)
Background and the use of performance measures in financial statements as
The IASB is undertaking a broad-based initiative to explore how part of the primary financial statements project (see below). The
disclosures in IFRS financial reporting can be improved. The remaining topics in the DP will not be pursued for the time being.
Board has identified implementation and research projects that
will support better communication. Targeted standards-level review of disclosures
The IASB has added a separate project to develop guidance to
Disclosure initiative help improve the way the Board drafts disclosure requirements
In December 2014 and January 2016, amendments to IAS 1 in IFRS standards and perform a targeted standards-level review
and IAS 7 Statement of Cash Flows, respectively, were issued. of disclosure requirements. The draft guidance developed by
Furthermore, the IASB released IFRS Practice Statement 2 the Board relates to IAS 19 Employee Benefits and IFRS 13. The
Making Materiality Judgement (the PS) in September 2017 and Board published an exposure draft (ED) in March 2021. The ED
the Definition of Material (Amendments to IAS 1 and IAS 8) in ~is open for comment until 12 January 2022.
October 2018. In February 2021, the IASB issued amendments
to IAS 1 and the PS relating to disclosure of accounting policies. Subsidiaries without Public Accountability
In January 2020, the Board decided to move the Subsidiaries that
In addition, the Disclosure Initiative comprises the following are SMEs project from the research programme to the standard-
projects: setting programme. The Board is developing a reduced disclosure
IFRS standard that would apply on a voluntary basis to
Principles of disclosure subsidiaries that do not have public accountability. The Board
The objective of this project is to identify and better understand published an Exposure Draft (ED) in July 2021, which proposes
disclosure issues and either develop a set of new disclosure to allow eligible entities to elect to apply reduced disclosure
principles, or clarify the existing principles. requirements while still applying the recognition, measurement
and presentation requirements in IFRS Standards. The ED is open
The IASB published a Discussion Paper (DP) in March 2017 which for comment until 31 January 2022.
focused on the general disclosure requirements in IAS 1 and
the concepts that were being developed in the Conceptual Primary financial statements
Framework for Financial Reporting. The project aims to improve the structure and content of the
primary financial statements, with a focus on the statement(s)
After considering the feedback received on the DP, the IASB of financial performance. The project also includes requirements
decided that improving the way disclosure requirements are for management performance measures. The Board published
developed and drafted in the standards is the most effective way an exposure draft in December 2019 and the comment letter
to address the disclosure problem. Therefore, the Board decided period ended on 30 September 2020. Currently, the Board is
to prioritise a standard-level review of certain standards (see redeliberating the proposals in light of the comment letters
below). received.

19 IFRS Update of standards and interpretations in issue at 31 December 2021

Management commentary IFRS Developments Issue 158: The IASB proposes major changes
The Board is working on a project to update IFRS Practice to primary financial statements (December 2019)
Statement 1 Management Commentary. As part of this project, EYG No. 005876-19Gbl
the Board is considering how broader financial reporting could
complement and support IFRS financial statements. The Board IFRS Developments Issue 138: IASB issues amendments to the
published an exposure draft in May 2021. The comment period definition of material (November 2018) EYG No. 011935-18Gbl
closed on 23 November 2021.
The IASB will consider the feedback received in 2022.

IFRS taxonomy
The Better Communication in Financial Reporting initiative will
also consider the IFRS taxonomy. The Taxonomy enables tagging
of electronic financial information and allows computers to
identify, read and extract the information. This facilitates analysis
and comparison. Users may create tailored reports to meet their
information needs.

Impact
Several of the measures being considered by the Board are
behavioural in nature, and, thus, the impact may not be easily
predicted. However, the different projects have the potential to
provide clarifications and guidance that will help entities prepare
more tailored and effective primary financial statements and
disclosures.

