23/01/2018 - EFRAG's Comment Letter and Feedback Statement on the IASB's Exposure Draft ED/2017/6 Definition of Material - Proposed amendments to IAS 1 and IAS 8
EFRAG has issued its Comment Letter and Feedback Statement on the IASB's Exposure Draft ED/2017/6 Definition of Material - Proposed amendments to IAS 1 and IAS 8 (the 'ED').
On 14 September 2017, the IASB published the ED with a comment period of 120 days.
The ED is essentially aiming at:
Aligning the definition of materiality in IAS 1 Presentation of Financial Statements, IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and the Conceptual Framework for Financial Reporting;
Incorporating some of the existing supporting requirements in IAS 1 into the definition to give them additional prominence (including 'obscuring information', 'could reasonably be expected to influence'); and
Improving the clarity of the explanation accompanying the definition of materiality.
In its comment letter, EFRAG:
Supports the objective to remove the inconsistencies in the definition of 'material' in the Conceptual Framework for Financial Reporting and in IFRS Standards and replacing the threshold 'could influence' with 'could reasonably be expected to influence;
Does not support the inclusion of the concept of 'obscuring' into the definition. Instead, EFRAG suggests removing the references to 'omitting', 'misstating' and 'obscuring' from the definition and defining material information more simply and directly as 'information that can reasonably be expected to, individually or collectively, influence the economic decisions that the primary users of financial statements make on the basis of those financial statements'; and
Lastly, EFRAG suggests that the IASB should concentrate the guidance on materiality in a single general standard and use cross-references from other IFRS Standards to that guidance when needed.
The Feedback Statement describes the main comments received by EFRAG in response to its draft comment letter and how these comments were considered by EFRAG in finalising its comment letter to the IASB.