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Board projects –Targeted consultation on post-implementation review framework

Date recorded:

Targeted consultation on post-implementation review framework

The staff sought advice on a draft general work plan for a post-implementation review, as the staff intend to bring the feedback received on the draft general work plan for a post-implementation review to a Board meeting in the second quarter of 2011. Such feedback, in addition to the Committee, will include feedback from the IFRS Advisory Council, the IASB's Global Preparers Forum and Analyst Representative Group, and a meeting of national standard-setters.

The staff described responsibilities of a post-implementation review as set out in the Due Process Handbook for the International Accounting Standards Board ("Handbook"), in which the objectives of a post-implementation review, according to the Handbook, are:

  • to review the important issues that had been identified as contentious during the development of the pronouncement; and
  • to consider any unexpected costs or implementation problems that have been encountered.

The staff also outlined the first two IFRSs or amendments for which the IASB is scheduled to begin post-implementation reviews are IFRS 8 and Business Combinations: Phase II (the revised IFRS 3 Business Combinations and the amended IAS 27 Consolidated and Separate Financial Statements), which are scheduled to commence in 2011 and 2012, respectively. It should be noted that a post-implementation review is expected to be conducted two years after the new requirements have been implemented.

The post-implementation project will be distinguished into phases as follows:

Information gathering and outreach:

The Boards and the staff will research sources from a range of jurisdictions and functions to: (a) review how a requirement that was identified as a contentious issue during its development, is applied in practice, from the perspective of all those involved in the financial reporting supply chain (for example, preparers, auditors, users and regulators); and (b) identify any unexpected costs or implementation problems that have been encountered.

Preliminary report on the post-implementation review:

The tentative conclusions of the review and analysis described above will be included in a preliminary report for the post-implementation review on the pronouncement. The preliminary report will be published by the Board for public comment. This public consultation will allow interested parties to comment on any preliminary views reached by the Board. After receiving and considering those comments, the report will be finalised and published, inclusive of an indication of the Board's preliminary assessment of how it should respond to each issue reviewed, as appropriate.

In deliberation on the post-implementation review process set forth by the staff, the Committee cited the concerns of the current post-implementation review framework, as follows:

  • The scope of the project. A minority of the Committee cited the necessary inclusion of certain other standards (beyond IFRS 8 and Business Combinations: Phase II, as described above) in which diversity in practice has been cited in the past, including that of IFRS 2. The staff noted that since the Boards are currently deliberating on a number of projects, the staff has currently excluded from its scope currently effective guidance which is expected to be amended as a result of project developments. Further, for the initial stages of review, the intended focus of the reviews was on relatively newly effective standards.
  • The objective of the original standard. Members of the Committee generally felt the objectives of a post-implementation review should include an assessment as to whether the original objective of the standard has been achieved, in addition to assessment around contentious issues and unexpected costs and implementation problems, as described above.
  • The completeness of the information gathering and outreach phase of the project, as described above. Members of the Committee cited the need to ensure that the initial phase of the post-implementation review be considered with a variety of research sources, including users, preparers, auditors, regulators, standard-setters and other parties.
  • Timeliness of reviews. A number of concerns were raised regarding the timing of relevant reviews, citing the following considerations:
    • One of the objectives identified in the performance of post-implementation reviews was the identification of unexpected costs or implementation problems. Committee members noted that a two-year post-implementation review period would not serve to identify costing issues in a timely manner; suggesting instead that further diligence should be considered in pre-implementation reviews.
    • Certain Committee members highlighted concern that a two-year post-implementation review period provided too short of an assessment period; not allowing for the application of market mechanisms to appear (e.g., market movement as a result of clarity offered to financial statement users following the effective date of new standards).

No consensus was sought regarding the above project, but the staff will consider feedback outlined above, in conjunction with feedback from other outreach activities, before bringing such information to the Boards in a future Board meeting.