Other EY publications
Applying IFRS: Alternative Performance Measures
(October 2018) EYG No. 011765-18Gbl

Applying IFRS: Enhancing communication effectiveness

(February 2017) EYG No. 000662-173Gbl

IFRS Developments Issue 194: Subsidiaries without public

accountability (August 2021)
EYG No. 006668-21Gbl

IFRS Developments Issue 192: IASB proposes a new framework

for management commentary (June 2021)
EYG No. 004815-21Gbl

IFRS Developments Issue 188: Disclosure Requirements in IFRS

Standards – A Pilot Approach (April 2021)
EYG No. 002697-21Gbl

IFRS Developments Issue 187: The Disclosure Initiative - IASB

amends the accounting policy requirements (February 2021)
EYG No. 001327-21Gbl

IFRS Developments Issue 161: Financing and investing entities:

proposed changes to primary financial statements
(February 2020) EYG No. 000962-20Gbl

IFRS Update of standards and interpretations in issue at 31 December 2021 20

Other projects
The IASB has a number of projects on its work plan to amend existing standards and interpretations for specific matters. The following is a brief summary of selected projects.
Refer to the IASB’s website for its work plan, which includes the current status of all projects.

Other projects Status/next steps

Financial Instruments – Accounting for Dynamic Risk Management • The stakeholder consultation on the core elements of the model
commenced in October 2020.
• The objective of this project is to address the specific accounting for risk management strategies relating to
open portfolios rather than individual contracts. The hedge accounting requirements in IAS 39 and IFRS 9 do not • The Board met to hear feedback on the core model and to discuss
provide specific solutions to the issues associated with macro hedging. next steps in April and May 2021.
• The IASB intends to develop the accounting model for dynamic risk management (DRM) using cash flow hedge • The IASB staff are currently investigating three main challenges
mechanics as a starting point in the following two phases: with the core model, namely:
 The first phase will focus on developing the ‘core areas’ that are central to the model that are comprised  The interaction between risk limits and the target profile
of: (i) target profile (liability side); (ii) asset profile; (iii) DRM derivative instruments; and (iv) performance
assessment and recycling, to shape the fundamentals of the DRM accounting model.  Designation of a proportion of pre-payable assets

 The second phase will address non-core areas that are extensions of concepts developed during  Recognition of changes in fair value of derivatives in other
the first phase. comprehensive income, to determine whether they can be
resolved
• The IASB has tentatively decided that key aspects of the core DRM model are:
• In November 2021, the Board tentatively decided to refine
 The model applies to the asset profile and target profile that meet the qualifying criteria on a portfolio (or the DRM model to closer align with entities’ risk management
percentage of portfolio) basis, consistently with the entity’s risk management policies and procedures practices. This will be achieved by revising the definition of the
 Core demand deposits could be included in the target profile, with certain conditions. Highly probable target profile as a range (risk limits), introducing a ‘risk mitigation
forecast transactions could also be eligible for inclusion in the asset profile and target profile (e.g., intention’ representing the extent of risk the entity intends to
refinancing) mitigate through the use of derivatives, revising the construction
of benchmark derivatives so that they represent this intention
 Designation and formal documentation will be required
and, prospective and retrospective assessments to ensure
 Changes to designated portfolios resulting in updates to the asset profile or target profile should not the DRM model mitigates risk (an entity cannot ‘over’ hedge its
represent a designation or a de-designation event, but, instead, a continuation of the existing relationship current net open risk position) and achieves its target profile
(the residual risk position is within the target profile).
 Entities should measure imperfect alignment on an on-going basis. Imperfect alignment may result in
volatility in profit or loss The next milestone is for the IASB to decide on the project direction,
 Application of the DRM accounting model should be optional. which is expected in Q2 2022.

21 IFRS Update of standards and interpretations in issue at 31 December 2021

Other projects Status/next steps

Availability of a Refund (Amendments to IFRIC 14) • An ED was issued in June 2015.

• The proposed amendments to IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding • In September 2017, the Board tentatively decided to perform
Requirements and their Interaction address whether the powers of other parties (e.g., trustees) affect further work to assess whether it can establish a more principles-
an entity’s right to a refund of a surplus in a defined benefit plan. based approach in IFRIC 14 for an entity to assess the availability
of a refund of a surplus.
• In February 2020, the Board was updated on the work performed
on the proposed amendments to IFRIC 14. The Board decided not
to finalise the proposed amendments and will consider the
project’s direction at a future meeting.

