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Year-end toolkit: Reporting under IFRS Accounting Standards · PwC's accounting podcast

0:00
SPEAKER_00: Thought leadership from PWC's National Office.
0:06
SPEAKER_02: Hello, and welcome to PWC's Accounting Podcast.
0:10
SPEAKER_02: I'm Heather Horn.
0:12
SPEAKER_02: If you've been listening this year, you'll know that last week we released our final episode in our year-in toolkit series.
0:19
SPEAKER_02: However, today we're back with a bonus episode for IFRS reporters.
0:23
SPEAKER_02: In this episode, we'll cover new IFRS accounting standards, IFRIC interpretations, and other topical issues impacting IFRS reporters for their year-in reporting.
0:37
SPEAKER_02: Our guest for today's episode is Gary Berkowitz, the leader of PwC's global corporate accounting topic team.
0:44
SPEAKER_02: Gary brings a wealth of financial accounting experience and contributes to the firm's global views on a variety of financial reporting matters.
0:52
SPEAKER_02: It was a busy year at the IASB, and Gary has valuable insights for companies to consider as they get ready to report for year end.
0:59
SPEAKER_02: It was great to speak with Gary on this topic while I was visiting our London office.
1:03
SPEAKER_02: So let's tune into our conversation now.
1:07
SPEAKER_02: Gary, so nice to have you back on the podcast.
1:09
SPEAKER_02: Thanks so much for joining me today.
1:10
SPEAKER_02: So this month has been all about a podcast series focused on year-end reminders to help companies with their year-end reporting.
1:17
SPEAKER_02: And so today we thought we'd have a bonus episode that's focusing in on companies that prepare financial statements under IFRS accounting standards.
1:25
SPEAKER_02: And that obviously could be people in the US or in other parts of the world.
1:29
SPEAKER_02: So in the discussion today, we're going to focus in on key year-end reminders and new requirements for IFRS preparers that you should keep top of mind as you're looking at your 2024 reporting.
1:39
SPEAKER_02: So, Gary, with all of that overview, can you give a few quick highlights of the things you think are important for us to hit today?
1:46
SPEAKER_01: Thanks, Heather High.
1:47
SPEAKER_01: And yeah, it's good to be back.
1:48
SPEAKER_01: So if I were to think about things, probably put them into two big buckets.
1:52
SPEAKER_01: Uh, because for those of your listeners who may have uh cast their minds back a whole year, um, I didn't want to sound like a broken record.
1:58
SPEAKER_01: So, you know, the first bucket would maybe be topical issues that are not necessarily new at the end of 2024, but they're continuation of the common ones you would hear at at year-end reminders.
2:08
SPEAKER_01: So we might spend a bit of time going over them and maybe just reminding folks what some of those are.
2:11
SPEAKER_01: And then new accounting requirements which have come out or come into effect in 2024.
2:15
SPEAKER_01: I'd put them into those two big buckets.
2:18
SPEAKER_02: All right.
2:18
SPEAKER_02: So maybe let's hit the new accounting requirements first, and then we'll do the sort of overview of the reminders.
2:24
SPEAKER_02: And maybe from an accounting requirements, I think we have sort of two sets of things we'll cover amendments that are coming into effect for 2024 year ends.
2:32
SPEAKER_02: But as well, I think we always have interesting things coming from the IFRIC.
2:36
SPEAKER_02: And in particular for this year end, we have something related to segment reporting, which may be of interest, particularly to dual reporters under US GAAP, given our new segment reporting requirements in the US.
2:46
SPEAKER_02: So what did we learn in this IFRIC decision?
2:50
SPEAKER_01: Yeah, so as you mentioned here, that this was one that related to segment reporting.
2:54
SPEAKER_01: And the the question that came in was just to say when we look at the words in um in IFRS 8, which is the IFRS requirement on segment reporting, there's a requirement there that says even if you know an item isn't specifically uh part of the COD and pack, but it's a material item of income or expense that's included in the segment measure, you know, you need to you need to provide it.
3:14
SPEAKER_01: And in the past, we um have interpreted that to mean the equivalent uh guidance that was in US GAAP, which is this is unusual or exceptional items.
3:21
SPEAKER_01: And the question was, is this limited just to unusual or exceptional items?
3:25
SPEAKER_01: And the the answer that came back was no.
3:28
SPEAKER_01: It's not just limited to unusual or exceptional items, which is actually a a surprise to us at least.
3:33
SPEAKER_01: And so what that means is um basically now entities, some entities may already be uh been complying with that and providing you know additional disclosures on material income and expenses that were included in the segment measure, in which case for them it wouldn't be a big deal.
3:46
SPEAKER_01: Um but I think the the the headline here is you probably make sense to have a look at um your segment reporting and what is in there in addition to the stuff that uh is typically mandatory or required to see if you've um got everything you should have.
3:59
SPEAKER_02: All right, definitely a good reminder.
4:01
SPEAKER_02: Is then from an effective date, is that effective right now, or how's that gonna work?
