The new webcast can be accessed on the IASB website. Earlier webcasts and webinars on IFRS 17 are available through an archive.

The Core & More concept introduced in 2015 aims to present corporate reporting in a smarter way, organising financial and non-financial information based on the interests of users. Information relevant for a wide range of stakeholders would be in the Core report, and supplementary details for a more limited audience would form the More reports. The paper presented today develops the concept further and provides ideas on what information could be presented in each of the pillars. It also explores how technology might support the Core & More concept and addresses the relationship between Core & More and integrated reporting. Please click to access the paper Core & More: an opportunity for smarter corporate reporting on the Accountancy Europe website.

The call for action notes that "the overwhelming number of existing disconnected non-financial information reporting frameworks complicates coherent, consistent, and comparable wider corporate reporting, and steadily increases the reporting burden for companies". Accountancy Europa calls on the different standard-setting bodies and initiatives to coordinate their efforts to streamline existing reporting frameworks addressing similar pieces of non-financial information. The organisation believes that the final step in this development should aim at developing a single global framework for non-financial information reporting. (At the very same event IASB Chairman Hans Hoogervorst noted in a speech that the IASB could not and would not take the decisive leadership role Accountancy Europe hints at in the call for action.) Please click to access the Call for action: Enhance the coordination of non-financial information initiatives and frameworks on the Accountancy Europe website.

Mr Hoogervorst's main message at the beginning of his peech was: "Keep calm and carry on". He explained that he was not at all concerned that the relevance of financial reporting is under threat. He noted that financial statements are primarily backward looking and, therefore, always provide an important reality check. And he also noted that the more information became available, the more need there was for comparability, standardisation and quality control.

Yet Mr Hoogervorst also conceded that times are changing and everybody needs to adapt - including the IASB. In this context he noted two aspects of the IASB's work. Firstly, he stressed the IASB's current effort at better communication in financial reporting. He noted a few projects and initiatives that form part of the effort and he also explained that the IASB may need to give preparers more guidance on how to provide context to their financial statements. And secondly, Mr Hoogervorst mentioned the IASB's non-mandatory Management Commentary Practice Statement and even went so far as to call it "an early foray of the IASB into integrated reporting". As times has moved on, however, he noted that the IASB is currently looking at taking up a project to update practice statement.

As a last aspect, Mr Hoogervorst looked at environmental, social and governance (ESG) reporting and the question of whether the IASB should become active in that field. He noted that audience for sustainability reporting is broader than that of financial reporting and that much of sustainability reporting is primarily focused on the external effects of the performance of a company. Mr Hoogervorst said that he believed that the IASB does not have the expertise to become the standard-setter in this field and that widening the audience and scope of the Board's work would most likely lead to loss of focus and identity. He stated:

If we want to create more clarity in the somewhat chaotic world of wider corporate reporting, we all need to define clearly what our responsibilities and competences are. If we all try to do everything, the most likely outcome is that nothing gets done properly.

However, Mr Hoogervorst did not just leave it at that. He also followed up on the question who should take responsibility for harmonisation of ESG requirements and try to prevent overload. He argued that since so much of ESG reporting is closely intertwined with public policy goals, public authorities would be best equipped to pursue harmonisation.

Please click to access the full text of the speech on the IASB website.

Background

The materiality project arose as part of the IASB's Disclosure initiative started in 2012. The first document published as part of this project was the May 2013 feedback statement Discussion Forum – Financial Reporting Disclosure, which outlined the IASB's intention to consider a number of further initiatives, including a project on materiality, seeking to develop application guidance or educational material on materiality, with input from an advisory group.

A draft practice statement on materiality was published on 28 October 2015, however, subsequently it became clear that some of the proposed guidance needed to be authoritative to have the desired effect, so the project was split up into a part that would see a practice statement published and a part that was intended to result in amendments to IAS 1 and IAS 8. Both, the final practice statement and the exposure draft of proposed amendments were published today. Please click for more information about ED/2017/6 Definition of Material (Proposed amendments to IAS 1 and IAS 8).

