IAS 1 — Going concern disclosures

Date recorded:

The IFRS IC had recommended to the IASB that it should make a narrow-focus amendment to IAS 1 to give guidance when an entity should be required to disclose information about material doubts upon the entity’s ability to continue as a going concern.

The IASB discussed the recommendations, however 8 of 16 IASB members voted against continuing with these proposals and therefore, this topic was removed from the IASB’s agenda.

As a matter of professional courtesy, the IASB now asked the IFRS IC if they have any questions about this decision.

Two IASB members who were present at the IFRS IC meeting confirmed that this was a very hard debate among IASB members.

One Committee member pointed out those general requirements might include disclosures on going concern, it is just not clear what the threshold is. However, the threshold is much higher for presentation than for disclosure.

The project manager adds that the IASB did not think there was a need to clarify that. Especially, as this is a very sensitive subject and different factors need to be considered. The IASB decided to leave it to the audit regulators to decide when disclosures will be required.

One Committee member said the IASB was worried about forcing disclosures upon entities that might hurt them and finds that this reasoning cannot be accepted. Instead, the IASB’s decision might encourage preparers not to make necessary disclosures.

Another Committee member expressed her disappointment with the IASB’s decision and found that the Standard is not clear enough to enforce disclosures on its grounds. She also mentioned that auditors are now taking over duties that are the standard setter’s responsibility (i.e. setting the disclosure threshold).

The Chairman concluded that the IASB should hear the concerns of the IFRS IC about the decision, however he sees only little probability that this will lead to further discussions within the Board.

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