4:05
SPEAKER_01: Excellent question.
4:06
SPEAKER_01: Yeah, I probably should have mentioned that.
4:08
SPEAKER_01: So again, IFRIC agenda decisions don't have um effective dates, but there is a um an understanding that entities typically have a sufficient amount of time to implement any agenda decisions that come out.
4:18
SPEAKER_01: So this one is kind of like a how long is a piece of string?
4:20
SPEAKER_01: Because for some entities it'll be relatively easy to do this, but for others it might be a little bit harder, depending on how your reporting pack gets put together, how you think of your entity, what are the information you provided.
4:30
SPEAKER_01: So for some entities they might have this all wrapped up for their December year ends, but um, for others they might they might need a bit of time.
4:35
SPEAKER_01: And if they do, they should probably say that.
4:37
SPEAKER_02: Yeah.
4:37
SPEAKER_02: So then you would think in some cases, though, the companies may need to say for this year end that this is out there and they're going to need to apply it next year.
4:46
SPEAKER_01: Yeah, yeah.
4:47
SPEAKER_01: Probably a safer place to be.
4:49
SPEAKER_02: All right, that's good to know.
4:51
SPEAKER_02: So then, Gary, with that, I guess nothing else from the IFREC that we would really focus on.
4:56
SPEAKER_02: So then how about just from a broader uh amendments to standards or new standards?
5:01
SPEAKER_01: Yeah, so there's probably three worth mentioning, um, maybe some some in more detail than others.
5:06
SPEAKER_01: I guess the the first one would be um non-current liabilities with covenants, and this was an amendment to the IS one.
5:12
SPEAKER_01: And so this is really an issue around when you've got loans and they've got uh covenants or conditions related to them.
5:18
SPEAKER_01: How do you decide if they should be presented as current or non-current at your end?
5:21
SPEAKER_01: So have you breached covenants and does that change the presentation?
5:24
SPEAKER_01: And I think the key thing that changed here was um, and we think it well changed a couple of times, but the what's effective at the end of 2024 is I think it's actually quite an intuitive principle to apply, which just basically says at the reporting date, what are my rights and obligations at the reporting date?
5:38
SPEAKER_01: If I have an existing right at the reporting date that doesn't require me to repay within the next 12 months, I show this uh liability as non-current or this loan is non-current.
5:47
SPEAKER_01: So the example I have is even if you know two weeks after year end you're gonna do a covenant test and it is highly probable that you're gonna fail that covenant test, at the reporting date, you still have the right to defer for 12 months.
5:57
SPEAKER_01: So it's based on the existing rights at the reporting date.
6:00
SPEAKER_01: Now, clearly it comes along with additional disclosure.
6:02
SPEAKER_01: So again, you might have to disclose the significant covenants you have at your end.
6:06
SPEAKER_01: If there are risky ones that you think are going to be potentially breached or that you're worried about, you might have to provide disclosure on that.
6:11
SPEAKER_01: But in terms of the actual presentation of currents or non-currents, the the principle is based on the rights and obligations at the reporting date.
6:18
SPEAKER_02: So you mentioned this change a few times then.
6:21
SPEAKER_02: Sounds like maybe some debate over where this landed.
6:23
SPEAKER_01: Yeah, there was.
6:24
SPEAKER_01: It was how many hours have you got?
6:26
SPEAKER_01: I guess it started with IFRES wasn't clear because it used to say you need to have the right to the reporting tape to defer for 24 months and people or sorry, for 12 months.
6:34
SPEAKER_01: Yeah.
6:34
SPEAKER_01: And people are like, does that mean that it needs to be an unconditional right?
6:37
SPEAKER_01: Or it needs to be, and everyone was like, well, because sometimes I feel very comfortable I can defer, and other times it might be there might be a condition, and that condition might be outside of my control or what I do then.
6:46
SPEAKER_01: So they were trying to just clarify that uncertainty that existed.
6:49
SPEAKER_01: And their first go at it's the the board said, okay, it should be based on a hypothetical assessment that's done at your end.
6:54
SPEAKER_01: So look at what those terms are and see whether or not you would pass the covenant test if you did it hypothetically at your end.
7:00
SPEAKER_01: And people then said that actually is going to create a whole lot of problems because some covenants are designed to be cyclical.
7:06
SPEAKER_01: And so you might be like, obviously, I'm never going to pass now because it's you know, my revenue is only going to come in in Q3, which is the plan.
7:12
SPEAKER_01: And so I think they went back and then they revised, and that's what I'm saying.
7:15
SPEAKER_01: So we had a previous guidance which wasn't clear, board tried to clarify it, folks.
7:19
SPEAKER_01: Then said actually, this is going to probably make it worse.
7:21
SPEAKER_01: And so now we've got this final set of amendments which are workable and I think are an improvement.
7:25
SPEAKER_02: All right, and in effect for this current year end.
7:28
SPEAKER_02: All right, very important.
7:28
SPEAKER_02: Okay, what's next then?
