Disclosure initiative — Materiality [Completed]
Effective date: |
The Practice Statement is not an IFRS. Consequently, entities applying IFRSs are not required to comply with the Practice Statement. However, it should be noted that materiality is a pervasive principle in IFRSs. The Practice Statement does not have an effective date, companies are permitted to apply the guidance in the Practice Statement to financial statements prepared any time after September 14, 2017. |
Last updated: |
September 2017 |
Overview
The IASB undertook a broad-based initiative to explore how disclosures in IFRS financial reporting can be improved. This initiative has been informed by a Discussion Forum on Disclosure in Financial Reporting that was held in January 2013. In conjunction with this, the IASB staff also conducted a survey. A Feedback Statement on these events was published in May 2013.
The Disclosure Initiative is currently made up of a number of implementation and research projects, as follows:
- certain narrow-focus amendments to IAS 1, Presentation of Financial Statements [see separate project]
- certain narrow focus amendments to IAS 7, Statement of Cash Flows [see separate project]
- a major project on changes in accounting policies and estimates [see separate project]
- this major project on materiality
- a major project on the definition of materiality [see separate project];
- a major project on the principles of disclosure (including the Standards-level Review of Disclosures) [see separate project];
- a project on Primary Financial Statements [see separate project]; and
- a project on general disclosure issues.
The objective of this project is to help preparers, auditors and regulators to use judgement when applying the concept of materiality.
A draft practice statement on materiality was published on October 28, 2015, however, subsequently it became clear that some of the proposed guidance needed to be authoritative to have the desired effect, so the project was split up into a part that would see a practice statement published and a part that was intended to result in amendments to IAS 1 and IAS 8. Both, the final practice statement and the exposure draft ED/2017/6 Definition of Material (Proposed amendments to IAS 1 and IAS 8) were published on September 14, 2017.
Other developments
September 2017
On September 14, 2017, the IASB issued Practice Statement (PS) 2, Making Materiality Judgements. The PS aims at assisting management in presenting financial information about the entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.
June 2017
In June 2017, the IASB staff updated the work plan to indicate that the IASB expects to issue a Practice Statement for comment in September 2017.
March 2017
On March 23, 2017, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish a Practice Statement for comment in June 2017.
January 2017
On January 19, 2017, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish a Practice Statement by July 2017.
December 2016
On December 15, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish the Practice Statement after June 2017.
November 2016
On November 18, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to issue the final Practice Statement sometime after May 2017.
September 2016
On September 23, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to decide the project direction by December 31, 2016.
July 2016
On July 20, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to decide the project direction sometime before October 31, 2016.
October 2015
On October 28, 2015, the IASB published draft guidance, in the form of a draft Practice Statement, to help company management determine whether information is material. The guidance is part of the IASB’s wider initiative to improve disclosures. The deadline for submitting comments on the draft Practice Statement is February 26, 2016.
May 2015
Most recently, on May 20, 2015, the IASB staff issued an update which highlights the recent and upcoming activities of the Disclosure Initiative project including: (i) the proposed Practice Statement in respect of materiality; and (ii) the next steps planned.
June 2014
On June 13, 2014, the IASB staff issued an Update in respect of the Disclosure Initiative project including the project in respect of Materiality.