The proposed amendments are intended to help entities identify and disclose all accounting policies that provide material information to primary users of financial statements; and identify immaterial accounting policies and eliminate them from their financial statements.

IAS 1 requires companies to disclose their ‘significant’ accounting policies. The IASB wants to replace the reference to ‘significant’ with a requirement to disclose ‘material’ accounting policies to clarify the threshold for disclosing information.

The proposals state that information about an accounting policy is material if, when considered together with other information included in a company’s financial statements, it can influence financial statement users’ decisions about the company.

The questions relating to proposed IAS 1 amendments cover the following:

1. amend paragraph 117 of IAS 1 to require entities to disclose their ‘material’ accounting policies instead of their ‘significant’ accounting policies;
2. changes para 117A of IAS 1 to state that not all accounting policies relating to material transactions, other events or conditions are themselves material to an entity’s financial statements; and
3. proposed new par 117B to list examples of circumstances in which an entity is likely to consider an accounting policy to be material to its financial statements.

The IASB will also release additional guidance on IAS 1 to support company reporters around issues of materiality disclosure, as well as an update to IFRS Practice Statement 2. This will add further explanations and examples to help companies apply the concept of materiality when making decisions about accounting policy disclosures.

IASB has not confirmed when the amendments will be mandatory for IFRS reporters.

The consultation closes for comment on 29 November 2019.

IASB Exposure Draft Disclosure of Accounting Policies

Sara White | 7 Aug 2019