Endorsement of May 2020 Amendments

Link to Adoption Statements and text of Amendments here.

The list of annual improvements and narrow-scope amendments projects below were issued by the IASB in May 2020.  The EU did not adopt these amendments before the UK left the EU at the end of the Transition Period on 31 December 2020.

Consequently, these amendments have been assessed and adopted by the UKEB.

Endorsement Criteria Assessment: Annual Improvements and Narrow-Scope Amendments (published in May 2020 with an effective date of 1 January 2022)

The UKEB secretariat has published a [draft] UK Endorsement Criteria Assessment below on a set of six Amendments to international accounting standards published by the International Accounting Standards Board (IASB) in May 2020, with an effective date of 1 January 2022 with earlier application permitted, (the ‘May 2020 Amendments’).

The May 2020 Amendments are comprised of three Annual Improvements amendments (from the IASB’s Annual Improvements to IFRS® Standards 2018–2020) and three Narrow-Scope amendments.

The UKEB secretariat welcomes stakeholders’ views on the potential UK adoption of the set of amendments covered in this assessment. These amendments are minor and/or narrow in scope.

The UKEB was not able to directly influence the development of the IASB’s proposals for these amendments as they were finalised and published before the creation of the UKEB. However, these amendments have been subject to public consultation and comments from UK stakeholders were fully considered by the IASB when finalising those amendments.

Annual Improvements to IFRS® Standards 2018–2020

Background

The IASB published Annual Improvements to IFRS® Standards 2018–2020 in May 2020, a collection of four different amendments to IFRS Standards. These amendments are effective for annual periods beginning on or after 1 January 2022, with early application permitted.

The amendments included in this publication are as follows:

• IFRS 1 First-time Adoption of International Financial Reporting Standards–Subsidiary as a first-time adopter. The amendment permits a subsidiary that applies the exemption in paragraph D16(a) of IFRS 1 to measure cumulative translation differences for all foreign operations at the carrying amount that would be included in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRS Standards.
• IFRS 9 Financial Instruments–Fees in the ‘10 per cent’ test for derecognition of financial liabilities. The amendment clarifies which fees an entity includes when it applies the ‘10 per cent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognise a financial liability. The borrower includes only fees paid or received between the borrower and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
• IFRS 16 Leases–Lease incentives. The amendment to Illustrative Example 13 accompanying IFRS 16 removes from the example the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.
• IAS 41 Agriculture–Taxation in fair value measurements. The amendment removes the requirement in paragraph 22 of IAS 41 to exclude cash flows for taxation when measuring the fair value of a biological asset using a present value technique. This is to ensure consistency with the requirements in IFRS 13 Fair Value Measurement.

Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)

Background

The amendments related to this project, Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) were published by the IASB in May 2020. These amendments are effective for annual reporting periods beginning on or after 1 January 2022, with early application permitted.

The amendments prohibit an entity from deducting from the cost of property, plant and equipment, any proceeds received from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items and related cost, in profit or loss.

Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

Background

The amendments related to this project Onerous Contracts—Cost of Fulfilling a Contract (Amendments to IAS 37) were published by the IASB in May 2020. These amendments are effective for annual periods beginning on or after 1 January 2022, with early application permitted.

Prior to these amendments, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, did not specify which costs to include in estimating the ‘cost of fulfilling’ a contract for the purpose of assessing whether that contract is onerous.

The amendments to IAS 37 specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. These costs can either be:

• incremental costs of fulfilling that contract; or 
• an allocation of other costs that relate directly to fulfilling contracts.

Reference to the Conceptual Framework (Amendments to IFRS 3)

Background

The amendments related to this project, Reference to the Conceptual Framework (Amendments to IFRS 3) were published by the IASB in May 2020. These amendments are effective for annual periods beginning on or after 1 January 2022, with early application permitted.

Originally, IFRS 3 Business Combinations required an entity to refer to an older version of the Conceptual Framework (that existed when IFRS 3 was developed) to determine what constitutes an asset or a liability. The purpose of this project was to update IFRS 3 to require an entity to refer instead to the Conceptual Framework issued in March 2018.

The amendments to IFRS 3 also added to IFRS 3 an exception to its requirement for an entity to refer to the Conceptual Framework. The exception specifies that, for some types of liabilities and contingent liabilities, an entity applying IFRS 3 should instead refer to IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies. This exception was added to avoid an unintended consequence of updating the reference to the latest Conceptual Framework.