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Disclosure Initiative - Accounting Policies

Description

On 18 July 2018, the IASB added a project to its agenda to develop guidance and examples to help entities apply materiality judgements to accounting policy disclosure. The IASB added this project in response to feedback on the Principles of Disclosure Discussion Paper (see EFRAG's projects Disclosure Initiative - Principles of Disclosure and Disclosure Initiative - Targeted Standards-level Review of Disclosures.)

 
The IASB is developing amendments to paragraphs 117-124 of IAS 1 Presentation of Financial Statements to require entities to disclose their material accounting policies rather than their significant accounting policies.  To support this amendment the IASB is also developing 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 (see EFRAG's project Disclosure Initiative - Definition of Material )

 
The IASB issued its Exposure Draft on 1 August 2019.

 
EFRAG published its draft Comment Letter on 27 September 2019 and its final Comment Letter on 12 December 2019. EFRAG supported the proposal to replace the undefined reference to 'significance' with the defined concept of 'materiality'. This, with other Disclosure Initiative projects, may help entities to identify and disclose accounting policies that provide material information to users and the connection to the application of materiality to other information. 

 
EFRAG suggested that the IASB further clarifies that, in applying the principle of materiality, an entity needs also to consider the accounting policies that are relevant to an understanding of its financial statements taken as a whole, consistently with Step 4 of the Materiality assessment process developed by the IASB.

 
EFRAG also noted the possible inconsistencies of the proposed guidance with the existing disclosure requirements in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors regarding accounting policies choices and changes.

 
Lastly, EFRAG welcomed the proposed guidance and examples to help entities determine when an accounting policy is material and suggests some improvements.​

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