7:30
SPEAKER_01: Yeah, so next is supplier finance arrangements.
7:32
SPEAKER_01: So we might have actually done a, I don't even done a separate podcast.
7:34
SPEAKER_01: This is everyone's been speaking about this.
7:36
SPEAKER_01: So obviously, alternative methods of financing, supplier financing, again, without going into massive amounts of detail here.
7:43
SPEAKER_01: This is where there's three parties.
7:45
SPEAKER_01: It's typically the entity that's buying stuff from a supplier, and there's typically a bank or a financier somewhere in the middle.
7:51
SPEAKER_01: And you, the three parties agree that there's ways in which either the supplier will get paid earlier than they otherwise would have, or you, as the entity buying, will get pay a bit later and the bank is in the middle doing all of the financing.
8:01
SPEAKER_01: And I think the issue we had here under IFRS is it wasn't always clear when these transactions were occurring, how they were occurring, and how they were affecting the liquidity and position of entities.
8:11
SPEAKER_01: And so I guess what the board did is they said, okay, if you've got one of these arrangements and they kind of defined it by this is what the the characteristics you might see if you have one of these, one of these arrangements, they didn't want to be too prescriptive.
8:22
SPEAKER_01: I think it comes along with some additional disclosure requirements to help folks understand what that means for the entity.
8:27
SPEAKER_01: Because I think, again, when things start going, um, I'll use the very technical term pear-shaped, um, you know, sometimes that liquidity disappears.
8:35
SPEAKER_01: The supplier or the bank says, actually, you know what, and and that can create massive liquidity issues for companies.
8:40
SPEAKER_01: And investors were saying that that potential risk was sometimes very, very opaque or difficult to see.
8:46
SPEAKER_01: And so the disclosures now say if you have one of these arrangements, what you need to do is provide quite a lot more disclosure on what are the major terms of these types of arrangements, um, why where are those liabilities that are subject to supplier financing sitting in your balance sheet?
8:58
SPEAKER_01: How many of them have already been paid by the bank, but you still have to pay the bank?
9:01
SPEAKER_01: And what are the key terms in terms of normally it would have taken me 30 days to pay, but as a result of the supplier financing, this group of liabilities is only going to be paid in 90.
9:09
SPEAKER_01: Um, and so it's mostly mostly disclosure to help avoid the um transparency issue.
9:15
SPEAKER_02: And Gary, from a reaction point of view, is this a case where most companies will have this information relatively readily available, or there's quite a lot of work in terms of gathering some of this and making sure you're prepared for the disclosures?
9:28
SPEAKER_01: So I think the majority of the, and I think we've been mentioning this the whole year.
9:30
SPEAKER_01: So I think folks have the board is very I was gonna say kind, very very considerate in that they said, you know, this was gonna be a thing where you weren't gonna have to uh apply in throughout the year uh throughout the UN interim.
9:41
SPEAKER_01: So this this year end will be the first time that it'll be mandatory to provide the disclosures, and that was to give folks a sufficient amount of time because I think by and large, most of the disclosures folks will be able to get them.
9:53
SPEAKER_01: They'll know that it changed our dates from 30 to 60 days.
9:56
SPEAKER_01: But the one that we did say would maybe require a bit more work on an entity's behalf would be the disclosure requirements around how much of the of the liabilities that are subject to this have already been paid to the supplier, but you now owe the bank the money.
10:08
SPEAKER_01: Because sometimes you as the entity might not be aware when the supplier's actually been paid.
10:12
SPEAKER_01: So sometimes it might require a bit of interaction and getting information between you and your financier.
10:17
SPEAKER_01: And so hopefully folks have had enough time now to get all the information and we'll see some better disclosure coming through.
10:22
SPEAKER_02: All right, interesting.
10:22
SPEAKER_02: And then I think there's one more you want to cover.
10:24
SPEAKER_01: Yeah, this is just a very quick one.
10:26
SPEAKER_01: So uh very niche.
10:27
SPEAKER_01: So it's uh uh lease liabilities and a sale and lease back.
10:30
SPEAKER_01: So um I think, yeah, this was uh uh an oversight that the board fixed.
10:33
SPEAKER_01: So if you have a sale and lease back, the problem was if the lease back was variable payments, you had a bit of a problem because you said, well, now when I try and create my um my liability, IFRS 16, I'll stand on leasing, would say, well, because it's variable payments, that's zero, which would have given you a full gain on a sale and lease back, which clearly no one wanted.
10:50
SPEAKER_01: So the interpretations committee said, actually, IFRS 16 would tell you, don't book that gain, book the liability.
10:56
SPEAKER_01: But there was no account and no guidance on what you do on day two, because these are variable payments.
11:00
SPEAKER_01: And so this amendment kind of gets in there and says, this is how you basically structure the lease back so that you've got the lease liability, even though the payments are variable and how you might make adjustments if those variable payments change compared to what you thought.
11:12
SPEAKER_01: So it's really niche.
