On or about 28 November 2019, the Accounting Standards Council (ASC) has submitted its comment on ED/2019/6 Disclosure of Accounting Policies (Proposed amendments to IAS 1 and IFRS Practice Statement 2) to IASB.
ASC is in supportive of the IASB’s decisions to apply and explain the concept of materiality in determining accounting policy disclosures.
The ASC are of the view that:
- the proposed amendments would result in coherence of principles within IFRS Standards relating to both application and disclosure of accounting policies and other requirements and would also help entities to make better judgements, and users to understand those judgements, in determining accounting policy disclosures.
- the proposed explanatory guidance has the potential to guide entities in making materiality judgements on accounting policy disclosures.
- the proposed examples of material accounting policies complement those explanations, with a focus on applying the concept of materiality to an entity’s own circumstances, and therefore, providing entity-specific accounting policy disclosures.
However, the ASC believe that accounting policies relating to material transactions, other events or conditions may be material, even if the accounting policies only duplicate the requirements of IFRS Standards and their application does not require an entity to make any choice or judgement. Accordingly, they are also concerned with in proposed Example T in IFRS Practice Statement 2 Making Materiality Judgements.
ASC view that material accounting policies are accounting policies that (i) relate to material transactions, other events or conditions, and (ii) are needed to understand other material information in the financial statements. They include accounting policies that reflect how an entity has applied the requirements in IFRS Standards to its own circumstances, but do not preclude the particular accounting policies in italics.
Therefore, ASC suggest that the IASB reconsider its view that the particular accounting policies in italics are themselves not material. ASB’s conclusion in proposed Example T in IFRS Practice Statement 2 Making Materiality Judgements.
Source: ASC website, 28 November 2019