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Key points

The IASB has decided to explore narrow-scope standard-setting instead of approving the IFRS Interpretations Committee (IFRS IC) agenda decision ‘Cash Received via Electronic Transfer as Settlement for a Financial Asset (IFRS 9)’.
What is the issue?
In September 2021, the IFRS IC published a tentative agenda decision in response to a submission relating to the recognition of cash received via an electronic transfer as settlement for a financial asset applying IFRS 9, ‘Financial Instruments’.
The IFRS IC received 27 comment letters on its tentative agenda decision.
Based on the feedback, the IFRS IC reaffirmed its views that the principles and requirements in IFRS 9 provide an adequate basis for an entity to determine when to derecognise a trade receivable and recognise cash received via an electronic transfer system as settlement for that receivable. As such, subject to approval by the IASB, in June 2022 the IFRS IC voted to finalise the agenda decision and not to recommend that the IASB undertake standard-setting to answer the question in the submission.
However, the IFRS IC acknowledged that many respondents expressed practical concerns about finalising the agenda decision. Accordingly, the IFRS IC decided to report those concerns to the IASB alongside its technical analysis. The practical concerns expressed included:
  • disruption to long-standing accounting practices;
  • consequences for other fact patterns, such as trade payables or payments made by cheque or credit card; and
  • costs and complexities to implement changes, including potential changes to systems and controls required for bank reconciliations.
Considering both the technical analysis and the practical concerns, at its September 2022 meeting, the IASB decided to explore narrow-scope standard-setting instead of approving the agenda decision.
What is the impact and for whom?
In October 2022, the IASB considered possible standard-setting options. It tentatively decided to develop an accounting policy choice to allow an entity to derecognise a financial liability before the date the electronic cash transfer is settled, if specified criteria are met.
The IASB noted that this accounting policy choice would not resolve all of the practical concerns raised relating to trade payables/receivables settled using electronic cash transfers. However, it would retain the derecognition requirements in IFRS 9 without any fundamental change, while providing practical relief by permitting existing accounting practices to continue in specified circumstances.
An exposure draft of proposed amendments to IFRS 9 is expected to be open for comment in the first half of 2023.
PwC observation
We expect that the proposed narrow-scope amendment to IFRS 9 will both:
  • add an accounting policy choice relating only to trade payables when settled using an electronic cash transfer, which would be an exception to the general derecognition requirements in IFRS 9, and
  • clarify the existing recognition and derecognition requirements in IFRS 9 in light of the questions raised by stakeholders. These clarifications would be relevant not only for trade payables settled through an electronic cash transfer system, but also for a wider range of circumstances in which there is a timing difference between the initiation and settlement of payment.
Any changes to accounting practices required or permitted as a result of these amendments would need to be made by the effective date that will be specified when the narrow scope amendment is finalised.
In anticipation of any possible future standard-setting, for reporting periods starting before 1 January 2023, entities should disclose their accounting policies relating to this issue, if significant (paragraph 117(b) of IAS 1). For reporting periods beginning on or after 1 January 2023, entities should consider the recent narrow-scope amendments to IAS 1, ‘Presentation of Financial Statements’, that require entities to disclose material (rather than significant) accounting policies. Our practice aid provides guidance to consider when determining if accounting policy information is material.
We would typically not expect entities to provide quantitative disclosures if an entity does not have reasonable and supportable information readily available. However, entities should consider if qualitative disclosures are required in accordance with paragraph 17(c) of IAS 1. That paragraph requires additional disclosure when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.
Next steps
At a future meeting, the IASB will continue its discussions on this matter and the IASB will be asked whether it agrees to start the process to develop the draft of the proposals.
Any standard-setting would be subject to the IASB’s usual due process, including inviting all stakeholders to comment on the draft proposals before they are finalised.
Where do I get more details?
For more information, contact Marie-Claude Kling, Scott Bandura or Gary Berchowitz.

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