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Disclosure initiative — Accounting Policies [Completed]

Effective date:

The amendments are applied prospectively. The amendments to IAS 1 are effective for annual periods beginning on or after January 1, 2023. Earlier application is permitted. Once the entity applies the amendments to IAS 1, it is also permitted to apply the amendments to IFRS Practice Statement 2.

Last up­dated:

June 2021

Overview

On July 18, 2018, the International Accounting Standards Board (IASB) added a project to its agenda to develop guidance and examples to help entities apply materiality judgements to accounting policy disclosure. The Board added this project in response to feedback on the Disclosure Initiative—Principles of Disclosure Discussion Paper.

The Principles of Disclosure Discussion Paper identified three main concerns about information disclosed in general purpose financial statements (collectively termed the "disclosure problem"). These concerns were:

  • not enough relevant information;
  • too much irrelevant information; and
  • ineffective communication of information.

The feedback on the Discussion Paper suggested that guidance was required to assist entities in determining which accounting policies to disclose. The Board added this project to its agenda in response to that feedback.

The Board was developing guidance and examples to explain and demonstrate the application of the “four-step materiality process” described in IFRS Practice Statement 2 Making Materiality Judgements (Materiality Practice Statement) to accounting policy disclosures. This guidance was initially being developed for inclusion in the Materiality Practice Statement.

At its meeting on October 24, 2018, the IASB Staff presented a Paper to the Board setting out its detailed recommendations for the direction of the project. A summary of the Staff’s recommendations was as follows:

  • Staff recommend that the Board clarify that not all accounting policies relating to material transactions, other events or conditions are themselves material.
  • Staff also recommend that the Board:

(a) develop guidance to help entities apply effective judgement when deciding whether those accounting policies relating to material transactions, other events or conditions are in fact material;

(b) develop two or three examples to demonstrate the practical application of the guidance described in (a) and base those examples on paragraphs 46 to 55 of the Materiality Practice Statement;

(c) locate the guidance and examples described in (a) and (b) above within the ‘Specific topics’ section of the Materiality Practice Statement; and

(d) make additional, minor amendments throughout the Materiality Practice Statement to clarify that the four-step materiality process is applicable to accounting policy disclosures.

If implemented, these recommendations would potentially result in significant changes to current practice. Based on feedback from financial statement users, most users said they do not find accounting policies that reproduce or summarize IFRS requirements useful. They thought that accounting policy disclosures are useful only when they:

(a) relate to material transactions, other events or conditions; and

(b) provide insight into how an entity has exercised judgement in selecting and applying accounting policies.

The objective of the project was to help stakeholders improve accounting policy disclosures for the primary users of financial statements.   

To achieve its objective, the Board issued these amendments on February 12, 2021:

  • amended paragraphs 117–122 of IAS 1, Presentation of Financial Statements to require entities to disclose their material accounting policy information rather than their significant accounting policies; and
  • amended IFRS Practice Statement 2 Making Materiality Judgements (Materiality Practice Statement) to explain and demonstrate the application of the ‘four-step materiality process’ to accounting policy disclosures by including guidance and examples on the application of materiality to accounting policy disclosures.

On June 1, 2021, the AcSB issued the amendments to IAS 1, Disclosure of Accounting Policies, and IFRS Practice Statement 2, Making Materialty Judgements, to Part I of the CPA Canada Handbook- Accounting.

Other de­vel­op­ments

June 2021

On June 1, 2021, the AcSB issued the amendments to IAS 1, Disclosure of Accounting Policies, and IFRS Practice Statement 2 to Part I of the CPA Canada Handbook- Accounting.

February 2021

On February 12, 2021, the IASB issued Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) with amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements. The amendments are effective for annual periods beginning on or after January 1, 2023.

December 2020

On December 18, 2020, the IASB staff updated the Work Plan to indicate that the Board plans to issue the amendments to IAS 1 and IFRS Practice Statement 2 in February 2021.

November 2020

On November 20, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue the amendments to IAS 1 and IFRS Practice Statement 2 in Q1/2021

September 2020

On September 28, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue the amendments to IAS 1 and IFRS Practice Statement 2 in December 2020.

April 2020

On April 17, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue the IFRS Amendments in Q4/2020.

March 2020

On March 27, 2020, the IASB staff updated the work plan to indicate that the Board expects to issue the IFRS Amendments in the second half of 2020.

February 2020

On February 28, 2020, the IASB staff updated the work plan to indicate that the Board will complete its review of the Exposure Draft feedback (no date specified).

December 2019

On December 13, 2019, the IASB staff updated the Work Plan to indicate that the IASB plans to review the Exposure Draft feedback in February 2020. 

October 2019

On October 1, 2019, the IASB® staff updated the work plan to indicate that the Board expects to review the Exposure Draft Feedback in November 2019.

August 2019

On August 22, 2019, the AcSB issued its Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Comments are requested by November 29, 2019.

On August 1, 2019, the IASB published an Exposure Draft "Disclosure of Accounting Policies" with proposed amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements. Comments are requested by November 29, 2019.

April 2019

On April 12, 2019, the IASB® staff updated the work plan to indicate that the Board expects to issue an Exposure Draft in Q3/2019.

March 2019

On March 14, 2019, the IASB staff updated the work plan to indicate that the Board will issue an Exposure Draft in the second half of 2019.

September 2018

On September 20, 2018, the IASB staff up­dated this pro­ject to in­di­cate that the IASB ex­pects to is­sue an Exposure Draft in respect of this project (no date/timing specified for this). 

 

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