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Disclosure initiative

Date recorded:

Analysis on amendments arising from the Disclosure Initiative

The agenda paper accompanying the session sets out analysis, recommendations and questions for the IASB with respect to ordering of the notes, subtotals, and other issues.

 

Ordering of the notes

The Technical Manager introduced the topic and asked the IASB members whether they agreed with the staff recommendations, being that the IASB should finalise the amendments regarding the ordering of the notes and that the amendments should emphasize the use of judgment when determining the order of the notes, without promoting a particular order.

The Vice-Chairman questioned whether inclusion of an example of an order of the notes based on importance or grouping of related items was necessary. He highlighted the fact that it could be confusing to emphasise to entities that they should use judgement in determining the order of the notes, and then provide them with an example. The Technical Manager responded and noted that there was already an example in IAS 1, which people had taken as a default or requirement with respect to the order of the notes. She noted that the addition of another example was to clarify that there were different ways of ordering the notes. Adding to the discussion, another IASB member pointed out that if no examples were included, people would likely continue with current practice, as that was the easiest fall-back position; which was what the amendment was trying to change.

Another IASB member noted that she agreed with the staff recommendation and suggested that it would be helpful to include a comment in the Basis for Conclusions to clarify that consistency in the order of notes over time would be expected, unless there was a reason for a change.

Another IASB member questioned whether there was an order of the notes that would be considered unacceptable, and if not, questioned what the objective would be that required the use of judgement. The Technical Manager responded saying that IAS 1:114 notes that an entity should consider both comparability and understandability when determining the order of the notes, which was an objective that required judgement. The IASB member noted that there was judgement required in terms of effective communication, noting that there were financial statements that were very difficult to read and other financial statements that were well ordered and presented and it was easy to find things. He questioned whether it was the job of accounting standards to provide education about communication. Another IASB member responded saying that he did not believe this was education on good communication, as the IASB was not telling people how to present their notes, but rather, saying that they must think about how they could best present them.

The Technical Manager noted that the reason this amendment arose was because people felt restricted by the current language. The Senior Director for Technical Activities added that this was an amendment to give entities more flexibility to present the notes in a different way.

Another IASB member questioned whether the amendment extended to the ability to distribute accounting policies throughout the notes, to which the Technical Manager confirmed that it did.

There was discussion amongst several of the IASB members with respect to the extent to which the amendment would result in changes to current practice. One IASB member noted that he had had discussions at the Advisory Council meeting the previous week with an individual from an entity that was already looking at implementing the amendment, adding that the entity had specifically chosen to break out the accounting policies and distribute them throughout the notes. He further noted that he believed change might happen more quickly than expected because this was something entities had wanted to do for a while.

All fourteen IASB members agreed with the staff recommendations in the agenda paper, subject to inclusion of a comment in the Basis for Conclusions to clarify that consistency in the order of notes over time would be expected, unless there was a reason that justified a change.

 

Subtotals

The Technical Manager introduced the topic and asked the IASB members whether they agreed with the staff recommendations as set out in the agenda paper.

One IASB member expressed concern about the proposals in this area. He noted that in certain jurisdictions, for example in the USA and Australia, providing non-GAAP information on the face of the Statement of Comprehensive Income was not permissible, and that there was the potential that the approach proposed in the agenda paper would provide additional incentive or authorisation to do so. He suggested to the staff that the clarification to paragraph 85b that was provided by IOSCO in their comment letter should be taken into consideration. He further suggested that more outreach, in particular with securities regulators, was needed to ensure that what was being proposed would not cause issues from a regulatory perspective. The Technical Manager responded and clarified that what the staff was proposing was not a new requirement or providing an opening for inclusion of an additional subtotal, but additional guidance to give more discipline to an existing requirement in IAS 1.

Another IASB member expressed reservations with respect to the proposal not to proceed with paragraph 85b. She questioned whether it would instead be helpful to include the wording IOSCO had proposed in their comment letter with respect to this paragraph, as that made it clear that the idea was to present line items that got one from whatever subtotals they had presented to the ones required by IFRSs, which would take some of the ambiguity out of the wording in the Exposure Draft.

Another IASB member noted that he was also in favour of including the IOSCO wording and that he was uncomfortable with removing paragraph 85b entirely, as it was included for a reason, which was to try and ensure transparency so it was clear on the face of the statement what was or was not included in the subtotals presented. A further IASB member also noted that she supported the suggestion to retain paragraph 85b or some variant of said paragraph.

The IASB members voted on the recommendations set out in question 2 in the agenda paper. All IASB members agreed with the first three staff recommendations. With respect to the staff recommendation pertaining to paragraph 85b of IAS 1, the IASB did not agree with the staff recommendation in the agenda paper not to finalise the proposed amendment to paragraph 85b and instead favoured retaining paragraph 85b, but amending it to reflect wording in the IOSCO comment letter.

 

Other issues

All IASB members agreed with the staff recommendation in the agenda paper to finalise the other Disclosure Initiative amendments proposed in the Exposure Draft, subject to drafting, and with the staff analysis and recommendations set out in the table in paragraph 40 of the agenda paper.

There were no further comments.

 

Analysis on amendment arising from presentation of items of OCI of equity-accounted investments

The Technical Associate introduced the agenda paper and asked the IASB members whether they agreed with the staff recommendation in the agenda paper to finalise the proposed amendment to IAS 1 arising from the presentation of items of other comprehensive income arising from equity-accounted investments as drafted in the Exposure Draft.

All IASB members agreed with the staff recommendation in the agenda paper. No further comments were made.

 

Due process steps and balloting

The Technical Associate introduced the agenda paper and asked the IASB members to respond to the questions set out in the agenda paper.

All IASB members confirmed that they agreed with the staff recommendations in the agenda paper, and that they were satisfied that the due process requirements had been met and that sufficient consultation and analysis had been undertaken to begin the balloting process for the amendments. No IASB members noted that they planned to dissent from the publication of the amendments.

In relation to a comment made earlier in the discussion on subtotals, an IASB member recommended that an observation should be included in the Basis for Conclusions that there could be jurisdictions that, from a regulatory perspective, may not permit certain presentations. The staff agreed to explore how this comment could be addressed.

No further comments were made.

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