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Disclosure Initiative - Comprehensive Project


The IASB is undertaking a broad-based initiative to explore how disclosures in IFRS financial reporting can be improved. This initiative has been informed by a discussion forum, Disclosure in Financial Reporting, which was held in January 2013. In conjunction with this, the IASB staff also conducted a survey. A Feedback Statement on these events was published in May 2013.

The Disclosure Initiative is made up of a number of implementation and research projects, as follows:

Amendments to IAS 1

In March 2014, the IASB issued an Exposure Draft with narrow-focus amendments to IAS 1 Presentation of Financial Statements to address some of the concerns raised at the Discussion Forum. EFRAG commented on the IASB proposals in July 2014.

In December 2014, the IASB issued the final amendments to IAS 1. In May 2015, EFRAG published its Endorsement Advice where it supported the adoption of the amendments and recommended their endorsement.

More information is available here.

Amendments to IAS 7

In December 2014, the IASB issued an Exposure Draft proposing amendments to IAS 7 Statement of Cash Flows to require a reconciliation of the opening and closing liabilities that form part of an entity's financing activities, excluding the changes in contributed equity. The IASB also proposed short term amendments to IAS 7 to improve disclosures about restrictions on cash. EFRAG commented on the IASB proposals in May 2015.

On 29 January 2016, the IASB issued the final amendments to IAS 7 in relation to the reconciliation. In June 2016, EFRAG published its Endorsement Advice where it supported the adoption of the amendments and recommended their endorsement.

More information is available here.

Practice Statement on the Application of Materiality

On 28 October 2015, the IASB published ED/2015/8 IFRS Practice Statement: Application of Materiality to Financial Statements (the 'ED'). The objective of the ED is to provide guidance to assist management in applying the concept of materiality to general purpose financial statements prepared in accordance with International Financial Reporting Standards.

EFRAG issued its draft comment letter on 27 November 2015 and its final comment letter on 8 March 2016.  In the letter, EFRAG supported the objective to provide non-mandatory application guidance on materiality. However, EFRAG considered that the objectives of the guidance should be clarified to state that the practice statement can be useful, beyond preparers, to promote a common understanding of the role and application of materiality by all those involved in the issue of financial statements. EFRAG also considered that the guidance should be drafted in a more concise and practical way and focus on areas where it is most difficult to exercise judgement on the application of materiality; in particular how materiality is applied in line with the specific roles of the primary financial statements and of the notes.

The IASB published IFRS Practice Statement 2: Making Materiality Judgements on 14 September 2017. 

More information is available here.

Definition of Materiality

On 14 September 2017, the IASB published Exposure Draft ED/2017/6 Definition of Material – Proposed Amendments to IAS 1 and IAS 8 ('the ED').  The ED refines the definition of material to:

  • align the wording of the definitions in IAS 1, IAS 8 and the definition in the Conceptual Framework for Financial Reporting (the Conceptual Framework)—the wording is currently similar but not identical;
  • incorporate 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
  • improve the clarity of the explanation accompanying the definition of material.

On 2 October 2017, EFRAG issued its draft comment letter where it supported the objective to remove the existing inconsistencies in the definition of "material" and replacing the threshold 'could influence' with 'could reasonably be expected to influence'. However, EFRAG suggested removing the references to 'omitting', 'misstating' and 'obscuring' from the definition of 'material' 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.

More information is available here.

Principles of Disclosure

The IASB published the Discussion Paper DP/2017/1 Disclosure Initiative-Principles of Disclosure ('IASB DP') on 30 March 2017, with comments requested by 2 October 2017. The objective of the Principles of Disclosure research project is to identify or clarify existing principles of disclosure in IFRS Standards, with the aim of:

  1. Helping preparers exercise better judgment and communicate information more effectively;
  2. Improving the effectiveness of disclosures for users of financial statements; and
  3. Helping the IASB develop and improve disclosure requirements in Standards.

The IASB DP considers the existing requirements in IAS 1 Presentation of Financial Statements as a starting point with a view to either making amendments to IAS 1 or creating a new disclosure standard to replace parts of IAS 1.

On 12 October 2017, EFRAG published its final comment letter in which EFRAG fully supported the aims of the IASB's Principles of Disclosure project. EFRAG also agreed with the description of the 'disclosure problem' insofar as it acknowledged that the problem is multifaceted, includes behavioural aspects and that the requirements in IFRS Standards are not the only root cause. EFRAG considered that, in the next steps of the project, a high priority should be given by the IASB to a comprehensive review of standards-level requirements. The review should, in particular, aim to identify and remove any disclosure requirements that are disproportionate or redundant.

Lastly, EFRAG regretted that a number of other issues identified in its 2012 Discussion Paper Towards a Disclosure Framework for the Notes are not addressed in greater depth, in particular  the boundaries of the financial statements  and the effects of technology on Financial Reporting.

On 15 November 2017, EFRAG published a feedback statement summarising the comments received in response to its draft comment letter and how they had been considered in the drafting of its final coment letter.  

More information is available here.

Standards-level review of disclosure

The objective of this research project is to develop a drafting guide for the IASB to use when developing disclosure requirements in new and amended Standards. The project also aims to identify targeted improvements to disclosure requirements in existing Standards. This project will be informed by the principles being developed in the Principles of Disclosure project. 

More information is available here.

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