IASB Better Communication in Financial Reporting
The IASB’s has a number of projects underway to promote the effective communication of information in the financial statements. Key projects include:
- Primary Financial Statements
- Principles of Disclosure
- Materiality Practice Statement
- Definition of Material
- IFRS Taxonomy
The FRC is monitoring these projects and responding to the IASB’s consultations.
Principles of Disclosure
The objective of this research project is to improve existing guidance in IFRS that helps entities determine the basic structure and content of a complete set of financial statements. The focus is on reviewing the general requirements in IAS 1 Presentation of Financial Statements, and considering how they may be revised. The aim is to develop a Disclosure Standard that improves and brings together the principles for determining the basic structure and content of the financial statements, in particular the notes.
The research covers a number of areas including disclosure principles for effective communication and the organisation, placement, format and linkage of information, similar to the principles set out in the FRC’s Guidance on the Strategic Report. The IASB is also exploring an objective-based approach to drafting disclosure requirements, that has been developed with the assistance of the New Zealand Accounting Standards Board.
In March 2017, the IASB published a Discussion Paper Disclosure Initiative – Principles of Disclosure.
Standards level review of disclosure
The objective of this project is to develop a drafting guide for the IASB to use when setting disclosure requirements in new and amended Standards, based on the principles being developed in the Principles of Disclosure project. The project may also identify targeted improvements to disclosure requirements in existing Standards, where conflicts, duplication and overlaps are identified. This project is part of the IASB’s Disclosure Initiative but not currently on their active agenda.
In September 2017, the IASB issued a Practice Statement Making Materiality Judgements.
The Practice Statement provides guidance on how to use judgement when selecting information to provide in financial statements prepared applying IFRS Standards. It is a non-mandatory document companies are permitted to apply to financial statements prepared any time after 14 September 2017.
In the same month, it issued an Exposure Draft Definition of Material. The Exposure Draft is open for comment until 15 January 2018.
The aim of the proposed amendment is to ensure that the definition of material is consistent across IFRS Standards Conceptual Framework for Financial Reporting, IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and provide guidance to help improve consistency in the application of that concept.
Amendments to IAS 1 Presentation of Financial Statements
The IASB made narrow-scope amendments to IAS 1 Presentation of Financial Statements, intended to address some of the concerns expressed about existing presentation and disclosure requirements and to ensure entities are able to use judgement when preparing their financial statements.
The IASB published the final Standard Disclosure Initiative: Amendments to IAS 1 in December 2014. It is effective for periods beginning on or after 1 January 2016, with earlier application permitted.
Amendments to IAS 7 Statement of Cash Flows
The IASB made narrow-scope amendments to IAS 7 Statement of Cash Flows requiring disclosure of changes in liabilities arising from financing activities, including changes arising from cash flows and non-cash changes, excluding the changes in contributed equity. In practice, this disclosure will usually take the form of a reconciliation, similar to the debt reconciliations already provided by many UK companies on a voluntary basis.
In January 2016 the IASB published the final Standard Disclosure Initiative: Amendments to IAS 7—2016. It is effective for periods beginning on or after 1 January 2017, with earlier application permitted.
Responses to IASB consultations
Debbie Crawshawe, Project Director
Rosalind Szentpéteri, Project Director