The Board discussed three recommendations for its annual improvements projects.

Reporting compliance with IFRS

The Board discussed whether IAS 1 Presentation of Financial statements should be amended to provide guidance on situations where the financial statements of an entity are based on, but not in full compliance with, IFRS. The issue has arisen as concerns have been expressed by the IAASB about how IFRS is referred to in financial statements and audit reports in situations in which the preparer has not adopted IFRSs in full. The concern is specifically that there is potential for misunderstanding of the information given.

The Board agreed that this was an issue and agreed that something had to be done in this respect.

The following additions were proposed to IAS 1:

14A Where the entity's financial statements are described as being based on IFRSs but are not fully compliant with IFRSs, the entity shall:

• a. disclose all instances where IFRSs are not complied with; and
• b. indicate the significance of those differences to its financial statements.

Considering the proposal, Board members expressed specific concerns about the proposal in 14A(b), and whether it would be possible for constituents to deal with the 'significance' requirement. The Board was also concerned that significance was a vague expression and discussed whether 'materiality' would be a sufficient replacement.

The Board stated that it would not take a decision at the November meeting, and decided that the staff should go back and explore whether to change the second sentence in the proposal, and whether more guidance would be necessary.

Presentation of 'net finance costs' on the face of the income statement

The Board discussed how a conflict between the requirements in IAS 1 and IFRS 7 Financial Instruments: Disclosures regarding presentation of finance costs on the face of the income statement should be resolved.

The Board decided that Paragraph IG 13 of IFRS 7 should be deleted as it is confusing. This would clarify that IAS 1 alone addresses presentation of net finance costs, and clarify that interest income and interest expense should not be presented net on the face of the income statement (unless, as previously decided by IFRIC, the gross amounts of interest income and interest expenses are also shown on the face of the income statement).

Classification of the liability component of a convertible instrument

The Board discussed whether the liability component of a convertible instrument with an obligation to deliver cash or other assets more than 12 months from the balance sheet date should be classified as current or non-current.

The Board discussed and agreed to amend IAS 1.60(d) to state that a liability would be classified as current when 'the entity does not have an unconditional right to defer delivery of cash or other assets to settle the obligation for at least twelve months after the balance sheet date'.

This would remove the conflict in IAS 1.60(d) with IAS 1.62 and IAS 32.16, which considers conversion of an obligation into equity as settlement of a liability. Basing the liability classification in the balance sheet on whether there is an unconditional right to deliver cash or other assets would better reflect the entity's liquidity situation.