11:13
SPEAKER_01: If you've got sale and lease back with variable payments, you're probably already all over this.
11:16
SPEAKER_01: If you didn't know that, you've now got new information.
11:18
SPEAKER_01: You can impress everyone in January.
11:20
SPEAKER_02: Well, and I think to your point, very niche, but very important for the companies that are impacted.
11:26
SPEAKER_02: So this is a, I would say, good fix from that perspective, but they have guidance in that area.
11:31
SPEAKER_01: Not to scare anyone, but if you've got material sale and lease back, this is the first time you hear about it, then that you might have bigger problems.
11:36
SPEAKER_02: Exactly.
11:37
SPEAKER_02: All right, very interesting.
11:39
SPEAKER_02: So then, Gary, let's move on to some of the other sort of year-end reporting considerations.
11:44
SPEAKER_02: And I think you mentioned this, and I know we talked about it last year, but I think one of the areas of interest is always what regulators are focused on.
11:52
SPEAKER_02: And in particular, I think thinking about sort of an IFRS audience, perhaps we could talk about ESMA.
11:59
SPEAKER_02: So our the EU regulator and then maybe the FRC.
12:02
SPEAKER_02: But perhaps we could start with the ESMA.
12:04
SPEAKER_02: And if you maybe want to give a quick reminder who that is and then what they're focused on, that'd be great.
12:08
SPEAKER_01: Yeah, so ESMA, the European Securities and Markets Authority.
12:12
SPEAKER_01: So they are effectively the SEC for um for the EU.
12:16
SPEAKER_01: Um and so they they will issue guidance every year saying these are the areas that we think we've noticed people could potentially improve on, and these are the areas that we'll be focusing on moving forward, and they do that, they do that annually.
12:26
SPEAKER_01: Um and the report that they've issued um this year basically says um you should you should focus on a couple of things.
12:31
SPEAKER_01: Um they've tried to take a little bit of the focus of financial reporting because you well, no, no doubt, it's very very uh close to your heart here that there's a big focus on sustainability reporting this year for European entities.
12:42
SPEAKER_01: But um so they did but they did say for financial reporting, some of the things folks should continue to be conscious of is liquidity considerations because we're still in a fair amount of uncertainty from a European and a global perspective.
12:54
SPEAKER_01: So uh supplier finance arrangements, because those are going to be new, they're expecting new disclosures on that.
12:59
SPEAKER_01: Um, covenants, no surprise.
13:01
SPEAKER_01: As I mentioned, current non-currents, so there's gonna be um a focus on that.
13:04
SPEAKER_01: And uh again, again, as I say, yeah, the the common the common heroes, yeah, the statement of cash flows.
13:10
SPEAKER_01: This is an area where regulators continue to the easiest place where they can find errors.
13:14
SPEAKER_01: So again, um presenting on a gross basis, uh presenting them in the right places, and disclosure on material um non-cash transactions are just some of the things to focus on.
13:25
SPEAKER_01: Um other areas, accounting policies, judgments, and significant estimates.
13:28
SPEAKER_01: Again, this has been an ongoing theme.
13:30
SPEAKER_01: A lot of the time companies will get the hard stuff right, the recognition and the measurement, but where they'll fall down is they don't go through the critical judgments or estimates that they went through to get their answer, and they sometimes get pulled up um by the regulator on not providing a sufficient amount of disclosure around the material judgment.
13:46
SPEAKER_01: So again, disclosures that are entity specific, the most important, difficult things that entities have to look at, um, and consistent consistency with other information.
13:55
SPEAKER_01: And again, that's a very short snippet, but that's our whole, we've had a couple of podcasts separately on that, just to the link between your financial reporting and your non-financial reporting or sustainability reporting.
14:04
SPEAKER_01: So just make sure that everything is consistent because the regulators are looking out for that as well.
14:08
SPEAKER_02: Yeah, and that one, um, just for the audience's benefit, we can link to those other podcasts in the show notes.
14:13
SPEAKER_02: And in addition, Gary, I think this is a place where it's very easy to kind of just roll forward last year and not really rethink through is this reflecting the latest.
14:23
SPEAKER_02: So definitely, you know, to the point you made, a key area of focus.
14:27
SPEAKER_01: Yeah, and I think that's maybe I'll just touch on that because I think when it comes to disclosure oversights and places where folks sometimes get into trouble with regulators, it's typically the places where you have done a roll forward, but there's been something very material or different this year, which was different from all your previous years.
14:42
SPEAKER_01: And that then it doesn't fall into the normal process.
14:45
SPEAKER_01: And so when you when you really need to think about this was something very unique or specific, do I need new disclosures, not just on the item, but on material estimates or judgments?
14:53
SPEAKER_01: And how does that tie in with other pieces of my financial?
14:55
SPEAKER_01: So that's a very good reminder for folks, I think.
14:58
SPEAKER_02: Yeah, I think there's like that temptation of, oh, I'll just stick a few things in here and there.
15:02
SPEAKER_02: And sometimes you just need to take that big step back.
