Disclosure initiative

Date recorded:

Disclosure Initiative — Accounting Policies — Examples — Agenda Paper 11A


In the July 2018 meeting the Board decided to develop guidance and examples for the Materiality Practice Statement which would help preparers in deciding what to disclose as ‘significant’ accounting policies, as required by IAS 1 Presentation of Financial Statements, in their financial statements.

In the October 2018 meeting there were concerns expressed by a few Board members around whether it is possible to apply the concept of materiality to accounting policies and whether the application of materiality would lead to too many or too few policies being disclosed.

In the December 2018 meeting the Board tentatively decided to amend paragraphs 117-124 of IAS 1 Presentation of Financial Statements to require entities to disclose their material accounting policies rather than their significant accounting policies.

Staff analysis

At the October 2018 meeting the Board agreed that staff should develop examples to be included in the Materiality Practice Statement that help preparers to apply materiality judgements to accounting policies.

Staff have developed two examples which they think will help those preparing financial statements avoid:

  1. boilerplate or generic descriptions of accounting policies that are material to the financial statements; and
  2. accounting policy disclosures that only repeat the requirements of IFRS Standards.

Staff recommendations

Staff recommend that the Board use two examples to demonstrate the practical application of guidance to help entities apply the four-step materiality process in the Materiality Practice Statement to accounting policy disclosure. Staff also recommend that those two examples:

  • a) highlight the need to focus on information which is useful to users of financial statements; and
  • b) demonstrate how the application of the four-step materiality process can address the issues of:
    1. boilerplate or generic information being disclosed in accounting policies that are material to the financial statements; and
    2. accounting policy disclosures containing only information that repeats the requirements of IFRS Standards.

Board Discussion

Most Board members expressed support for the examples proposed. Some drafting suggestions were given, such as aligning the wording with other examples in the Materiality Practice Statement. It was also suggested that the second example could be more affirmative and accentuate the positives of avoiding boilerplate disclosures and limiting repetition.

One Board member clarified with the Staff that when a business has segments that are equally material the Company as a whole would have to consider the accounting policies for each segment on both a quantitative and qualitative basis to understand what should be included. It was confirmed that it was possible for all segments to have material policies.

One Board member did not support the proposals as they do not support the concept of materiality being applied to accounting policies.

Board Decisions

13 Board members voted in favour of the staff recommendations.

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