Objective and scope

The objective of IFRS Practice Statement Making Materiality Judgements is to assist management in presenting financial information about the entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. It applies to the preparation of financial statements in accordance with full IFRS. It is not intended for entities applying the IFRS for SMEs.

General characteristics of materiality

The Practice Statement works with the definition of materiality in the current Conceptual Framework. Similar definitions are contained in IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. However, the IASB is currently working on a new definition of materiality (see ED/2017/6 Definition of Material (Proposed amendments to IAS 1 and IAS 8 published today)) and the IASB notes that if any changes are made to the definition of material in IAS 1 and IAS 8 as a result of the proposals in the ED, the Board will make consequential amendments to the Materiality Practice Statement and the forthcoming revised Conceptual Framework.

The Practice Statement notes that the need for materiality judgements is pervasive in the preparation of financial statements and affects recognition, measurement, presentation, and disclosure. When assessing whether information is material, an entity considers its own specific circumstances and the information needs of the primary users of its financial statements.

Four-step process

The Practice Statement notes that an entity may find it helpful to follow a systematic process in making materiality judgements and offers an example of such a process.

• Step 1. The entity identifies information that has the potential to be material. In doing so it considers the IFRS requirements applicable to its transactions, other events and conditions and its primary users’ common information needs.
• Step 2. The entity then assesses whether the information identified in Step 1 is material. In making this assessment, the entity needs to consider quantitative (size) and qualitative (nature) factors.
• Step 3. In a next step, the entity organises the information within the draft financial statements in a manner that supports clear and concise communication.
• Step 4. In the most important step, the entity then steps back and assesses the information provided in the draft financial statements as a whole. It needs to consider whether the information is material both individually and in combination with other information. This final assessment may lead to adding additional information or removing information that is now considered immaterial, aggregating, disaggregating or reorganising information or even to begin the process again from Step 2.

Status and effective date

The Practice Statement is not an IFRS. Consequently, entities applying IFRSs are not required to comply with the Practice Statement. However, it should be noted that materiality is a pervasive principle in IFRSs. The Practice Statement does not have an effective date, it can be applied with immediate effect.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the Practice Statement on the IASB website
• IASB project summary and feedback statement (link to IASB website)
• Video hosted by IASB Board member Françoise Flores explaining the Practice Statement.
• Our summary of IFRS Practice Statement Making Materiality Judgements
• IFRS in Focus newsletter summarising the Practice Statement
• Our IAS Plus project page on Disclosure initiative — Materiality
• Our IAS Plus project page on Disclosure initiative — Overview

Background

The materiality project arose as part of the IASB's Disclosure initiative started in 2012. The first document published as part of this project was the May 2013 feedback statement Discussion Forum – Financial Reporting Disclosure, which outlined the IASB's intention to consider a number of further initiatives, including a project on materiality, seeking to develop application guidance or educational material on materiality, with input from an advisory group.

A draft practice statement on materiality was published on 28 October 2015, however, subsequently it became clear that some of the proposed guidance needed to be authoritative to have the desired effect, so the project was split up into a part that would see a practice statement published and a part that was intended to result in amendments to IAS 1 and IAS 8. Both, the final practice statement and the exposure draft of proposed amendments were published today. Please click for more information about Practice Statement 2 Making Materiality Judgements.

Suggested changes and reasoning behind the changes

The changes proposed in ED/2017/6 Definition of Material (Proposed amendments to IAS 1 and IAS 8) all relate to a revised definition of 'material' which is quoted below from the ED:

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of a specific reporting entity’s general purpose financial statements make on the basis of those financial statements.

Three new aspects of the proposed definition should especially be noted:

• Obscuring. The existing definition only focused on omitting or misstating information, however, the Board concluded that obscuring material information with information that can be omitted can have a similar effect. Although the term obscuring is new in the definition, it was already part of IAS 1 (IAS 1.30A).
• Could reasonably be expected to influence. The existing definition referred to 'could influence' which the Board felt might be understood as requiring too much information as almost anything ‘could’ influence the decisions of some users even if the possibility is remote.
• Primary users. The existing definition referred only to 'users' which again the Board feared might be understood too broadly as requiring to consider all possible users of financial statements when deciding what information to disclose.