15:05
SPEAKER_01: Exactly, exactly.
15:06
SPEAKER_01: Yeah, yeah.
15:06
SPEAKER_01: Taking taking the time to have a cold read when you're finished with your story is always always helpful, though in the real world that's uh very hard to do.
15:13
SPEAKER_01: Um, some other areas, again, control, joint control, significant influence.
15:17
SPEAKER_01: Again, those it comes back to those areas of significant judgments or estimates.
15:21
SPEAKER_01: And again, our our superhero that comes up all the time revenue from contracts with customers.
15:25
SPEAKER_01: Um, again, focusing on the disclosure of significant judgments, um, uncertainty of forecasts, principal versus agent as always, um, and compliance with any of the specific ESMA guidelines on uh alternative performance measures.
15:38
SPEAKER_02: All right, so then FRC, if you can remind us what that is.
15:41
SPEAKER_02: And then I'm very curious if we're gonna hear much different from them.
15:45
SPEAKER_01: Yeah, so the um the FRC is the the UK equivalent of the of the SEC.
15:49
SPEAKER_01: So uh they are the uh the UK authority uh who look at financial statements.
15:54
SPEAKER_01: And again, it's almost well it's not, it's almost these regulators obviously are in contact with each other and they chat to each other because the themes are often very similar with some minor jurisdictional changes.
16:03
SPEAKER_01: And that's why it's no surprise when you look at kind of the FRC's findings, um, try to group them maybe into three main categories.
16:10
SPEAKER_01: The one is presentation of financial statements, um, current versus non-current.
16:14
SPEAKER_01: Again, you'll notice that we mentioned that when we were talking about ESMA, um, but also maybe some other things there around derivative income, reimbursements, um, gross versus nets, but but presentation issues that people are focusing on.
16:26
SPEAKER_01: Again, the FRC has had this on their watch list for a long time, cash flow statements, again, as I mentioned on ESMAs as well, surprise, surprise, but again, same areas identified.
16:35
SPEAKER_01: And I think I might have said this before, but I think some of the challenge of the reason why, you know, I suspect that we typically find the most common errors in cash flow statements is because it's something that's done quite late in the process.
16:47
SPEAKER_01: You normally do your cash flow statement after you've done your income statement, your balance sheet.
16:50
SPEAKER_01: So it's done quite late in the process, and we don't have the same level of prescriptive guidance that we have in a lot of other standards, which means a lot of it is left to judgments and putting things there.
17:00
SPEAKER_01: And that's why you really need the time to actually take a step back, look at that cash flow statement, ask yourself some questions around does that all make sense?
17:07
SPEAKER_01: Has there been anything new in the current year that I haven't, that isn't business as usual in the cash flow statement?
17:12
SPEAKER_01: And also, you know, is it consistent with what's going on in the rest of the, because that's where I think people will notice that things don't make sense when they look at operating, but it doesn't make sense when I compare some big stuff in the income statement.
17:22
SPEAKER_01: So just uh, I think a good idea to focus on that.
17:25
SPEAKER_01: Um the other items, again, revenue.
17:27
SPEAKER_01: So I won't spend too much time on that common with with ESMA and again, risks and uncertainties.
17:31
SPEAKER_01: But again, going to the disclosures around the specific things that required the most judgment or estimate and have you provided enough information on them.
17:38
SPEAKER_01: So uh things related to impairment, um potentially recognition of uh tax loss carry forwards, um, financial instruments um and judgments and estimates just in general.
17:47
SPEAKER_01: So yeah, as I say, it's kind of very, very similar.
17:49
SPEAKER_01: And I think if you go outside of those two, those two regulators, a lot of the other regulators who issue similar reports, you'll find very similar messaging.
17:56
SPEAKER_02: Yeah, so Gary, I think that's my question because I, you know, listening to you, I think those are similar themes that we heard from the SEC or that we continue to hear from the SEC.
18:06
SPEAKER_02: But many, we know many of our listeners won't be covered by the SEC ESMA or the FRC.
18:11
SPEAKER_02: So for companies that are maybe thinking about a local regulator, just any advice on how to think about guidance you might be getting, or how to even know what guidance your regulator may be giving.
18:24
SPEAKER_01: Yes, I mean obviously we mentioned those two because they're they're near and dear to location where I am.
18:29
SPEAKER_01: But but I mean, for example, the Australian regulator, I think they issue um reports twice a year, actually.
18:34
SPEAKER_01: Um and I mean I think obviously if you have um reporting obligations in a in a in a jurisdiction, you probably know whether or not your regulator is issuing these reports.
18:42
SPEAKER_01: So the the the JSC in South Africa does a monitoring report once a year as well.
18:46
SPEAKER_01: So it's it's I'd be very surprised if you're in a major capital market where there isn't one of these regulatory reports issued by a regulatory body.
18:53
SPEAKER_01: So that would be obviously obvious, but I mean go go to the regulator in which you operate.
