Disclosure initiative

Date recorded:

Restrictions on cash (see Agenda Papers 11B)

In September the IASB asked the staff for additional analysis before deciding whether or not to finalise the amendments requiring information to be disclosed about restrictions that affect the decisions of an entity to use cash and cash equivalents.  The staff had concluded that they had not been able to solve the concerns raised in September because the proposed amendments dealt only with cash and cash equivalents and not with other liquid assets for which the matters were equally relevant.  

The staff recommended that further research be undertaken, but that this research would be undertaken as part of the Principles of Disclosure project and that the proposed amendment should not be finalised in its current form.  Nevertheless, the staff provided the IASB with proposed revised wording should it decided to finalise the proposal rather than follow the staff recommendation. If the IASB decided to finalise the amendment it would be asked to confirm that it was satisfied with the due process steps it has taken.


IASB discussion and decision

The Board approved the staff recommendation to undertake further testing and separate this project from the amendments to IAS 7 related to a reconciliation of liabilities. The Board also decided that the staff would analyse the liquidity project more broadly and would consider the feedback to be obtained from the agenda consultation. The staff would also analyse the research performed by the FASB on this area.

During the discussion, several Board members raised concerns about the lack of clarity of the proposed wording to amend IAS 7 (see paragraph 9 of the agenda paper). The concerns were related to (i)  the wording was not operational (ii) it was not clear what type of costs should be considered because every single transaction carried costs, (iii) the analysis did not focus on causes and effects regarding cash disincentives; and (iv) a more extended fatal flaw process was needed.

Several Board members were concerned making continual changes to IAS 1 or IAS 7.  The Board therefore agreed that before deciding when or how to complete the project they will assess the feedback they receive on the Agenda Consultation Request for Views.  That feedback will be discussed by the Board in the first half of 2016.    

Principles of Disclosure Discussion Paper (See Agenda Paper 11A)

In relation to the broader 'principles of disclosure' Discussion Paper (DP), the staff set out the due process steps completed so far; and recommended that the IASB gave the staff permission to move to the more formal review and approval of the discussion paper (balloting).  The staff confirmed that the DP would cover: a) Content of a general disclosure standard; b) Components of financial statements; c) improvements to the principles of disclosure; d) Disclosure of accounting policies; e) Non-IFRS information; f) drafting disclosure requirement; and g) implications of the improvement proposals.

The staff recommended that the DP be open for comment for 120 days.

IASB discussion and decision

The Board approved the staff recommendations with the amendment that the comment period would be of 150 days instead of 120 as originally suggested. The change was due to concerns expressed by some Board members during the discussion due to (i) the importance of the project; and (ii) the additional work that would be required to translate the document for non-English speaking countries.

During the discussion the staff gave an indication as to the approximate extent of the document saying that it could be approximately 120 pages in length.

Amendments to IAS 7

The IASB considered the feedback on its proposals to amend IAS 7.

Liabilities reconciliation (see Agenda paper 11C)

In September the IASB decided to finalise the amendments requiring an entity to present a reconciliation of liabilities.  At this meeting the staff recommended that the effective date of the amendments to be 1 January 2017.  The IASB was also asked to confirm that it was satisfied with the due process steps it had taken.

IASB discussion and decision

The majority of Board members approved the staff recommendations with the exception of the transition provisions. Given concerns raised during the discussion that 2017 would be too early to implement the requirement to present comparative information, the Board decided that the transition provisions would not require comparative information in the year of implementation.

There were two Board members that indicated that they would dissent. They expressed concerns related to (i) the information would not be useful because it would provide incomplete information; (ii) there had not been a proper cost and benefit analysis, particularly because entities would be required to implement the amendments in 2017 and then update their information system to adapt to the changes introduced by IFRS 9 and IFRS 15 in 2018 and one year later by the changes introduced by the new lease standard; and (iii) the interaction between cash and liquidity assessment was not being addressed. 

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