Cleaning Windows without FOMO. Short Summary of the April IASB Update. Two Learning Bits From My Sunday Quizzes.
Dear Reader,
Spring is showing. This year, the month of April made me do the Marie Kondo thing. Target: apartment windows, ceiling-to-floor-sized.
Despite a busy and exhausting work week, I bought some racks, a strong chemical agent (no baking-soda-lemon-homemade stuff) and got on to the task. 4 hours in, 2 windows done, I paused and opened WhatsApp to check out some friends' stories.
I saw: a boat trip on a sunny day on Lake Zürich (accessory: a glass of champagne), a Coral Reef family adventure in Australia, a friend of mine who just became a fresh homeowner showing off a "backyard with a swing" ready for summer barbecues. None of them was anywhere close to my reality. And yet, weirdly, I did not feel the slightest pinch of envy.
Would I want to be at a spa instead of working hard to keep things running? Hell, yes! But I was not craving it. I was content exactly as I was — being in the place and state I was.
Have you had the feeling recently of being content with your life at the exact moment, doing ordinary things?
Sitting with that thought — and with cleaner windows — let me bring you back to the desk.
Here is my brief summary of what is new at the standard setter, the IASB, as published in the podcast covering the April 2026 meeting:
- Costs vs benefits at the center of attention of this project; - Subsequent information, such as targets and post-acquisition disclosures will only be required for a subset of significant business combinations disclosed in an entity's financials;
- To determine significant, entities shall use a threshold approach at:
10% of revenue, or
10% of the assets.
(Initially discussed thresholds based on operating profit as well as qualitative thresholds were dismissed by the Board).
- Exempted will be disclosures that would breach specific statutory, legal or regulatory requirements.
Topics in focus of the meeting: accounting for discretionary payments (contingent consideration settlements) & clarification of terms liquidation and not genuine.
i) Accounting for contingent settlement provisions:
A financial instrument (or its component) containing a contingent settlement provision would give rise to a financial liability. Contingent settlement provision requires an entity to deliver cash or another financial asset in the event of the occurrence or non-occurrence of uncertain future events (or on the outcome of uncertain circumstances) that are beyond the control of both the issuer and the holder of the instrument.
However, if it wasn’t for the contingent settlement provision, the financial instrument would be classified as an equity instrument.
Example: ordinary shares to be settled in cash only upon genuinely remote contingency. Contingent clause requires cash settlement equal to fair value of shares only if a specific piece of national legislation is enacted that prohibits equity ownership by foreign investors.
IASB clarifies that, even if the financial instrument (or its component) contains contingent settlement clause, this does not prevent it from being classified as equity.
This is true even if the value of that equity portion is assigned zero at initial recognition. In this regard, IASB proposes an amendment of paragraph 26 of IAS 32 for internal consistency.
ii) The 2008 amendment to IAS 32 incorporated guidance concerning puttable financial instruments and obligations arising on liquidation (paragraphs 16C and 16D) which are classified as equity instruments.
In that regard, April meeting proposed a clarification of the term liquidation of an entity. Liquidation is a permanent cessation of entity’s operations, including i) converting assets, ii) paying obligations and iii) settling equity claims. It is also important to discern activities which do not constitute a liquidation of an entity.
Topic in focus of the April 2026 Meeting were an estimate of contractual cash flows in calculation of effective interest rate.
Question from practice was how to account for a change of estimated cash flows, which were agreed upon originally, i.e., were pre-existing (not later modifications during the contract term). IASB has collected the following feedback from the stakeholders: i) If the change is “business as usual” and relates to credit risk, interest rate risk, i.e., inputs for the effective interest rate method, the change of contractual cash flows shall be adjusted prospectively; ii) A catch-up (retrospective) adjustment of the contractual cash flows would be required - as it is currently the case - for special, extraordinary changes.
1. Did you know that:
- Maturity mismatch,
- Different payment amounts and,
- The use of floating vs fixed interest rates,
are the characteristics of repricing risk for financial instruments, typical for banks and financial institutions?
Repricing risk is at the heart of the current project Risk Mitigation Accounting at the IASB.
The Exposure Draft on this project is open for comment until 31 July 2026.
2. Did you know that companies are not allowed to hedge a firm commitment to acquire a business?
The rationale behind is that: A firm commitment to acquire a business in a business combination cannot be a hedged item, except for foreign currency risk, because the other risks being hedged cannot be specifically identified and measured. Those other risks are general business risks (IAS 39, paragraph AG98 and paragraph B6.3.1 of IFRS 9 Financial Instruments).
I wish you a great accounting week!
Best,
Barbora