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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:

  1. cer­tain nar­row-fo­cus amend­ments to IAS 1, Pre­sen­ta­tion of Fi­nan­cial State­ments [see sep­a­rate project]
  2. cer­tain nar­row fo­cus amend­ments to IAS 7, State­ment of Cash Flows [see sep­a­rate project]
  3. a major project on changes in accounting policies and estimates [see separate project]
  4. this major project on materiality
  5. a major project on the definition of materiality [see separate project];
  6. a major project on the principles of disclosure (including the Standards-level Review of Disclosures) [see separate project];
  7. a project on Primary Financial Statements [see separate project]; and
  8. 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.

 

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