IASB ED/2019/6

Tier 1 and Tier 2

Disclosure of Accounting Policies—Proposed amendments to IAS 1 and IFRS Practice Statement 2

The International Accounting Standards Board (IASB) has recently issued for comment ED/2019/6 Disclosure of Accounting Policies—Proposed amendments to IAS 1 and IFRS Practice Statement 2 (the ED).

In March 2017 the IASB issued the Discussion Paper Disclosure Initiative—Principles of Disclosure (PoD DP) to help it identify and address issues related to the disclosure of information in the financial statements prepared applying IFRS®Standards.

Unlike some other areas of the PoD DP, there was clear support from users for the IASB developing guidance to help preparers decide which accounting policies to disclose. Further, users said that the application of materiality is key to deciding which accounting policies to disclose and thought that materiality should be the basis of any requirements developed by the IASB.

These users thought it would be useful if the IASB developed more guidance on how to determine if an accounting policy is material.

The proposed amendments are intended to help entities provide accounting policy disclosures that are more useful to primary users of financial statements. The IASB has heard that users of financial statements do not find accounting policy disclosures useful when they contain standardised (or ‘boilerplate’) information and only duplicate or summarise the content of the recognition and measurement requirements of IFRS Standards.

The proposed amendments are intended to help entities:

• identify and disclose all accounting policies that provide material information to primary users of financial statements; and
• identify immaterial accounting policies and eliminate them from their financial statements.

Proposed amendments

The table summarises the proposed amendments contained in the ED:

Standard	Proposed amendment
IAS 1 Presentation of Financial Statements	Amend paragraph 117 of the Standard to require an entity to disclose its ‘material’ accounting policies rather than those that are ‘significant’.
	Adding explanatory paragraphs to accompany the amendment to paragraph 117 to: clarify that not all accounting policies relating to material transactions, other events or conditions are themselves material; and identify circumstances in which an entity normally would conclude that information about an accounting policy is material to its financial statements. The IASB does not propose to relieve an entity from meeting other disclosure requirements within IFRS Standards.
IFRS Practice Statement 2 Making Materiality Judgements	To support the proposed amendments to IAS 1, the IASB also proposes amending the practice statement to Illustrate how an entity could judge whether information about an accounting policy is material to its financial statements.   In particular, the IASB proposes adding guidance and examples to the practice statement to help entities apply its four-step materiality process to accounting policy disclosures.

The XRB Board is committed to adopting international standards in the for-profit sector. Generally, once a standard has been issued by the IASB, the NZASB then issues the New Zealand equivalent standard without further consultation.

So, this is your opportunity to comment on the proposed future standard that will be issued in New Zealand.

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Submissions closed on 29 November 2019