IASB proposes amendments to IAS 1 and the Materiality Practice Statement

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01 Aug 2019

The International Accounting Standards Board (IASB) has published an exposure draft 'Disclosure of Accounting Policies (Proposed amendments to IAS 1 and IFRS Practice Statement 2)' with proposed amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements. Comments are requested by 29 November 2019.



The feedback on the Board's DP on Principles of Disclosure suggested that guidance is required to assist entities in determining which accounting policies to disclose. It was noted that the application of materiality is key to deciding which accounting policies to disclose, however IAS 1 Presentation of Financial Statements does not refer to materiality but states that ‘[a]n entity shall disclose its significant accounting policies' without the Board providing a definition for the term ‘significant’.

Therefore, the Board decided to develop amendments to paragraphs 117-122 of IAS 1 to require entities to disclose their material accounting policies rather than their significant accounting policies. To support this amendment the Board has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2 Making Materiality Judgements to accounting policy disclosures.


Suggested changes

ED/2019/6 Disclosure of Accounting Policies (Proposed amendments to IAS 1 and IFRS Practice Statement 2) proposes to amend paragraphs 117-122 of IAS 1 in the following ways:

  • Paragraph 117 of IAS 1 would be amended to require an entity to disclose its material accounting policies instead of its significant accounting policies;
  • Paragraphs 117A-D of IAS 1 would be added to explain how an entity can identify a material accounting policy (for example an accounting policy has changed during the reporting period, was chosen from alternatives allowed in IFRSs, was developed in accordance with IAS 8 in the absence of an IFRS that specifically applies, relates to an area of significant judgement and assumption, or reflects unique entity-specific application of an IFRS);
  • Paragraph 122, which requires an entity to make disclosures about ‘other judgements’, would be retained but would see a minor amendment to replace the reference to ‘significant accounting policies’ with the reference to ‘material accounting policies’.

The Board has also developed additional guidance to be included in the Materiality Practice Statement for entities to use when applying the four-step materiality process to accounting policy disclosure. This additional guidance is supported by two new examples that highlight the need to focus on information that is useful to users of financial statements and demonstrate how the application of the four-step materiality process can address the issues of: i) boilerplate or generic information being disclosed in accounting policies that are material to the financial statements; and ii) instances in which accounting policy disclosures contain only information that repeats the requirements of IFRSs. 

Comments on the proposed changes are requested by 29 November 2019.


Effective date and transition

The exposure draft does not contain a proposed effective date as the IASB intends to decide on this after exposure. The proposed amendments would be applied prospectively and early adoption would be permitted.


Dissenting opinion

Board member Martin Edelmann dissented from issuing the exposure draft. Mr Edelmann does not believe that materiality is a concept that should be applied to accounting policies as accounting policies differ from other information in the financial statements. He is also concerned that the application of the concept to accounting policies might lead to a loss of important information.


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