Financial Instruments with Characteristics of Equity (FICE) • In April 2020, the Board continued their discussions on how to
• The objective of the project is to improve the information that entities provide in their financial statements clarify the principles for classifying financial instruments settled
about financial instruments they have issued by: in an entity’s own equity instruments. The Board tentatively
decided that for a derivative on own equity to meet the fixed-for-
 Investigating challenges with the classification of financial instruments applying IAS 32 Financial fixed condition, the number of functional currency units to be
Instruments: Presentation exchanged with each underlying equity instrument must be fixed
And or only vary with:

 Considering how to address those challenges through clearer principles for classification and enhanced  Allowable preservation adjustments
requirements for presentation and disclosure Or
• The IASB published the Discussion Paper Financial Instruments with Characteristics of Equity in June 2018.  Allowable passage of time adjustments

• In September 2019, taking into account the feedback received on the Discussion Paper, the Board tentatively • The Board met in April and May 2021 to discuss the addition of
decided to explore making clarifying amendments to IAS 32 to address common accounting challenges that disclosure requirements to IFRS 7. The Board tentatively decided
arise in practice when applying IAS 32. to require disclosure of:

• In October 2019, the Board discussed the project plan for the FICE project. In particular, the Board discussed  The nature and priority of claims against an entity that arise
the practice issues that it could address in the scope of the project and an indicative project timeline outlining from financial instruments; and
the expected commencement of Board deliberations on each issue.  The terms and conditions for priority on liquidation for
particular financial instruments
• The Board is seeking to limit changes to classification outcomes to those in which sufficient evidence exists that
such a change would provide more useful information to users of financial statements. In addition, the Board • The finalised requirements will be incorporated into IFRS 7.
intends to further develop some of the presentation and disclosure proposals explored in the Discussion Paper. • In December 2021, the Board tentatively decided to propose
amendments to IAS 32:
 To clarify that financial instruments with contingent
settlement provisions may be compound instruments. The

IFRS Update of standards and interpretations in issue at 31 December 2021 22

 Other projects Status/next steps
liability component of such instruments, which would require
immediate settlement if a contingent event occurs, is
measured at the full amount of the conditional obligation.
Payments at the discretion of the issuer are recognised in
equity, even when the proceeds are initially allocated to
the liability component of a compound instrument
 To specify that ‘liquidation’ is the process of permanently
ceasing operations, and assessing whether a contract
term is ‘not genuine’ includes more than the probability of
occurrence
 To require classification as debt or equity by considering:
i) contractual terms that are in addition to, or more specific
than, those established by law; and ii) applicable laws that
prevent the enforceability of a right or obligation

Lease liability in a sale and leaseback • The Board issued an exposure draft of the proposed amendment
• The IASB intends to amend IFRS 16 to specify the method a seller-lessee uses in initially measuring in November 2020 which was open for comment until
the right-of-use asset and liability arising in a sale and leaseback transaction and how the seller-lessee 29 March 2021.
subsequently measures that liability. • In May 2021, the Board considered the feedback received on
• The proposed amendment applies to sale and leaseback transactions in which, applying paragraph 99 of the exposure draft.
IFRS 16, the transfer of the asset satisfies the requirements to be accounted for as a sale of the asset. • In December 2021, the Board tentatively decided to change
the proposals in the exposure draft, as follows:
 Not to prescribe how, at the commencement date, a seller-
lessee determines the proportion of the previous carrying
amount of the asset that relates to the right of use the
seller-lessee retains
 To require the seller-lessee to subsequently measure the
leaseback liability applying paragraphs 36–46 of IFRS 16
 To specify, for the purposes of applying paragraphs 36–46,
the term ‘lease payments’ may not be as defined in
Appendix A to IFRS 16. Instead, the seller-lessee would
apply the term ‘lease payments’ or ‘revised lease payments’
in such a manner that it does not recognise any amount of

23 IFRS Update of standards and interpretations in issue at 31 December 2021

Other projects Status/next steps

the gain or loss that relates to the right of use retained to

the extent that the right of use is retained

Lack of Exchangeability (Amendments to IAS 21) • The exposure draft was issued in April 2021, which was open
• The IASB intends to amend IAS 21 The Effects of Changes in Foreign Exchange Rates to address the spot for comment until 1 September 2021. The Board is expected to
exchange rate an entity uses when a currency lacks exchangeability. consider the feedback received on the exposure draft in Q1 2022.