18:58
SPEAKER_01: They'll probably be issuing a report which shows you where they're they're focusing on things.
19:02
SPEAKER_01: Um and again, as I say, if your regulator's report comes out at a time that isn't convenient for when you're doing your annual reporting, you know, looking at their last year report plus other regulators who may be coming out with reports um closer to where you're when you're when you're interested might be helpful because as I say, a lot of a lot of the themes are often the same when regulators start focusing on things because it's normally linked to things that are either happening in the environment or it's new accounting requirements where they're going to be focusing on people getting it right for the first time.
19:30
SPEAKER_02: Yeah, and I think one thing I know I had a client that was regulated by the FRC, and reading the report yourself definitely gives a different flavor than listening to podcasts like this, or a lot of times people like to rely on their auditors to share with them.
19:43
SPEAKER_02: And so highly recommend that you actually, if you're the financial reporting responsible person, sit down, read the report.
19:50
SPEAKER_02: You're and Gary's nodding.
19:52
SPEAKER_01: I'm nodding, I'm nodding vigorously because I think that I don't think the 30 seconds that are done with those reports do them justice because they go into a huge amount of detail.
19:58
SPEAKER_01: And I think again, depending on your industry and the type of transactions you have, there'll be very specific pieces of the report that'll be far more interesting to you, but you really need to go through the whole thing to find out the gems.
20:08
SPEAKER_01: So we're not going to do it justice in a in a you know half-hour podcast.
20:11
SPEAKER_02: Yeah, hopefully just enough to get people thinking, oh, I better go out and read this and then read the ones that relate to your company.
20:18
SPEAKER_02: So, Gary, that's a lot of the topics.
20:20
SPEAKER_02: And I think many of the topics we sort of highlighted at the beginning of the podcast, as well as ones we talked about last year.
20:26
SPEAKER_02: But any other, you mentioned geopolitical and hyperinflationary, anything on those two you'd want to cover?
20:32
SPEAKER_01: Uh yeah, maybe a couple.
20:33
SPEAKER_01: Just so just on geopolitical risks, um, I do think we had issued an in-brief uh and in and an in-depth, and we've discussed it several times.
20:41
SPEAKER_01: And I think that's why, not to sound like a broken record, but all of those risks and all those accounting considerations continue to be relevant to the extent that you're exposed to those locations where there may be wars or uncertainty.
20:51
SPEAKER_01: So again, I'd I'd I'd remind folks, just because it's time's gone on doesn't mean those issues aren't still there.
20:57
SPEAKER_01: And again, just the point you made before about don't just roll forward the disclosures you had last year.
21:01
SPEAKER_01: Actually, ask yourself, has there been developers?
21:03
SPEAKER_01: Have there been new things either in those locations or in the transactions that I undertake, which would require me to update those disclosures or rethink some of the accounting.
21:11
SPEAKER_02: Well, and subsequent events, I think that's I mean, obviously, subsequent events is important anyway, but in particular, you know, things are obviously changing relatively quickly.
21:20
SPEAKER_02: So that was going to be important as well.
21:22
SPEAKER_01: No, exactly.
21:23
SPEAKER_01: And I think again, there's a whole section, a whole section on it.
21:25
SPEAKER_01: But that's a that's a very good reminder, yeah.
21:27
SPEAKER_01: Um and then just on hyperinflation, there's maybe, you know, unfortunately, um, we find more and unfortunate when we look at our list of hyperinflationaries, it seems like the list continues to grow rather than get smaller, which is unfortunate.
21:38
SPEAKER_01: But there's maybe just two that I'd mentioned because they are relatively big economies and it were quite judgmental um in terms of um our decision around whether or not we felt they were hyperinflationary or not at the end of the year, and that is um Nigeria and Egypt.
21:51
SPEAKER_01: So both of those, I think from a US GAAP perspective, was determined they were hyperinflationary.
21:56
SPEAKER_01: I think from an IFRS perspective, you know, we looked at both quantitative and qualitative.
22:00
SPEAKER_01: Qualitative factors and it was a uh probably quite a quite a tight judgment call.
22:03
SPEAKER_01: But I think on balance we felt that they are still not hyperinflationary at the 31st of December 2024.
22:08
SPEAKER_01: Now, 2025, we'll just have to see how things develop.
22:11
SPEAKER_01: I think if things continue to trend inflationary there, there's a good chance that if you're reporting under IFRS in 2025, you might need to reconsider Nigeria and Egypt, but we'll need to watch the spokes.
22:21
SPEAKER_01: Hopefully they they bring things under control.
22:23
SPEAKER_02: Yeah, and also, Gary, I I've resisted the temptation to highlight US GAP differences throughout this.
22:28
SPEAKER_02: But I think this is a key place.
22:30
SPEAKER_02: There's a different judgment because there are actually different rules between IFRS and US GAP.
22:34
SPEAKER_02: And in fact, so some emails with Gary about this very topic.
22:37
SPEAKER_02: So um definitely something that you know to be aware of if you're a dual reporter.
