The project manager introduced Agenda Paper 9: Distinction between a change in accounting policy and a change in accounting estimate. The IFRS Interpretations Committee (IFRS IC) had received a request to clarify the distinction between a change in accounting policy and a change in accounting estimate. This issue was raised because enforcers were using divergent practices in distinguishing the two. The IFRS IC had tentatively decided not to take this issue onto its agenda. In its tentative agenda decision, the IFRS IC had stated that a change in accounting estimate would only be permitted when it led to more reliable and relevant information. One comment letter received on this tentative agenda decision said that this statement should be removed. The respondent said in its letter that it would not be appropriate to extrapolate the “more reliable and relevant”-criterion in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors for changes in accounting policies to changes in accounting estimates as this was unsupported by the Standard. The staff had therefore changed the wording of the proposed agenda decision to “equally or more relevant information”. The project manager asked the Committee whether they agreed with the agenda decision and the changed wording.

One Committee member said that she was unhappy with the wording of the proposed agenda decision as it said “regardless of the change”. She thought that this could be read as if the “equally or more relevant”-criterion could also be applied for changes in accounting policy which was clearly not in line with IAS 8 as the Standard only says “more relevant” for changes in accounting policy. The implementation director confirmed that this would indeed not be appropriate. This was also supported by one of the observing IASB members.

One IFRS IC member asked whether the concern of the respondent about extrapolation had any adverse effect on the extrapolation made from IFRS 13.65 to all changes in accounting estimates. The project manager reminded the Committee that IFRS 13.65 stated that a change in valuation technique or its application would be appropriate if the change resulted in a measurement that was equally or more representative of fair value in the circumstances. IFRS 13.66 said that such revisions should be accounted for as accounting estimates. The Committee member replied that ‘representative’ was not the same as ‘relevant’ or ‘reliable’. She said that the guidance in IFRS 13 Fair Value Measurements was very specific and she was concerned over the generalisation in the proposed agenda decision. This was supported by several IFRS IC members.

One IFRS IC member said that there were two changes in accounting estimates that needed to be distinguished. One was the change of inputs to an estimation method; the other was a change of the method itself. While inputs were always required to be updated from period to period, a change in estimation method could only be made if it led to better estimates. The chairman said that this had led to the use of the word “regardless of the change”. However, it was argued by another IFRS IC member that there was no guidance in this respect. She said that if the estimation method was very burdensome and a quicker, more cost-efficient approach led to an estimate that was less accurate but still reasonable, she thought that the change would be justified as long as it was disclosed. One IFRS IC member replied that this would not be possible under the current wording of the proposed agenda decision. The chairman asked if the Committee member could think of another reason than cost-benefit to change the method of estimation. She replied that she also thought of consistency reasons, i.e. the wish to value a whole class of assets and liabilities under the same method.

The chairman reminded the Committee that this discussion was unrelated to the question that led to the proposed agenda decision, i.e. the distinction between change in accounting policy and change in accounting estimate. One IFRS IC member said that he thought that the difference is that changes in accounting policies were a free choice while changes in accounting estimates were involuntary. Another Committee member disagreed but said that she liked the outcome of this discussion and that this might be suggested for the Annual Improvement Process of the IASB.

One Committee member suggested saying that the relevance of the information resulting from the change should not be worse rather than saying it should be equally good or better. She felt that “not worse” would be less stringent and felt that this would have more support amongst the Committee members.

One IFRS IC member said that, in the agenda decision, it might be helpful to distinguish between different changes in estimates as said by one Committee member before (i.e. change in inputs and change in methodology) and identifying different accounting consequences from those changes.

The chairman summarised as follows:

• General accounting requirements (IAS 8) cannot be extrapolated from specific accounting requirements (IFRS 13) – no objections from the Committee members
• The IFRS IC has wording problems with “regardless” and “equally or” in the proposed agenda decision. He asked the Committee whether they wanted “equally or” in the agenda decision. The Committee voted in favour of removing “equally or” from the agenda decision.

One Committee member asked whether the latter decision would be in conflict with IFRS 13.65. In response to that the chairman suggested adding the words “notwithstanding the specific requirements in IFRS 13 …” to the agenda decision. Another Committee member added that she is unsure that IFRS 13 could not be generalised. She said that the question was whether the “equally or” should be in the agenda decision or whether it should be an Annual Improvement to IAS 8. The chairman replied that the IASB had had the chance to change this as a consequential amendment of IFRS 13 and decided not to. He therefore thought that this was more than only an Annual Improvement. In response to that, one Committee member found that if it was too big for an Annual Improvement it would certainly be too big for an agenda decision.

Another Committee member said that he would not object to changing the Standard, however, he said, it should be common sense to not change accounting estimates for the worse. He was concerned of the notion that changing something for the worse was acceptable unless it was explicitly prohibited.

One Committee member said that the sentence in the agenda decision would not allow a change for cost-benefit reasons if the outcome would be less accurate but still reasonable. He said that this should be carefully considered by the Committee.

One observer said that he would prefer to include the sentence in the rejection note from an enforcer point of view.

The chairman summarised that he saw two alternatives after the discussion:

• Alternative 1 — propose a narrow-scope amendment to the IASB.
• Alternative 2 — reword the agenda decision.

Upon taking a vote on these alternatives, 7 out of 13 IFRS IC members were in favour of Alternative 1. When asked if any of the Committee members would object to Alternative 1, nobody objected. The IFRS IC will therefore propose a limited-scope amendment to the Board.

One Committee member asked the chairman on the language of the proposal to the IASB. He replied that it would be to prohibit changing to an estimation method that delivers worse output (subject to cost-benefit restraints).