Background
At the January 2009 Board meeting, the staff informed the Board of a 'cross-cutting issue' identified during the staff's work on IFRS 7 Financial Instruments: Disclosures. The issue is whether or not particular disclosure requirements within IFRS 7 should be mandated for interim reporting under IAS 34 Interim Financial Reporting. The staff noted that possible updating of the disclosure requirements in IAS 34 is an issue that arises in other agenda projects – not just the one on IFRS 7.
Discussion at the February 2009 IASB Meeting
The staff introduced the topic by reminding Board members why this issue had been raised. It noted that some constituents have asked the Board to mandatorily require particular IFRS 7 disclosures (for example, fair values) in interim reports.
The staff identified four possible courses of action:
- Approach A: Do nothing
- Approach B: Mandate specific information to be disclosed in interim financial statements
- Approach C: Provide further guidance on how to comply with IAS 34
- Approach D: Mandate the same disclosure requirements for interim and annual financial statements
The staff recommended Approach C.
The Board had some debate over ways to improve interim reporting in the short-term and long-term. The majority of Board members was in favour of providing more examples in IAS 34 as a short-term solution and agreed with the staff proposal. Many believed a fundamental review of the disclosure framework and interim reporting was necessary, but that this could not be pursued at this point in time.
The staff was asked to prepare possible additional examples for interim reporting disclosures and to report back to the Board.
Discussion at the May 2009 IASB Meeting
The staff introduced the paper by noting that at its May 2009 meeting, the IFRIC concluded that IAS 34 provides guidance sufficient to enable entities to decide whether updates to fair value disclosures are required in interim financial reports and decided not to add the issue to its agenda as it did not expect diversity in practice. The IFRIC's decision does not specifically address other IFRS 7 disclosures such as reclassifications. However, we think that, by analogy, IAS 34 provides a clear principle for determining which explanatory notes are required in interim reports-disclosures that explain events and transactions that are significant to an understanding of changes in financial position and performances of the entity since the end of the last annual reporting period. (IAS 34.15)
The staff believed that amending IAS 34 could be addressed through the annual improvements process. The staff proposed amendments to IAS 34 that add guidance to emphasise the existing disclosure principle that when providing explanatory notes at an interim date, an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity and the financial statement effects of such events and transactions since the end of the last annual reporting period are more useful. The additional examples proposed by the staff discuss disclosures relating to fair value measurements and reclassification.
One Board member queried whether the changes relating to fair value which would require disclosure (if material) of significant changes in the business or economic circumstances that affect the fair value of financial assets and liabilities related to only those assets which are measured at fair value, or if it also relates to those assets measured at say amortised cost for which disclosure of fair values is made. The Board member thought it was both. The staff agreed it was meant to be both. The Board member suggested that the wording be clarified.
The Board discussed concerns that the proposals relating to fair value measurement (for which an ED is yet to be published) include a proposal to include fair value disclosures in interim financial statements. Some Board members wondered whether disclosure is already required by IAS 34 or not. Concerns were also raised as to the amount of work would be required for entities to comply with these requirements. The staff noted that as this is an Exposure Draft the Board could reconsider the proposals depending on the responses received.
The Board agreed with including the proposed draft amendment to IAS 34 (subject to editorial changes) in the forthcoming annual improvements ED.
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