In addition, the ED proposes some clarifications to the explanation accompanying the definition of material. These proposals include:

• Relocating some information that explains rather than defines material from the definition into the explanatory paragraphs accompanying the definition;
• adding a description of the characteristics of the primary users of financial statements;
• noting that the consideration of the characteristics of users must be judged in the entity’s circumstances;
• explaining that even well-informed and diligent users may need to seek the aid of an adviser from time to time; and
• highlighting that the materiality of information is assessed either individually or in combination with other information.

Effective date

The exposure draft does not contain a proposed effective date which the IASB intends to decide on after the exposure. However, the Board has already concluded that an entity should apply the amendments prospectively and that earlier application will be permitted.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• IFRS in Focus newsletter explaining the proposed amendments
• Our IAS Plus project page on Disclosure initiative — Materiality
• Our IAS Plus project page on Disclosure initiative — Overview

Please click through for the notes relating to the following issues:

New issues:

• IFRS 15 — Pattern of revenue recognition in a real estate contract
• IAS 41 — Taxation in fair value measurements
• IAS 28 — Contributing property, plant and equipment to an associate

Agenda decisions to finalise:

• IFRS 9 — Financial assets eligible for the election to present changes in fair value in other comprehensive income
• IAS 12 — Interest and penalties
• IFRS 1 — Subsidiary as a first-time adopter
• IAS 37 — Costs considered in assessing whether a contract is onerous
• IAS 38 — Goods acquired for promotional activities
• IAS 28 — Acquisition of an associate or joint venture from an entity under common control

Administrative session:

• Work in progress

The pre­lim­i­nary and un­of­fi­cial notes taken by Deloitte observers for the entire meeting are also available.

Background

The requirements in IFRSs, in particular in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, make a distinction between how an entity should present and disclose different types of accounting changes in its financial statements. Changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively.

Companies sometimes struggle to distinguish between accounting policies and accounting estimates and enforcers have identified divergent practices. Therefore, the Interpretations Committee received a request to clarify the distinction. The Interpretations Committee observed that it would be helpful if more clarity were given and brought the issue to the IASB’s attention for future consideration.

Suggested changes

The changes proposed in ED/2017/5 Accounting Policies and Accounting Estimates (Proposed amendments to IAS 8) are focused on three areas:

• Relation of accounting policies and accounting estimates to each other.
  • The ED proposes to clarify the exisiting definition of accounting policies by removing the terms ‘conventions’ and ‘rules’ as the Board feels that their meanings are not clear and because these terms are not used elsewhere in IFRSs. Also, the Board proposes to clarify the term ‘bases’ by using ‘measurement bases’ instead.
  • The ED proposes to add a definition of accounting estimates because so far a defintion has not been provided. The definition makes clear that accounting policies are the overall objectives and accounting estimates are the inputs used in achieving that objective by stating that "accounting estimates are judgements or assumptions used in applying an accounting policy when, because of estimation uncertainty, an item in financial statements cannot be measured with precision".
• Selecting an estimation technique or valuation technique. The ED proposes to clarify that selecting an estimation technique or valuation technique (the ED deliberately uses both terms as both terms are used in IFRSs) used when an item cannot be measured with precision constitutes making an accounting estimate.
• IAS 2 Inventories. In developing the ED, the Board concluded that that selecting one of the two cost formulas for interchangeable inventories is not an attempt to estimate the actual flow of these inventories, therefore it does not constitute making an accounting estimate but selecting an accounting policy.

In addition, the ED proposes deleting an example form the implementation guidance for IAS 8, namely Example 3 – Prospective application of a change in accounting policy when retrospective application is not practicable.

Effective date

The exposure draft does not contain a proposed effective date which the IASB intends to decide on after the exposure. However, the Board has already concluded that an entity should apply the amendments only to changes in accounting policies and changes in accounting estimates that occur on or after the start of the first annual period in which the entity applies the amendments.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• IFRS in Focus newsletter on the proposed amendments
• Our IAS Plus project page on Changes in accounting policies and estimates

There are seven topics on the agenda.

