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Disclosure of 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.​ 

EFRAG published its feedback statement on the IASB Exposure Draft ED/2019/6 Disclosure of Accounting Policies on 22 January 2020. 

The IASB issued the final Amendments on 12 February 2021.

On 17 February 2021 the European Comission issued a letter requesting advice on the endorsement ot the Amendments.

On 15 March 2021, EFRAG published its draft endorsement advice​ which was  open for comment until 7 June 2021. 

EFRAG published its Comment Letter on 12 December 2019 which supported the proposal to replace the undefined reference of 'significance' with the defined concept of 'materiality'. EFRAG issued a feedback statement summarising the feedback received from its constituents on its DCL in January 2020.

The IASB issued Disclosure of accounting policies (Amendments to IAS 1 and to the IFRS Practice Statement 2) on 12 February. EFRAG issued its draft endorsement advice on 15 March 2021 with comment period ending on 7 June 2021.

At its March meeting EFRAG TEG agreed to recommend a draft endorsement which was subsequently approved by the EFRAG Board by written procedures.

On 18 July 2018, the IASB added a project to its agenda to help entities to apply materiality judgements to accounting policy disclosures. The IASB added this project in response to feedback on the Disclosure Initiative - Principles of Disclosure Discussion Paper (see section 2.2.8 above).

The IASB issued its Exposure Draft on 1 August 2019. The proposed amendments revise 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.

EFRAG published its Comment Letter on 12 December 2019 which supported the proposal to replace the undefined reference of 'significance' with the defined concept of 'materiality'. EFRAG issued a feedback statement summarising the feedback received from its constituents on its DCL in January 2020.

The IASB issued Disclosure of accounting policies (Amendments to IAS 1 and to the IFRS Practice Statement 2) on 12 February 2021. ​

At its March meeting, EFRAG TEG agreed to recommend a draft endorsement advice which was subsequently approved by the EFRAG Board by written procedure. EFRAG's preliminary assessment is that the Amendments satisfy the criteria for endorsement for use in the EU and therefore recommends its endorsement. ​

The draft endorsement advice was issued on 15 March 2021 with comments requested by 7 June 2021.

​EFRAG submitted its Endorsement Advice Letter​ to the European Commission on 8 July 2021. 

Next Steps

EFRAG has completed its diligences regarding its endorsement advice.  



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