Disclosure initiative

Date recorded:

The Technical Principal provided an overview of the papers that would be discussed at this meeting. She also mentioned that the Disclosure Initiative team would bring a number of papers in September, including papers on (a) Amendments to IAS 1 – a feedback summary and analysis arising from the recently issued Exposure Draft; (b) Materiality – to present the results of the research conducted and ask the IASB whether additional guidance was needed; (c) Significant accounting policies – proposals to amend IAS 1; and (d) Principles of Disclosure – papers discussing the objectives and purpose of the notes.


Establishing a consultative group

The Technical Principal introduced the agenda paper which discussed the pros and cons of the IASB establishing a separate consultative group to support the Disclosure Initiative. The Staff proposed that the Disclosure Initiative should continue to use the IASB’s existing advisory groups for consultation, e.g. ASAF, CMAC and GPF, and should not establish a specific consultative group.

One Board Member indicated his agreement with the Staff recommendation, although he indicated that there was a need for strong interaction with market authorities, especially as regards discussions around materiality.

The Technical Principal responded that in terms of materiality, they were already discussing the issue with IAASB and IOSCO. These discussions had been informal and the staff was not proposing creating a specific group. The Board Member responded that it was important to involve them more and with a formal commitment. The chairman agreed with this recommendation.

Another Board Member indicated that he agreed with the Staff recommendation and suggested adding joint discussions with user groups focussing on this project in addition to individual discussions already held.

The Chairman concluded that there was agreement with the Staff recommendation.


Amendments to IAS 7 – Reconciliation of liabilities related to financing activities – summary of feedback

The ASAF Coordinator introduced the agenda paper describing a requirement that entities disclose and explain their net debt reconciliation. The Staff concluded that there was support for the proposed amendment. In March 2014, the IASB had tentatively decided to explore amending IAS 7 by requiring a reconciliation of the opening and closing balance of liabilities that relate to cash flows from financing activities. The IASB had asked the Staff to undertake further outreach with users and preparers to understand whether the proposed amendment would meet the objective of providing information. The agenda paper described the comments received during the outreach activities.

In the paper the Staff also proposed the IFRS Taxonomy include only elements directly mentioned in the amendment to IAS 7 and the Illustrative Example.

In relation to taxonomy considerations, one Board member indicated that it was necessary to explain what paragraphs 13-18 on IFRS taxonomy consideration were saying, whether the objective was to create practice or leave it to users. The ASAF Coordinator responded that XBRL would add more rows and columns; users could ignore them or create more. The Staff was not suggesting that user had to use the format. She further clarified that the taxonomy was a dictionary and did not dictate what preparers had to present. Another Board member indicated that there was a need for more discussions about the taxonomy and common practice: the Board needed to anticipate common practice. Another Board member indicated that in many jurisdictions, XBRL should equate to what was presented in the financial statements, and there was a need to start to develop a common practice in XBRL.

In relation to the additional reconciliation requirement several Board Members supported the proposed amendment while expressing specific concerns.

One Board member made a reference to the example where there was only one acquisition; however, in real life there were several acquisitions and disposals. He asked whether the Staff was thinking of requiring disclosure of each significant acquisition and loss of control. He mentioned that it was necessary to explain to users that this was not an extra burden, since the information was already required; he further indicated that discussion of materiality in this context was very important. The PM responded that the agenda paper was based on the fact that IFRS 3 already requires those disclosures for each significant acquisition, the information is already in the financial statements but it would be presented in a more cohesive way.

Another Board member expressed concern that, when considering the real life situation of thousands of subsidiaries, the reconciliation requirement could delay the release of the consolidated financial statements. The ASAF Coordinator responded that, generally, users were looking for this information. The information was available, but it had to be put together. Users were looking for a tabular reconciliation and detailed information about what happened in the entity. She acknowledged that this was a first step and not the solution for all user concerns.

Another Board member questioned why example 2 in the agenda paper subsumed pensions within financial liabilities. The ASAF Coordinator responded that the objective was to demonstrate that the definition of financing activities varied among entities, although the Staff was not proposing to add example 2 in the Exposure draft. In relation to paragraph 8 of the agenda paper, the Board member further asked, if there were elements that were not on the face of the balance sheet, whether the presumption was that the entity would still have to apply the reconciliation to those items. The ASAF Coordinator confirmed that this would be the case. Another Board member further indicated that the entity determined what was financing; there were different business models for defining debt.

Several Board members did not agree with the proposed amendment. One Board member expressed concerns that the additional requirement would not be valuable and would lead to duplication. Some Board members also expressed concerns about the applicability of this requirement for banks. The ASAF Coordinator responded that banks could prepare this reconciliation, but the question was whether this would be useful information. She suggested that they could add a comment in the Basis of Conclusions.

