IAS 1 Amendment — Disclosure of Accounting Policies

🧧Name of the Amendment
🔋Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

💜Why amendment?
💚At present, companies need to disclose all the significant accounting policies. However, “significant” as a term is not defined under IFRS. Further IASB received feedback to provide guidance on which accounting policies to disclose. Hence this amendment which states and replace the existing “Significant” term with “Materiality”. Four-step materiality process has been developed for further assisting companies in making materiality judgements.

An entity is now required to disclose its material accounting policy information instead of its significant accounting policies.

💜Four-step Materiality process :

💜Twist To The Amendment :
Board member Ms Flores while issuing the amendment has dissented to it. Ms Flores believes that stating that accounting policy information is material even if it is standardised or duplicates the requirements of IFRSs if the underlying accounting is complex and users of the entity’s financial statements would otherwise not understand material transactions, other events or conditions stretches the concept of materiality beyond its intended scope and undermines the overall aim of the amendments, which is to help an entity reduce the disclosure of immaterial accounting policy information.

Effective date : Period on or after 1 January 2023. Earlier application is permitted.
Transitional provision : It should be applied prospectively.

💜In My Opinion?
💚The change is basically more on alignment of the terminology across the IFRS. This is more sort of standardization of the format. From practical perspective, this change is again relatively subjective in the hands of the reporting companies.

Summary : In a nutshell, the idea behind this amendment is that companies must disclose all its material accounting policy. Further board has guided on how should companies evaluate whether a policy is material to report. And entities should not obscure the material information with immaterial information.

Thank you!👏