22:42
SPEAKER_02: And then any others I know companies impacted likely will know the countries that are hyperinflationary or not.
22:50
SPEAKER_02: But any other changes that you would highlight for this year?
22:52
SPEAKER_01: Uh other than those two, I mean, maybe just to say um, you know, that uh Lao and Malawi, for example, are expected to become hyperinflationary um 31st December 2024.
23:02
SPEAKER_01: And uh Zimbabwe um they uh adopted a new currency, but we don't necessarily think that would change whether or not you think they're hyperinflationary.
23:10
SPEAKER_01: But um again, watch the space.
23:12
SPEAKER_01: Not sure if changing a currency will change your hyperinflation.
23:14
SPEAKER_01: But as you as you mentioned heather, you know, we've got that in brief that basically summarizes our views on all the countries that we think have come in, gone out, and that you should pay attention to.
23:21
SPEAKER_01: So again, if you're operating jurisdictions that really had relatively high inflation, I'd say, you know, take a look at that document.
23:26
SPEAKER_01: We've just just updated it as at the end of the year.
23:29
SPEAKER_01: So it's current as at 31 December 2024.
23:31
SPEAKER_02: Yes, very helpful and it gives a laundry list, so you can kind of run through that.
23:36
SPEAKER_02: All right.
23:36
SPEAKER_02: So I wanted to ask you this before I, but I resisted the temptation because I wanted to get through your end reminders.
23:42
SPEAKER_02: But I think always for this podcast, there's so much interest in what's coming and clearly a lot going on from a sustainability perspective you mentioned.
23:50
SPEAKER_02: But people should not forget there actually is also still a lot going on from an IFRS accounting standards perspective, not the least of which is IFRS 18.
23:59
SPEAKER_02: I'll steal your thunder on that.
24:01
SPEAKER_02: But if you want to just give a few reminders in this area.
24:04
SPEAKER_01: Yeah, wow.
24:05
SPEAKER_01: So this could be a separate podcast on its own.
24:07
SPEAKER_01: So, I mean, obviously, and we might do some separate podcasts again on IFRS 18 implementation issues.
24:13
SPEAKER_01: So obviously IFRS 18 is issued and folks are starting to work through it in anticipation of adoption.
24:18
SPEAKER_01: Uh IFRS 19 came out, and that's for subsidiaries without public accountability.
24:22
SPEAKER_01: So that was the the board's attempt to help folks who have multinationals allow their subsidiaries who apply, can apply IFRS measurement and recognition, but have maybe some reduced disclosure requirements.
24:32
SPEAKER_01: So we'll see how that's how that gets implemented as well, because it came out um this year.
24:37
SPEAKER_01: Um we're expecting in 2025 a new rate-regulated uh standard.
24:41
SPEAKER_01: So yeah, it looks like it's you'll be happy about that one.
24:44
SPEAKER_01: No doubt we'll have a couple of conversations on that.
24:46
SPEAKER_01: So that's expected in 2025.
24:48
SPEAKER_01: The um the board issued a an amendment actually right at the end of 2024, but unless you unless you have early adoption or you ought to adopt I4S standards, it wouldn't necessarily affect you.
24:58
SPEAKER_01: And that was on um purchase power arrangements or VPPAs.
25:02
SPEAKER_01: And I think they were trying to fix a uh an I wouldn't say a problem, but uh an issue you had in that you you sometimes had to um you'd fail own use and then have to do derivative accounting when you're really just trying to apply power in a physical purchase power arrangement.
25:15
SPEAKER_01: So they made amendments to try and make that a little bit easier for some types of energy contracts, and also um they've helped help with hedge accounting in that respect as well.
25:22
SPEAKER_01: So again, if you have those types of transactions, probably you already knew about this, and and no doubt folks will be using it uh yet next year.
25:29
SPEAKER_02: Although that one, Gary, I will chime in here that I think rate-regulated accounting, that's a very select group of companies that need to worry.
25:36
SPEAKER_02: I think this renewable energy contracts, there are a lot of companies now that do enter into various types of these arrangements.
25:43
SPEAKER_02: So even if you have nothing to do with utilities in your name, just make sure you understand what contracts you're entering into because we see widespread questions from all across different industries on this.
25:55
SPEAKER_02: So even though it says electricity, it could still impact you.
25:58
SPEAKER_01: So very good, very good.
26:00
SPEAKER_01: Good point.
26:00
SPEAKER_01: Yep.
26:01
SPEAKER_01: Um, and then I think just on a couple of other things that are potentially on the ISB's um to-do list for 2025, there are a couple of examples on um, they're supposed to be examples on uh uncertainty, but you know, I think 80% of them are climate related.
26:15
SPEAKER_01: So these will be examples on how folks should be thinking around how they disclose uncertainties and risks related to uncertainties, but mostly climate.
26:22
SPEAKER_01: So have a look when those come out.
26:24
SPEAKER_01: Again, they're just going to be illustrative examples.
