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Effective dates

Date recorded:

The Board published an Invitation to Comment seeking views on the effective date and transition method on its major projects — Revenue recognition, Leases, Insurance and Financial instruments.

In the light of the potential major changes in the financial statements, some constituents noted that it might be helpful if the Board were to consider providing some guidance, or requiring additional disclosures, to assist users to:

  1. advise them of any potential changes when those IFRSs are applied and
  2. inform them of the effects of those changes after those IFRSs have been applied.

The Board was asked to consider if and how such additional guidance should be provided.

Disclosures when an IFRS has been issued but is not yet mandatory

The staff proposed that such disclosures should only be applied if there could be a significant change in the financial statements as a result of the new or revised IFRSs that has been issued.

The staff also proposed that IAS 8 Accounting Policies, Changes in Estimates and Errors should be amended to provide additional guidance that an entity should consider in determining whether to disclose possible and significant financial statement line items that could be affected; and, if there would be a significant change to an entity’s information or data systems, internal controls, and an explanation on how the entity is managing the transition.

The Board tentatively decided to retain the existing guidance and did not agree with the staff’s proposals. Several Board members expressed concern about using the word ‘significant’ and whether this would be interpreted as higher or lower than ‘material’ and whether this would cause confusion. In addition, a few Board members noted that discussions around the change to the entity’s information or data systems or how the entity is managing the transition should not be included in the financial statements but if necessary, in the management commentary.

The staff also proposed that for disclosures when an IFRS has been issued but is not yet effective, such disclosures should be applied in interim financial reports. This disclosure would only be applicable when there is a significant update to the information that was reported in the notes in the most recent annual financial report.

The Board tentatively decided to retain the existing guidance and did not agree with the staff’s proposals. Several Board members felt that this proposal might be burdensome to preparers.

Disclosure requirement on transitional provisions when there is a mandatory change in accounting policy

The staff proposed that the Board clarify that when applying IAS 8:

  1. an entity is only required to provide a narrative disclosure on applicable transitional provisions. If those transitional provisions may have an effect on future periods, that fact should be disclosed.
  2. an entity should not be required to disclose the amount of adjustment on the current period when an IFRS is initially applied or when there is a change in accounting policy.

The Board tentatively disagreed with the staff’s proposals and asked the staff to rewrite the paper and conclusions and to consider issues such as impracticability and whether (b) should only be applied in situations where retrospective application is applicable. Several Board members also noted that they wanted to review the draft wording before making any decisions. A Board member questioned whether (a) was really necessary.

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