• The proposed amendments would (a) define exchangeability and thus a lack of exchangeability; and
(b) specify how an entity determines the spot exchange rate when a currency lacks exchangeability.

Business Combinations: Disclosures, Goodwill and Impairment • The DP was issued in March 2020 and was open for comment
• Based on the feedback received during the Post-implementation Review of IFRS 3, the Board decided to begin until 31 December 2020. In June 2021, the Board tentatively
a research project to explore possible improvements to IFRS 3 and IAS 36 Impairment of Assets. decided to make no changes to the project’s scope. The Board
will continue its redeliberations at a future meeting. The Board
• In March 2020, the IASB published the Discussion Paper (DP) Business Combinations: Disclosures, Goodwill and expects to decide the direction of the project in Q2 2022.
Impairment. The Board’s preliminary views are that it:
 Should develop proposals to enhance the disclosure objectives and requirements in IFRS 3 to improve the
information provided to investors about an acquisition and its subsequent performance
 Cannot design a different impairment test for cash-generating units containing goodwill that is significantly
more effective than the impairment test in IAS 36 at recognising impairment losses on goodwill on a timely
basis and at a reasonable cost
 Should not reintroduce amortisation of goodwill
 Should develop a proposal to help investors better understand entities’ financial positions by requiring them
to present on their balance sheets the amount of total equity excluding goodwill
 Should develop proposals intended to reduce the cost and complexity of performing the impairment test by:
 Providing entities with relief from having to perform an annual quantitative impairment test for cash-
generating units containing goodwill if there is no indication that an impairment may have occurred
 Extending the same relief to entities for intangible assets with indefinite useful lives and intangible
assets not yet available for use
 Should develop proposals intended to reduce cost and complexity, and to provide more useful and
understandable information by simplifying the requirements for estimating value in use by:

IFRS Update of standards and interpretations in issue at 31 December 2021 24

 Other projects Status/next steps

 Removing the restriction on including cash flows from a future uncommitted restructuring or from
improving or enhancing an asset’s performance
 Permitting the use of post-tax cash flows and post-tax discount rates
• Should not change the range of identifiable intangible assets recognised separately from goodwill in
an acquisition

Business Combinations under Common Control • The DP was issued in November 2020. The comment period
• In November 2020, the IASB published the Discussion Paper (DP) Business Combinations under Common closed on 1 September 2021 and the IASB began considering
Control. The DP identifies two methods of accounting for business combinations under common control (BCUCC) the feedback received at its December 2021 meeting.
by a receiving entity. The key proposals are: • The IASB will continue to redeliberate the project proposals at
 That the acquisition method should, in principle, be applied to those BCUCC that affect non-controlling future meetings.
shareholders of the receiving entity and that a single book-value method should be applied to all other
BCUCC, subject to the following:
 The optional exemption from the acquisition method: a receiving entity should be permitted to use
a book-value method if it has informed all of its non-controlling shareholders that it proposes to use
this method, and they have not objected.
 The exception from the acquisition method: a receiving entity should be required to use a book-
value method if all of its non-controlling shareholders are the entity’s related parties as defined in
IAS 24 Related Party Disclosures.
 The acquisition method should be applied according to IFRS 3 but considering that the consideration may
not be at arm’s length and may lead to a distribution of or contribution to equity.
 A book-value method, measuring the assets and liabilities received using the transferred entity’s book
values, should be applied to all BCUCC that do not affect non-controlling shareholders.
When applying the book-value method, the receiving entity should measure consideration paid in assets at the receiving
entity’s book values of those assets at the combination date or if by assuming liabilities at the amount determined at the
combination date using the IFRS Standards applicable for initial recognition of a liability of that type.

