EUROPEAN COMMISSION Directorate-General for Financial Stability, Financial Services and Capital Markets Union INVESTMENT AND COMPANY REPORTING Accounting and financial reporting
Endorsement of amendments under the International
Accounting Standards to IAS 1 Disclosure Initiative
Introduction, background and conclusions
Attachment: Endorsement advice prepared by the European Financial
Reporting Advisory Group (EFRAG)
1. INTRODUCTION
The European Commission and the European Financial Reporting Advisory Group
(EFRAG) prepare studies on the effects and interpretations of new international
accounting standards (IAS) before they are endorsed by the European Union. These
studies set out the accounting issues involved, the results of stakeholder consultations, and
an analysis of the effects of using the new accounting rules in the EU.
EFRAG has assessed whether the amendments to IAS 1 Disclosure Initiative meet the
technical requirements for endorsement. EFRAG has also provided the European
Commission with its analysis of the costs and benefits of the amendments.
2. BACKGROUND
On 18 December 2014, the International Accounting Standards Board (IASB) published
amendments to IAS 1 Disclosure Initiative. These amendments will apply for annual
periods beginning on or after 1 January 2016. Earlier application is permitted.
The amendments to IAS 1 include clarifications to current requirements under IAS 1
Presentation of Financial Statements. The amendments aim to improve the effectiveness
of disclosure and to encourage companies to apply professional judgement in determining
what information to disclose in their financial statements when applying IAS 1. In
particular, the amendments clarify that:
the concept of materiality applies to financial statements as a whole;
if relevant for understanding a company’s financial position and performance,
items in the financial statements may be disaggregated or subtotals added; and
companies have flexibility in structuring the notes to financial statements.
IASB due process and EFRAG consultations
In 2013, the IASB started the Disclosure Initiative, a package of projects aimed at
improving disclosure of financial information. The amendments to IAS 1 are part of this
initiative. Between March 2014 and July 2014, the IASB carried out a public consultation
on exposure draft ED/2014/1 Disclosure Initiative - Proposed amendments to IAS. The
IASB received 118 submissions commenting on the draft. After considering the results of
the consultation, the IASB decided to publish the amendments.
EFRAG carried out an initial evaluation of the amendments against the EU’s endorsement
criteria and consulted on the results of this initial evaluation. It finalised its assessment in
the light of comments received. In February 2015, EFRAG issued an invitation to
comment relating to the endorsement of the amendments. The consultation period closed
on 27 March 2015. EFRAG issued its endorsement advice to the Commission on 19 May
2015.
3. EFFECTS ANALYSIS
Assessment against the endorsement criteria of Regulation (EC) No 1606/2002
EFRAG assessed whether the amendments met the endorsement criteria set out in
Regulation (EC) No 1606/2002 on the application of international accounting standards.1
It must be noted that, in general, the amendments clarify rather than change the existing
requirements under IAS 1. As shown in the attachments, EFRAG concluded that the
amendments satisfy the criteria for EU endorsement.
Costs and benefits for preparers and users
EFRAG also carried out an assessment of the likely costs and benefits of implementing
the amendments in the EU.
In EFRAG’s assessment, the overall benefits of the amendments are likely to outweigh the
associated costs to implement them. Preparers and users are likely to benefit from the
amendments, as they enable companies to exercise more judgement in presenting and
disclosing information and hence result in improving the relevance for users of
information in financial statements. It is likely that the impact on costs for preparers will
be neutral. For users, the potential cost related to implementation of the amendments is
likely to be insignificant.
4. OVERALL COST-BENEFIT CONSIDERATIONS AND CONCLUSIONS
On the basis of EFRAG’s effects study, the Commission has considered the main costs
and benefits of endorsing the amendments to IAS 1. The Commission shares EFRAG’s
opinion that the overall benefits of the amendments are likely to outweigh the costs to
implement them.
Taking into account that the amendments to IAS 1 meet the criteria for endorsement, the
Commission agrees that the amendments to IAS 1 should be endorsed in the EU.
1 Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the
application of international accounting standards (OJ L 243, 11.09.2002).
Attachment
Endorsement advice prepared by the European Financial Reporting Advisory Group
(EFRAG)
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