26:25
SPEAKER_01: So again, in theory, they're not gonna have an effective date.
26:28
SPEAKER_01: Folks still have to just think about them and think, does that make an impact on how they um how they treat things today?
26:33
SPEAKER_01: Um business combinations, disclosure, and goodwill impairment, BCDGI as we call it.
26:38
SPEAKER_01: Um so that's been going on for a while.
26:39
SPEAKER_01: There's redeliberations there that might come out in 2025 as well, or at least the they'll think about the project then.
26:45
SPEAKER_01: Um that'll be some big changes in terms of the disclosures.
26:47
SPEAKER_01: Folks providing business combinations, much more information that folks will need to gather and some changes on how folks might do goodwill impairment testing.
26:54
SPEAKER_01: So it'll be a big one.
26:55
SPEAKER_01: Um equity accounting method, they're going to make some tweaks to ICE 12, they say tweaks, changes, improvements to IS-28 on how you do equity accounting, um, fix some of the practice issues you've had on how you actually do it.
27:05
SPEAKER_01: So um that can be quite complicated.
27:08
SPEAKER_01: They've uh recently issued an exposure draft on provisions, so IS-37.
27:12
SPEAKER_01: So everything that's not a financial liability under IFRS, typically or covered by another standard, falls under IS-37.
27:18
SPEAKER_01: Um, I think some some pretty good changes in there to help folks deal with.
27:21
SPEAKER_01: I think some of the more difficult practice issues we've done had recently on kind of um NEV credits and uh other types of liabilities.
27:29
SPEAKER_01: You might have a lot of them related to climate.
27:31
SPEAKER_01: So hopefully that'll that'll help help folks.
27:34
SPEAKER_01: Um there's a small amendment for translation to a hyperinflationary presentation currency, but I'm guessing for folks who are listening to this, they're probably hyperinflation presentation currencies.
27:43
SPEAKER_01: And then uh redeliberation on on FICE.
27:46
SPEAKER_01: Um there was a large, large number of comment letters.
27:48
SPEAKER_01: So it's uh most of the stuff that's gonna be moving forward in 2025, and then some long-range projects as well, I'm not sure if you're interested in those.
27:55
SPEAKER_02: Well, at least have to mention Gary.
27:58
SPEAKER_01: Okay, so at least well, because I'm I'm pretty excited about them.
28:01
SPEAKER_01: So and again, no doubt we'll do a couple more discussions on this.
28:03
SPEAKER_01: But uh longer range projects the board's looking at is uh intangible assets, uh statement of cash flows are the two big ones that I think are are gonna be really big changes to the way we've seen things in the past and hopefully a massive improvement to financial reporting.
28:16
SPEAKER_01: They're also gonna look at amortized cost measurements, but I think the the first two I mentioned, at least from my perspective, I'm very excited about.
28:22
SPEAKER_02: All right.
28:22
SPEAKER_02: So, what of all of this then, if you're listening, and if I'm a financial reporting person, I've just listened to a laundry list of information for about 25 minutes.
28:32
SPEAKER_02: What is sort of your key takeaway from all of this?
28:36
SPEAKER_01: I think again, the key takeaway would be in the real world.
28:38
SPEAKER_01: I understand you're probably trying to get a set of financials done if you've got a December year end.
28:41
SPEAKER_01: So don't worry about 80% of the stuff I said, just take it and you know, if you remember it to impress people, that's great.
28:46
SPEAKER_01: I think the biggest thing for me is just the the year-end reminders.
28:49
SPEAKER_01: If you have a regulator in your territory, make sure you've had a read of what their focus is going to be.
28:53
SPEAKER_01: And if you can, to the extent build in some time to do a cold read of the financials, try give yourself an extra couple of days at least to sit down as if you were reading these financials, because that is where the most common easy errors are found when someone says, You've said this here, but it doesn't make sense somewhere else.
29:08
SPEAKER_01: So give yourself a little bit more time and focus on what your regulator's focusing on would be my takeaway.
29:12
SPEAKER_02: Yeah, it's much easier to deal with those comments in draft instead of when you get a question from an investor.
29:19
SPEAKER_02: So uh definitely a great reminder there.
29:21
SPEAKER_02: And Gary, plenty of follow-up topics.
29:24
SPEAKER_02: I'll have to get you on the calendar for those, but it's always such a pleasure to talk to you.
29:28
SPEAKER_02: So thanks so much for joining me today.
29:29
SPEAKER_01: Any time.
29:30
SPEAKER_01: Thanks, Ada.
29:31
SPEAKER_02: Thank you.
29:32
SPEAKER_02: That's our show for today.
29:34
SPEAKER_02: Tune in next week for more fresh episodes so that you never miss any of our audio content.
29:40
SPEAKER_02: Follow the PWC Accounting Podcast wherever you listen to your podcasts.
29:45
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29:54
SPEAKER_02: From Thought Leadership at PwC, I'm Heather Horn.
29:58
SPEAKER_02: Thanks for tuning in.
30:10
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30:12
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