Regulatory Assets and Regulatory Liabilities • The ED was issued in January 2021 and was open for comment
• In January 2021, the IASB published the Exposure Draft (ED) Regulatory Assets and Regulatory Liabilities. until 30 July 2021.
The ED sets out proposals for the recognition, measurement, presentation and disclosure of regulatory assets,
• In November 2021, the IASB completed its discussion of the
regulatory liabilities, regulatory income and regulatory expense. The key proposals are:
feedback received.

25 IFRS Update of standards and interpretations in issue at 31 December 2021

Other projects Status/next steps
 Regulatory assets and regulatory liabilities exist due to a regulatory agreement that determines the • In December 2021, the IASB agreed with the proposed plan for
regulated rate in such a way that some, or all, of the total allowed compensation for goods or services redeliberations.
supplied in one period is charged to customers in a different period.
 An entity recognises its regulatory assets and regulatory liabilities existing at the end of the reporting
period and its regulatory income and expense arising during the reporting period.
 If it is uncertain whether a regulatory asset or regulatory liability exists, an entity will recognise that
regulatory asset or regulatory liability if it is ‘more likely than not’ that it exists.
 An entity measures regulatory assets and regulatory liabilities at historical cost using estimates of future
cash flows by applying a cash-flow-based measurement technique.
 In predicting uncertainty, an entity can use either the ’most likely amount’ and ’expected value’ methods.
All regulatory income or regulatory expense should be presented as a separate line item immediately below revenue.

Supplier Finance Arrangements • The ED was issued in November 2021 and is open for comment
• In December 2020, the Board published the IFRS Interpretations Committee’s Agenda Decision Supply Chain until 28 March 2022.
Financing Arrangements – Reverse Factoring. Subsequently, the Board met in June 2021 and decided to add
a narrow-scope standard-setting project to its work plan, with the aim to develop disclosure requirements for
supplier finance arrangements. The Board decided to propose amending IAS 7 Statement of Cash Flows and
IFRS 7 Financial Instruments: Disclosures to that effect.
• In November 2021, the IASB published the Exposure Draft (ED) Supplier finance arrangements. The ED proposes
to introduce new disclosure requirements to enhance the transparency of supplier finance arrangements and
their effects on an entity’s’ liabilities and cash flows.

Request for Information, Post-implementation Review, IFRS 9 Financial Instruments Classification and Measurement • Comments are to be received by 28 January 2022. The Board will
• In September 2021, the Board published a Request for Information (RFI) for its Post Implementation Review consider the responses to the RFI and will present its findings in
(PIR) of the Classification and Measurement (C&M) requirements of IFRS 9. The RFI divides the PIR into six H2 2022.
broad topics on which the Board is seeking to understand the effects to date on investors, preparers and
auditors following the issuance and application of IFRS 9 C&M. The topics are, as follows:
 Business model for managing financial assets
 Contractual cash flow characteristics
 Equity instruments and other comprehensive income
 Financial liabilities and own credit
 Modifications to contractual cash flows

IFRS Update of standards and interpretations in issue at 31 December 2021 26

 Other projects Status/next steps
 Amortised cost and the effective interest method
 Transition
 Other matters
The IASB will undertake a post implementation review of the remaining two elements of IFRS 9, impairment and hedge
accounting, at a later stage.

27 IFRS Update of standards and interpretations in issue at 31 December 2021

The table below sets out the estimated timeline for the remaining projects on the IASB’s agenda as at the end of December 2021.

IASB projects Next milestone Expected date

Research projects

Extractive Activities Decide Project Direction H2 2022

Pension Benefits that Depend on Asset Returns Project Summary Q2 2022

Post-implementation Review of IFRS 10, IFRS 11 and Feedback Statement Q2 2022

IFRS 12

Equity Method Decide Project Direction March 2022

Standard-setting and related projects

Second Comprehensive Review of the IFRS for SMEs Exposure Draft

Standard

Maintenance projects

Provisions – Targeted Improvements Decide Project Direction

IFRS Update of standards and interpretations in issue at 31 December 2021 28

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