IASB proposes new reduced disclosure IFRS

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26 Jul, 2021

The International Accounting Standards Board (IASB) has published the exposure draft 'Subsidiaries without Public Accountability: Disclosures' that would permit eligible subsidiaries that are small and medium-sized entities (SMEs) to apply IFRSs but with reduced disclosure requirements. The deadline for submitting comments is 31 January 2022.


As part of the feedback on the 2015 Agenda consultation, some respondents had noted that subsidiaries that are SMEs report to their parent, for consolidation purposes, numbers that apply the recognition and measurement requirements of IFRSs. Using the IFRS for SMEs is not attractive to them as it would mean that they would have to maintain two sets of accounting information. Instead, they would welcome less onerous disclosure requirements as that would reduce costs without removing information needed by the users of their financial statements. They, therefore, suggested that the Board consider developing a reduced disclosure IFRS.

The Board acknowledged these concerns and decided to pursue a project that would analyse adaptations required to the disclosure requirements of the IFRS for SMEs and possibly develop a reduced disclosure IFRS that would allow eligible subsidiaries to apply, in principle, the recognition and measurement requirements of full IFRSs and the disclosure requirements of the IFRS for SMEs with minimal tailoring of those disclosure requirements. A draft of this possible new standard has been published today.


Key proposals

The proposals in ED/2021/7 Subsidiaries without Public Accountability: Disclosures aim at entities that

  • (a) do not have public accountability; and
  • (b) are subsidiaries of an ultimate or intermediate parent that produces consolidated financial statements available for public use that comply with IFRSs.

The application of the new proposed IFRS would be optional for subsidiaries that are eligible to apply it (i.e., those that fulfil the preceding two conditions).

Proposed new disclosure requirements

The proposed new standard contains about 200 paragraphs of disclosure requirements listed by standard. For developing these, the Board started with the disclosure requirements in the IFRS for SMEs and tailored those where they differed from those in full IFRSs by adding disclosure requirements for topics or accounting policy options that are addressed in full IFRSs but omitted from the IFRS for SMEs and by deleting disclosure requirements relating to accounting policies available in the IFRS for SMEs but not in full IFRSs.

There are exception to this approach explained in the Basis for in Conclusions of the new standard. They especially relate to:

  • disclosure objectives;
  • investment entities;
  • changes in liabilities from financing activities,
  • exploration for and evaluation of mineral resources; and
  • defined benefit obligations.

An appendix to the proposed new standard lists the disclosure requirements in full IFRSs that would be replaced by the disclosure requirements in the exposure draft.

The proposed new standard does not contain reduced disclosure requirements for IFRS 17 Insurance Contracts. The Board argues that while it found that some entities applying IFRS 17 would be entitled to apply the new standard, IFRS 17 introduces a model for accounting for insurance contracts that is supported by its disclosure requirements. If there were possible reductions, these would be limited in extent. Also, in the early years of applying IFRS 17, the interests of users of the financial statements may be best served by full IFRS 17 disclosures. Hence, a subsidiary that applies the proposed new standard and applies IFRS 17 is required to apply the full disclosure requirements of IFRS 17.

The exposure draft does include reduced disclosure requirements that apply to a subsidiary that is preparing its first IFRS financial statements and has elected to apply the new proposed standard. The exposure draft expressly asks respondents whether they agree with including reduced disclosure requirements for IFRS 1 First-time Adoption of International Financial Reporting Standards in the draft standard rather than leaving the disclosure requirements in IFRS 1 untouched.

The deadline for submitting comments on these proposals is 31 January 2022.


Effective date

The exposure draft proposes that an entity may elect to apply the new standard for reporting periods beginning on or after a certain date (approximately 18–24 months after publication) with earlier application permitted. An entity would apply the new standard in the current period but not in the immediately preceding period, however, the entity would provide comparative information for the preceding period for all amounts reported in the current period’s financial statements.


Additional information

The following additional information is available on the IASB website and on IAS Plus:


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