12/12/2019 - EFRAG's Comment Letter on the IASB Exposure Draft ED/2019/6 Disclosure of Accounting Policies.
EFRAG has published its Comment Letter in response to the IASB's Exposure Draft ED/2019/6 Disclosure of Accounting Policies (Proposed Amendments to IAS 1 and IFRS Practice Statement 2) (the ED).
On 1 August 2019 the IASB issued the ED which proposes to amend IAS 1 Presentation of Financial Statements to require entities to disclose 'material' rather than 'significant' accounting policies. To support this amendment the IASB also developed guidance and examples to illustrate the application of materiality to accounting policy disclosures, both in IAS 1 and in IFRS Practice Statement 2 Making Materiality Judgements.
EFRAG supports 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 suggests 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 notes 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 welcomes the proposed guidance and examples to help entities determine when an accounting policy is material and suggests some improvements.
The Comment Letter is available here.