First-time adopters and IAS 8 disclosures

There were two issues and Staff recommendations:

1. Transition methods available for first-time adopters

1. To permit first-adopters of IFRS to use the alternative transition method (as outlined to the Boards in February 2013) to transition to the revenue recognition standard. Recommendation: not to permit the use of the transition method.
2. To provide an exemption to ignore, in their application of IFRS 1, contracts that are completed under legacy revenue requirements before the earliest comparative period presented, i.e. first-time adopters are required to apply the new standard retrospectively. Recommendation: not to provide the exemption.

2.   The applicability of disclosures required by paragraph 28(f) of IAS 8 that requires an entity to disclose the amount of adjustments for each financial statement line item affected, in the current and prior periods, as a result of applying a new IFRS. Recommendation: do not require this disclosure.

The Board had a discussion about the transitional exemptions (i.e. issues 1(a) and 1(b)). A number of Board members believed that first-time adopters were not provided with sufficient transitional exemptions.

In response to this, another Board member agreed with the Staff proposal 1(a) not to permit the alternative transition method, because, she believed, the level of disconnect between previous GAAP and the new IFRS standard could be potentially too big and this would defy the objective of the first-time adoption. However, she had more sympathy for proposal 1(b) for contracts that were completed. Other Board members supported the member’s view.

The Board agreed not to permit the alternative transition method in 1(a); it agreed to provide exemption for completed contracts in 1(b). The Board also agreed not to require disclosures in paragraph 28(f) of IAS 8.

Due process summary 

The revenue recognition project is a joint project with the FASB. The FASB will complete its own due process analysis in the next few weeks and will start their ballot process, subject to permission. Although the analysis of each Board’s respective due process is done separately, the final standard will be a joint standard and the Boards will be asked to approve for the publication substantially the same Standard at the same time.

At the May 2013, the IASB discussed three questions about the revenue recognition standard:

1)      Re-exposure: does the Board agree with the Staff recommendation not to re-expose?

2)      Permission to ballot: can the process begin?

3)      Dissents: do any Board member intend to dissent?

The Board members were satisfied with the mandatory and non-mandatory due process steps.

No Board members wanted to re-expose the standard. The Board gave its permission to ballot. No Board member expressed an intention to dissent.