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IFRS Taxonomy (education session)

Date recorded:

Agenda Paper 13A: IFRS Taxonomy Due Process

The Senior Technical Manager informed the Board that the purpose of the session was to present the results of the IFRS taxonomy due process trial that had been undertaken as part of the exposure draft (ED) for proposed amendments to IAS 7 Statement of Cash Flows, and obtain the Board’s view on what to recommend to the Due Process Oversight Committee (DPOC) for their October meeting.

The staff recommended aligning the standard-setting with the IFRS taxonomy, i.e. concurrent public consultation and approval for EDs and final standards/amendments. Otherwise, issues identified during the public consultation for the final IFRS taxonomy update could not be considered for the final standard/amendments. Also, the cooperation between technical staff and taxonomy staff would be beneficial for the development of a standard or amendments. Exposing technical documents and taxonomy documents at the same time as EDs and final standard/amendments would mean that the public consultation on the final taxonomy would be removed. To address this a fatal flaw review of the final IFRS Taxonomy Update would be performed at pre-ballot stage of the final standard/amendments by members of the IFRS Taxonomy Consultative Group and other interested parties. This review would also be beneficial for the technical documents as the taxonomy gave a different perspective. The staff emphasised that the taxonomy document would still be separate from the technical document but suggested that on an ED basis, the invitation to comment should also include taxonomy-related questions.

One Board member asked whether this would delay expedited EDs. The Senior Technical Manager replied that a fatal flaw review at pre-ballot stage would give the taxonomy team enough time to review.

The Vice-Chairman expressed concern that a concurrent review with an ED might mean additional work as the final standard/amendments could be significantly different to the ED. He therefore suggested publishing the taxonomy at the same time as the final standard/amendment. The Chairman supported this view.

One Board member said that different groups would review the technical and the taxonomy document. He said that therefore he did not see a huge benefit in simultaneous exposure. The Executive Technical Director replied that a simultaneous exposure could inspire collaboration between those teams which would be beneficial in the staff’s view. The Chairman said that a simultaneous disclosure might be beneficial to reduce the number of exposures but he also said that preparers were not interested in taxonomy. One Board member disagreed and said that if different teams looked at the exposures there would be no complaints about too many exposures. He warned that a simultaneous exposure could be interpreted as the taxonomy being part of the standard. This was supported by another Board member. He also said that in the IAS 7 trial where the ED and the taxonomy update were issued simultaneously, only around 10% answered taxonomy-related questions. For him this sent a clear message from constituents that they did not want to answer taxonomy-related questions at an ED stage. The taxonomy update was like a translation that should be done when the standard/amendment was final. This view was supported by several Board members. One Board member however disagreed and said that feedback on taxonomy should be stimulated by simultaneous exposure. He said it could not be estimated what damage the absence of feedback caused. A fellow Board member added another benefit of the taxonomy. During the deliberation of a standard, Board members might say the same things but mean different things. Translating the draft standard into taxonomy could reveal those differences, but only before the final publication.

A Board member suggested increasing the interaction within the IASB between technical staff and taxonomy staff. He proposed to continue the trial to expose both documents at the same time and defer the decision regarding the due process.

The Senior Technical Manager concluded that the majority agreed with a concurrent fatal flaw review of a final standard/amendment and a publication of the proposed taxonomy update at the time the final standard/amendment is published. The due process would be discussed with the DPOC in October.

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