Improvements project

Date recorded:

The IASB project leader reviewed the background to this project and asked liaison standard setters for their comments on the proposals to eliminate choices within existing IASs:

  • FIFO/LIFO - IAS 2 Inventories: The Sub-committee proposes that the LIFO alternative be prohibited. Comments: Many of the standard setters reported tax complications that would arise if LIFO were banned. The possibility of using IASs only for group accounts and allowing individual entities to use LIFO was discussed. Fundamental errors - IAS 8: The Sub-committee proposes that all errors (whether or not fundamental) should be corrected by restating prior period financial statements Comments: The Japanese commercial code does not permit restatement of financial statements; and UK ASB reported adverse reaction in the UK to trying to drop the 'fundamental' element of the requirement.
  • Change in accounting policy: The Sub-committee proposes a requirement to restate prior period financial statements for all changes in accounting policy. No comments were raised.
  • Leases - IAS 17: The Sub-committee proposes to prohibit allocating initial direct costs over the lease period. Comments: Japan commented that it was expensing that should be prohibited; and the UK commented that were many more fundamental issues that should be addressed in relation to IAS 17 and that it could send out the wrong signals to issue a minimally revised standard. Canada supported these comments.
  • Translation of goodwill and fair value adjustments - IAS 21: The Sub-committee proposes the use of the closing rate. It was suggested that there were many other issues that needed to be dealt with in IAS 21. Borrowing costs - IAS 23: The Sub-committee proposes the prohibition of capitalisation. Comments: Australia commented that this is a big question and not really suitable for a quick fix, as there are likely to be diverse views; and FASB commented that if capitalisation is allowed to remain that it is important that there be adequate guidance on how to capitalise.
  • Investments in subsidiaries and associates - IAS 27 and 28: The Sub-committee proposes the use of the equity method only. Many comments were made in relation to whether or not IASs should be applied to group accounts or individual entities. This will be discussed further by the Board.
  • Joint ventures - IAS 31: The Sub-committee proposes the use of the equity method only. The UK commented that the committee need to think carefully about joint ventures in all circumstances, including those in which the joint venture is not an entity.

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