The International Accounting Standards Board (IASB) has published an Exposure Draft (ED) of proposed amendments to IAS 1 'Presentation of Financial Statements'. The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgement in presenting their financial reports.
The IASB formally added an initiative on disclosure to its work programme in December 2012 to complement the work being done in the Conceptual Framework project. The initiative is made up of a number of smaller projects that aim at exploring opportunities to see how presentation and disclosure principles and requirements in existing Standards can be improved. Among them is a narrow scope project on IAS 1 Presentation of Financial Statements to ensure that entities are able to use judgement when presenting their financial reports as the wording of some of the requirements in IAS 1 had in some cases been read to prevent the use of judgement.
The IASB proposes in ED/2014/1 Disclosure Initiative (Proposed amendments to IAS 1) amendments in four areas that seem to impede the use of judgement.
First, the IASB proposes clarifications that are aimed at emphasising that information should not be obscured by aggregating or disaggregating information; that materiality considerations apply to the all parts of the financial statements; and that even when a Standard requires a specific disclosure materiality considerations do apply.
Secondly, the IASB proposes to introduce a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant, and additional guidance on subtotals in these statements.
The IASB also proposes to clarify that the understandability and comparability should be considered when determining the order of the notes, and that the notes need not be presented in the order listed in paragraph 114 of IAS 1.
Finally, the IASB proposes to remove guidance and examples with regard to the identification of significant accounting policies that are perceived as being potentially unhelpful.
The IASB has also included one proposal that arose from a submission to the IFRS Interpretations Committee. The IASB proposes to clarify that an entity's share of OCI of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.
"The Disclosure Initiative is focused on ensuring that financial reports are instruments of communication and not simply compliance documents," says Hans Hoogervorst, Chairman of the IASB. "These proposals form a small part of our efforts to encourage preparers, auditors and regulators away from a ticking-the-box mentality towards disclosures."