The Chairman requested a vote on the question on the taxonomy. It was approved by eleven members.


Amendments to IAS 7 – Disclosure about restrictions on cash and cash equivalents

The Technical Associate introduced the agenda paper which describes a requirement to add to the existing requirements of disclosing restricted cash and cash equivalents where an entity would have to disclose the costs that would be incurred if the cash or cash equivalents were remitted as earnings (including a distribution of profits) to a parent entity.

Several Board members expressed concern as to why the requirement would be limited to remittances of earning and did not include other common transactions between a parent and its subsidiaries. One Board member also indicated that the proposed definition of the new element to be created in the IFRS taxonomy would too broad and not consistent with the Staff proposal.

Another Board member asked whether the requirement would be to disclose the cost for remittances between an entity and its direct parent, to its ultimate parent or both. The Technical Associate indicated that it referred to cash remittances to the immediate parent.

Additional concerns expressed by other Board Members were related to the fact that the requirement seemed too broad; for example, there were tax planning opportunities, it was not clear whether an entity would have to disclose the most probable cost, the most advantage etc., there was a range of costs depending on what option an entity may choose. Other concerns were centred around the difficulty on implementation. Some also suggested that such disclosure would likely end up being boiler-plate.

The Chairman indicated that the Staff would need to continue to work on the project and asked the Board what additional issues they had identified.

One Board member indicated that it was important for the project to identify what the objective was. Another Board member indicated that there was no short-term fix about requiring disclosure of the cost of moving cash and that Staff would have to assess whether this was feasible or should be turned into a long-term project. Another Board member indicated that this was a very important disclosure and the Staff should find a way of making it operational.

The Technical Associate responded that they would provide an update in September. The Chairman concluded that there was agreement in objecting to the Staff proposal.


Note: Agenda paper 11D – Summary of due process was not discussed given that IAS 7 amendments were not approved.


Principles of Disclosure (POD) – Cross-referencing

The Project Manager introduced the agenda paper discussing the feedback received from the Conceptual Framework project related to concerns about duplication of financial information. The Staff recommended that (i) IFRSs include a general principle for cross-referencing that would apply across IFRSs and that would replace cross-reference guidance in particular Standards; (ii) the IASB add additional guidance for the use of cross-referencing to information otherwise outside of financial statements and (iii) the IASB do not develop narrow focus amendments to IFRSs on cross-referencing.

Several Board members agreed on not developing a narrow focus amendment while others expressed concerns in different areas. One Board member indicated that there had been concerns from users that there was a lot of duplication, that information was scattered around and that cross-reference was the main problem. Users needed to access the information more easily, the information needed to be provided directly or by cross-reference, depending on different circumstances, but, generally, users still preferred to have the information in one place.

Another Board member agreed and indicated that they did not explore sufficiently any concerns regarding access. The Board would need to better understand user concerns in this area and what the interrelation of cross-reference was with XBRL. The Project Manager responded that if information was presented outside the financial statements, then it should also be accessible through XBRL.

Some Board members also indicated that the Board needed to focus on cross-references between the management commentary and the financial statements. Some Board members suggested doing the analysis on a standard-by-standard basis, while others cautioned against this suggestion.

One Board member expressed concerns about how the information would be audited and that the Staff should work with auditing standard setters. The Technical Principal responded that they were discussing with the IAASB and she was aware that auditors were publicly consulting on this topic.

The Chairman suggested that both approaches should be combined (developing a general principle for cross-reference and an in-depth analysis on a standard-by-standard basis), clarifying that before moving to a detailed analysis of each standard it was necessary to have a clear principle for referencing.

The Project Manager informed Board members that they would work on developing a general principle and would review individual standards that could help identifying a general principle. No objections were raised.


Research Programme – Financial Statement Presentation (FSP)

The Technical Principal introduced the agenda paper containing an outline of the history of the former FSP project. The Staff recommended that the IASB (a) add a project to its Research Programme on Performance Reporting and (b) specify that the project was a [short-term/medium-term] project.

Several Board Members agreed with the Staff proposal while some expressed concern that there were several projects currently and this was not a key one; other concerns raised related to the fact that the objective of the project did not seem to be clear. It was suggested finishing the Conceptual Framework before moving forward with this project. One Board Member suggested that the Staff should prepare a "mapping" to identify where exactly this project would lead to, its interaction with the Disclosure Initiative, and critical areas.

The Chairman indicated that they had to finish what the Board had already started. He requested a vote and the majority approved the Staff recommendation to add a project to the IASB’s Research Programme on Performance Reporting.

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