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23 November 2019

Disclosure Initiative

In 2013, the IASB started its Disclosure Initiative project in response to widespread observations that the quality of disclosures in financial statements prepared in accordance with IFRS could be improved. The IASB’s project has evolved during the four year period to date, and has become a central theme of the Board’s work for the coming years during which it will focus on ‘Better Communication’.

In March 2018, the Board published the Discussion paper Disclosure Initiative – Principles of Disclosure.
In response to the feedback on the Principles of Disclosure Discussion Paper the Board added separate
projects to its agenda to:

  • develop guidance to help improve the way the Board drafts disclosure requirements in IFRS Standards and perform a targeted Standards-level review of disclosure requirements; and
  • develop guidance and examples to help entities apply materiality judgements to accounting policy disclosure.

The Board has now made all next step decisions relating to the Principles of Disclosure research project. The Board plans to publish a summary of the research findings in due course.

Changes have already been made to a number of IFRSs as a result of the Disclosure Initiative project, in particular to IAS 1 Presentation of Financial Statements, which are aimed at clarifying current materiality guidance and the order of the notes, including accounting policies. These amendments are aimed at encouraging, assisting and enabling entities to revisit their disclosures in financial statements in order to reduce the extent of uninformative, standardised ‘boilerplate’ disclosures, and to focus on those aspects that are of greatest significance to them. A summary of those amendments, which were effective for periods beginning on or after 1 January 2016, is set out below in order to highlight the changes that have been made, and to assist in enabling an informed view to be taken about which disclosures are, and are not, required in each entity’s financial statements.

In October 2018, the IASB issued Definition of Material (Amendments to IAS 1 and IAS 8). The amendments clarify and align the definition of ‘material’ and provide guidance to help improve consistency in the application of that concept whenever it is used in IFRS. In September 2017, IFRS Practice Statement 2: Making Materiality Judgements (Practice Statement) was issued for application from 14 September 2017. The Practice Statement provides guidance on how to make materiality judgements when preparing general purpose financial statements.

The Practice Statement:

  • provides an overview of the general characteristics of materiality;
  • presents a four-step process companies may follow in making materiality judgements when preparing their financial statements; and
  • provides guidance on how to make materiality judgements in specific circumstances; namely, how to make materiality judgements about prior-period information, errors and covenants, and in the context of interim reporting.