Wednesday 20 September

The meeting starts with a continuation of the background sessions designed to help the Board understand dynamic risk management. This session focuses on prepayment risk and the concept of capacity (whether an entity has enough hedged items against which derivatives could be designated in a hedging relationship).

The Board will discuss three implementation projects:

• Discussions will continue on a potential Exposure Draft to amend IAS 8 to make it easier to apply a change in accounting policy arising from an agenda decision prospectively.
• The staff are recommending that the Board finalise its proposed amendments to IAS 19 on plan amendments, curtailment or settlement amendments, but not the proposed amendments to IFRIC 14 in relation to the availability of a refund.
• The staff are recommending that the IASB complete the 2015-2017 Cycle of its Annual Improvements: IAS 12 the income tax consequences of dividends; IAS 23, when specific borrowing remains outstanding after completion of the asset; and IFRS 3 and IFRS 11 the initial measurement when an entity gets control of a joint operation. The IFRS 3 and IFRS 11 amendments were exposed separately, but will be completed as part of Annual Improvements. The IASB expects to issue the amendments in December 2017.

The day concludes with a continuation of the discussions on rate-regulated activities. This session focuses on initial measurement when an entity incurs costs in excess of estimates and the regulatory agreement allows the entity to recover these costs over more than one reporting period by increasing the rate charged. The question is how time value of money and an entitlement to earn a return should be taken into account when measuring the regulatory asset.

Thursday 21 September

The Board will discuss business combinations under common control, for the first time since April 2016. The purpose of the session is to give the Board a recap of previous discussions. The staff plan to bring papers back to the Board with the goal of developing a Discussion Paper for release in 2018.

The Board will be given a brief update on the research programme.

The Board will continue its discussions on primary financial statements. The staff are recommending that the Board give priority to developing an EBIT subtotal over developing a management performance measure—they plan to use the term ‘profit before financing and income tax’ rather than EBIT. The staff also recommend introducing an investing category into the statement of financial performance, although it would not be the same as the ‘investing activities’ category in the cash flow statement. The staff also think that cash and cash equivalents should be used as a proxy for cash and temporary investments of excess cash that form part of capital structure.  The papers also look at the requirement in IAS 1 to disclose expenses by nature or function.  The staff are recommending that the choice be retained but with additional disclosure. Additionally, by nature must be used when an entity is unable to allocate natural components to functions on a consistent and non-arbitrary basis.

The last agenda item is Conceptual Framework. The current draft has been undergoing a fatal flaw review. In that draft, the Basis for Conclusions alludes to the trade-off between relevance and faithful representation, but the Framework does not have an explicit principle, or any guidance on how to assess any such trade-off. This was identified as a weakness by reviewers. The staff are recommending that the Framework acknowledge the trade-off but not add any guidance on how to make that trade-off when the IASB sets Standards.

More information

Our pre-meeting summaries are available on our September meeting note page and will be supplemented with our popular meeting notes after the meeting.

The Board will discuss the following:

• Dynamic risk management (education session)
• IFRS im­ple­men­ta­tion issues
• Rate-regulation activities (education session)
• Business combinations under common control (education session)
• Research update
• Primary financial statements
• Conceptual framework

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries as well as observer notes from the meeting on this page as they become available.

The study notes that the potential benefits of using structured data have not been realised yet although the use of such data can potentially improve the way financial information can be consumed by investors, regulators, and other users. The authors argue that this is primarily the case because companies mainly see structured data and reporting as a cost burden.

Therefore, the study looks first at what companies are saying about the costs associated with their XBRL filings and then goes through several case studies to demonstrate how, with proper implementation, companies can benefit from structured data. The authors conclude that if companies

• bring structured reporting in-house instead of using outside vendors to prepare their regulatory filings,
• implement inline XBRL so that the data is both human and machine readable, and
• curtail the use of company-specific tags

they can reduce costs, allowing both companies and users to benefit from structured reporting.

Please click to access the full study on the CFA Institute website.