The International Accounting Standards Board (IASB) has recently updated its definition of "material" as it appears in IAS 1 and IAS 8, and by a similar process now wants to clarify accounting policy changes as defined in IAS 8. Regarding the latter, the IASB has just finished collecting feedback on its exposure draft (ED).
Definition of material
The IASB found that the previous definition of "material" left room for interpretation. How can materiality judgements be made, and consistency within all the standards and the conceptual framework be kept? Thus it published an ED, Definition of Material (proposed amendments to IAS 1 and IAS 8), in September 2017, took comments on it until 15 January 2018, and finally published a practice statement on Making materiality judgements. This statement provides non-mandatory guidance and practical examples on how to apply judgement in financial statements.
Regarding accounting policy under IAS 8, the IASB published its ED, Accounting policy changes – proposed amendments to IAS 8, on 27 March 2018. The idea is to relieve issuers in cases where optional amendments in their accounting policies conflict with agenda decisions made by the IFRS Interpretations Committee (IFRIC). Currently, IAS 8 requires entities to apply the new policy as if they had always done so, except where this is impracticable. The revised standard will provide guidance on how far back to apply the new accounting policy while considering the benefits for users and costs for the entity. The deadline for comments was 27 July 2018.
The big picture
Thus far, the general opinion has been that these updates will not lead to major changes in practice. The amendments hope to clarify definitions so as to provide extra guidance to financial statement preparers.
Back in January, KPMG published a comment letter on the Definition of Material ED, providing the IASB with its recommendations.
Please watch this space for more IFRS news. We will examine the final drafts once they have been published.
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