The first two discussions also featured feedback from the World standard-setters meeting held earlier that week. The topics covered during the meeting were the following (numbers in brackets are references to the corresponding paragraphs of the summary):

• 2015 Agenda consultation (1-22). ASAF members discussed (a) the factors used to allocate resources between standards-level projects, research and maintenance and implementation, (b) the prioritisation of the research programme, (c) the level and mix of implementation support provided, (d) the pace of change and the level of detail given in IFRS, and (e) a proposal to extend the interval between agenda consultations to five years.
• Conceptual Framework (23-54). ASAF members discussed (a) possible implications for IAS 37 Provisions, Contingent Liabilities and Contingent Assets of the proposals in the Conceptual Framework exposure draft, (b) the proposals on measurement in the ED, and (c) possible implications of the ED for the rate-regulated activities project.
• Clarifications to IFRS 15 (55-58). The IASB staff provided an overview of the exposure draft of clarifications to IFRS 15 and asked the ASAF members (a) to comment on the high hurdle applied by the IASB when considering whether and how to amend IFRS 15 and (b) to provide their preliminary views on the questions in the ‘Invitation to comment’ section of the ED.
• Measuring quoted investments in subsidiaries, joint ventures and associates at fair value -unit of account (59-82). ASAF members were asked to provide their views on the relevance of the proposed measurement model included in the exposure draft Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value published in September 2014.
• Pollutant pricing mechanisms (83-96). ASAF members considered a possible model to account for a cap-and-trade type of emissions trading scheme that reflected the feedback received from ASAF members at the July 2015 meeting.
• Equity method of accounting (97-104). The FASB briefly outlined its simplification project on the equity method of accounting, which includes eliminating the requirement for an entity to measure at fair value its share of the investee’s identifiable assets and liabilities. The IASB staff then sought the views of the ASAF’s members on the IASB staff’s preliminary proposals to amend the equity method of accounting.
• IASB project update including insurance contracts (105-113). The IASB staff provided an overview of the recent IASB’s tentative discussions on the insurance contracts project, which focussed on (a) requirements for insurance contracts with participation features and (b) the different effective dates of IFRS 9 and the new insurance contract. The staff then presented an overview of the IASB’s current projects, a summary of the actions taken on the advice provided by the ASAF in previous meetings and the suggested agenda topics for the December 2015 and April 2016 ASAF meetings .

A full report of the meeting is available on the IASB's website.

Background

The IASB initiated its disclosure initiative in December 2012 as part of its response to the Agenda Consultation 2011. In March 2014, a project on materiality was added to the disclosure initiative. The objective of the project is be to help preparers, auditors and regulators use judgement when applying the concept of materiality in order to make financial reports more meaningful. The final pronouncement the IASB is driving at is a Practice Statement, not a standard. Consequently, entities applying IFRSs are not required to comply with the Practice Statement, unless specifically required by their jurisdiction. Furthermore, non-compliance with the Practice Statement will not prevent an entity's financial statements from complying with IFRSs, if they otherwise do so.

Suggested guidance

The guidance proposed in ED/2015/8 IFRS Practice Statement - Application of Materiality to Financial Statements is intended to provide explanations and examples to help management apply the definition of materiality. The guidance covers three main areas: characteristics of materiality, presentation and disclosure in the financial statements, and Omissions and misstatements. It also contains a short section on applying materiality when applying recognition and measurement requirements.

Characteristics of materiality. The PS builds on the definition of materiality in the Exposure Draft ED/2015/3 Conceptual Framework for Financial Reporting that states: "Information is material if omitting it or misstating it could influence decisions that the primary users of general purpose financial reports make on the basis of financial information about a specific reporting entity." It states that materiality is pervasive to the preparation of general purpose financial statements and needs to be considered in the primary financial statements as a whole. The IASB also concedes that judgement needs to be applied to assess whether information could reasonably be expected to influence decisions that its primary users make. The PS also notes that the assessment of whether information is material needs to be on both an individual and a collective basis and also needs an overall assessment and does involve assessing qualitative and quantitative factors.

Presentation and disclosure in the financial statements. The PS notes that in preparing the financial statements, management should consider the objective of providing information that is useful to users in assessing the prospects for future net cash inflows to the entity and in assessing its stewardship of the entity's resources. This objective provides the context for materiality judgements and may lead to different materiality assessments in different parts of the financial statement. The IASB proposes three steps - to assess what information should be presented in the primary financial statements, to assess what information should be disclosed within the notes (including assessment of appropriate emphasis), and then to review the financial statements as a whole - to ensure that the financial statements are a comprehensive document with an appropriate overall mix and balance of information. The IASB also states that an entity shall not reduce the understandability of its financial statements by obscuring material information with immaterial information or by aggregating material items that have different natures or functions, although it concedes that "IFRS does not prohibit entities from disclosing immaterial information".

Omissions and misstatements. The PS notes that the materiality of identified errors or omissions needs to be assessed individually and on basis of the financial statements as a whole. Material misstatements or omissions that offset each other still are considered material misstatements of the financial statements as such. The PS also states that intentionally made misstatements shall always be considered material.

Recognition and measurement. The PS notes that materiality considerations also apply to decisions not to apply a requirement in an IFRS when recording a particular item on grounds of the effect of not applying it being considered immaterial. It stresses that some entities might choose practical expedients for this reason. However, the PS states that IFRS recognition and measurement requirements need to be applied if their effect is material and that financial statements do not comply with IFRSs if they contain either material errors or immaterial errors made intentionally to achieve a particular presentation of an entity’s financial position, financial performance or cash flow.

Initial application and transition

Given the proposed PS is not a mandatorily applicable IFRS, it does contain neither a proposed effective date nor transition guidance. The IASB also notes that the PS may undergo further changes even after being finalised depending on developments in the conceptual framework project and the project on principles of disclosure.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• IASB Snapshot publication explaing the PS
• Our IAS Plus project page on materiality

A summary of the agenda for the meeting is set out below:

Agenda papers for the meeting are available on the IASB's website.