The IASB added an initiative on disclosure to its work programme in 2013 to complement the work being done in the Conceptual Framework project. The initiative is made up of a number of smaller projects that aim at exploring opportunities to see how presentation and disclosure principles and requirements in existing Standards can be improved. Among them is a narrow scope project on IAS 1 Presentation of Financial Statements to ensure that entities are able to use judgement when presenting their financial reports as the wording of some of the requirements in IAS 1 had in some cases been read to prevent the use of judgement. An exposure draft of proposed amendments was published in March 2014 with comments requested by 23 July 2014.
Disclosure Initiative (Amendments to IAS 1) makes the following changes:
- Materiality. The amendments clarify that (1) information should not be obscured by aggregating or by providing immaterial information, (2) materiality considerations apply to the all parts of the financial statements, and (3) even when a standard requires a specific disclosure, materiality considerations do apply.
- Statement of financial position and statement of profit or loss and other comprehensive income. The amendments (1) introduce a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and additional guidance on subtotals in these statements and (2) clarify that an entity's share of OCI of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.
- Notes. The amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes and to demonstrate that the notes need not be presented in the order so far listed in paragraph 114 of IAS 1. The IASB also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful.
Changes from the proposals in the Exposure draft
ED/2014/1 Disclosure Initiative (Proposed amendments to IAS 1) had included a proposal that an entity should 'not aggregate or disaggregate information in a manner that obscures useful information'. As disaggregation often means expanding totals and subtotals and thus providing added transparency, the IASB decided to rephrase the clarification to say that 'an entity shall not reduce the understandability of its financial statements by obscuring material information with immaterial information'.
ED/2014/1 had also proposed to use the term 'disclose' to mean information in the notes and the term 'present' otherwise. As respondents to the ED noted that a change in terminology should be part of a comprehensive review of IAS 1 and would be outside the scope of a narrow-scope amendment, the IASB did not finalise the proposals regarding use of the terms 'present' and 'disclose'.
Finally, the ED had proposed that an entity should disclose the fact that it applies the amendments when it does so for the first time. The transition provisions now state that an entity need not disclose the fact that it has applied these amendments (regardless of early application or application on the effective date), as the IASB considers the amendments to be clarifying and not directly affecting an entity's accounting policies or accounting estimates.
Effective date and transition requirements
The amendments are effective for annual periods beginning on or after 1 January 2016. Earlier application is permitted. Application of the amendments need not be disclosed.
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