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Disclosure initiative – Education session

Date recorded:

The Technical Principal opened the session by stating that the purpose of this meeting was to provide the Board with an update about the different streams dealt with under the umbrella of the so-called disclosure initiative. The staff had provided the Board with a slide deck (agenda paper 3A) which they were going to explain in this session.

The major change to the components of the disclosure initiative that had been presented to the Board in September 2013 was the inclusion of a further short-term step dealing with disclosures on debt. The Principal said that the contents of that project stream would be covered in a separate session later this afternoon.

The first of the three streams was called 'New EDs and digital reporting'. There was no specific timeline attributed to this stream, as it was seen as an ongoing effort. The only major development to this stream was the inclusion of the IFRS taxonomy/XBRL team into the disclosure initiative. One Board member said that the Board, when discussing disclosures, would never consider XBRL aspects. He wondered how they could make sure that any proposals from the IASB would not create conflicts for the taxonomy team. The Technical Principal replied that the staff were involving the taxonomy team when drafting technical guidance and that the general feedback had been very positive. The Board member then asked how qualitative disclosures would be included in the taxonomy. The Senior Technical Director replied that this would be achieved through using a block/text tag. The Technical Principal continued by explaining that the conceptual framework team was working on the ontology, being the meaning of terms and their interaction, and that this would also benefit the disclosure initiative. In order to make the entire process more visible to everyone the staff proposed to take a paper to the trustees in April regarding the due process of the taxonomy project.

She then turned to the three short-term initiatives, being the proposed amendments to IAS 1 (due to be published on Tuesday), materiality, and changes in debt. The Technical Principal did not go into any detail as regards the proposed amendments to IAS 1 but would report back after the end of the comment period of the ED. On materiality, she briefly explained that the purpose of this step was to seek improvement on how the concept of materiality was being applied in practice – with the objective of making disclosures more effective. The following session would provide more details about this initiative. The third initiative under the short-term steps was devoted to addressing requests from the investor community regarding a requirement for entities to disclose their net debt. When this had been discussed initially in October 2013, the Board had felt that the issue was broader for it to be dealt within the proposed amendments of IAS 1. Meanwhile, staff had carried out some more work and would present proposals in the last session later in the afternoon.

The Technical Principal then moved on to the block containing the medium steps, starting with the research project on principles for disclosures in IFRSs. This was a medium-term project that would explore whether the IASB could set principles with regards to disclosure that would ultimately replace IASs 1, 7 and 8. The Technical Principal said that they would also see whether they could built on work that had been done for the financial statement presentation (FSP) project. Overall, this part of the disclosure initiative would be a project where the project managers would work closely with the Conceptual Framework team. Staff expected to bring a paper to the Board for the April IASB meeting.

One Board member said that many comments had been received in the conceptual framework project suggesting restarting the FSP project. She said that a lot had been done in the FSP project with regard to disclosure that could be used in this project. However, the FSP project had been more ambitious and had struggled because of the proposal to alter the fundamental structure of financial statements. This part of the disclosure initiative would be a very major project, but on the other hand it should be considered what lessons had been learned in the FSP project. The project manager said that a similar view was presented at the ASAF meeting and would be considered.

Another Board member said that the scope of the project should be clear. He also said that FSP should not be the starting point for this project. He said that it should not be forgotten that the FSP project had been a joint project with the FASB whilst the disclosure initiative was an IASB-only project. He asked what the timing on the project was with regard to the conceptual framework project, which would be finished by the end of 2015. He said that the Discussion Paper on this project should be held back until at least one year after finalisation of the conceptual framework project. In addition, he said that the relationship to the project on the review of existing Standards was not clear. The Technical Principal agreed that the FSP was not the starting point. However, she noted that presentation and disclosure were integrally linked and could not be looked at separately.

The chairman asked if and when they had to take a decision whether to reopen the FSP project. The Technical Principal responded that the staff would not propose to reopen the FSP project. She said that the IASB should merely decide which parts of the FSP project should be used in the disclosure initiative. The question was, however, whether the IASB wanted a presentation project. One Board member said that it might be a good idea to have some education sessions on the FSP project. The Technical Principal agreed.

Another Board member questioned whether the FSP project was really that closely related to the disclosure project. He thought that this was not what had been asked for by constituents during the agenda consultation. The Senior Technical Director said that it might be helpful to issue a position paper with the IASB’s view rather than a discussion paper. The vice chairman said that after the next education session it should be decided whether the project should be added to the agenda without any further consultation or whether the Board should wait for the next agenda consultation to be launched in 2015.

Turning then to the other medium-term step, being a research project on a review of existing standards, the Technical Principal said that this project depended on the principles of disclosure, which would need to be determined in the conceptual framework project first. One Board member raised the question whether the review of existing disclosures in IFRSs to identify and assess redundancies, conflicts and duplication was really dependent on the conceptual framework project being completed or whether that could not be started now. The Technical Principal conceded that this was a valid point and that staff was in contact with the taxonomy team, given that the taxonomy was, in essence, a complete list of all IFRS disclosures, with the aim of looking whether something could already be done.

Another Board member noted that regulators would take a critical view as regards the wording 'as a minimum' in some standards (i.e. they were of the view that disclosures needed to be made regardless of materiality), and that this should be part of a project. The Technical Principal responded that, in general, the 'as a minimum' wording in any particular standard could and should be overridden by materiality considerations. She acknowledged that this was not always understood this way, though.

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