Trustees Concerned Over Long-Term Funding

The IFRS Foundation is concerned about its long-term ability to raise funds to govern its two international accounting and sustainability rulemaking boards, Trustee Chair Erkki Liikanen said. The foundation is open to suggestions for establishing a long-term funding process, one without conflicts of interest and ethical concerns, Liikanen told the IFRS Advisory Council on April 10. “It’s a real issue and these trustees and these boards will be faced with the issue for a long time,” he said. Funding has declined at the same time that the foundation’s task got broader, Liikanen said. “An organization can’t be run if it’s just funded three to five years, it must be longer term; to create this global funding base has not been easy.” India, for example, “is not funding us anymore, they stopped recently,” he said. “EU, always been key supporter for years, have reduced our funding also because they need to give support to EFRAG [European Financial Reporting Advisory Group], which we understand.” Liikanen’s remarks were part of an update about the foundation’s activities.

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New Disclosure Rules for Subsidiaries Without Public Accountability Coming

The IASB’s new disclosure standard for privately held subsidiaries will be issued “at the beginning of May,” Chair Andreas Barckow told the board’s advisers on April 10. The standard will be issued as International Financial Reporting Standard (IFRS 19), Subsidiaries without Public Accountability: Disclosures, to reduce the disclosure requirements for subsidiaries that are required to apply IFRS accounting standards for reporting to their parent company for group consolidation purposes. The main benefit of IFRS 19 is that it will remove the need for companies to run dual accounting systems or do complex reconciliations between two systems, an IASB staff member said during a meeting of the IFRS Advisory Council. Dual systems come about as “quite often a subsidiary faces local GAAP which is different from IFRS,” and therefore the reduction of disclosures is a secondary benefit, she said. IFRS 19 will use the same definition of public accountability as IFRS for SMEs and so won’t cover items like segment reporting and earnings per share. The standard will take effect on January 1, 2027.


Cash Flow Hedge Accounting Could Get Easier Under FASB Plan

FASB is in continued discussions to clarify six hedge accounting issues, with this current round focused on shared risk assessments in cash flow hedges. The discussions are aimed at developing a proposal for public comment. The project—in part—involves the redeliberation of Proposed Accounting Standards Update (ASU) 2019-790, Derivatives and Hedging (Topic 815) Codification Improvements to Hedge Accounting, which was issued in 2019. That proposal will not be finalized, but aspects will be included in the new proposal being drafted. Other issues being addressed stem from a hedge accounting research project, according to the discussions. From the 2019 proposal, the board affirmed expanding the population of hedged risks allowed to be combined in a portfolio of individual forecasted transactions in a cash flow hedge by removing the “same index” example from paragraph 815-2-22-23. The threshold terminology used for assessing risk exposure will be changed from “shared” to “similar,” as suggested by comment letters, the board decided. The “similar” risk assessment should be performed at hedge inception and on an ongoing basis, the board also affirmed. This would align with current practice. Discussions will continue at a future meeting.