The following is a summarised update on the main provisional decisions taken by the IASB at its meeting on 18-19 October 2016. Other topics discussed include timing of the next review of the IFRS for SMEs Standard, and issue of the IFRIC Interpretation Foreign Currency Transactions and Advance Consideration by the end of 2016.

For more detailed and comprehensive information on the IASB’s discussions:

Revised Conceptual Framework (final due 2017)

  • An executory contract establishes a right and an obligation to exchange economic resources that are interdependent and cannot be separated; the combined right and obligation constitute a single asset or liability.
  • Sometimes it may be appropriate to select one unit of account for recognition and another unit of account for measurement of a given asset or liability, and the selected unit of account may need to be aggregated or disaggregated for presentation and disclosure.
  • While the exercise of prudence does not imply a need for asymmetry (such as more persuasive evidence to support the recognition of assets/income than of liabilities/expenses), such asymmetry may sometimes arise as a consequence of specific standards requiring the most useful information.

Disclosure Initiative: Materiality Practice Statement (post exposure draft analysis)

  • The Practice Statement (PS) will address the application of the concept of materiality only in preparing IFRS financial statements (both annual and interim). Providing additional information (even if not material) to meet local regulatory requirements is not prohibited, as long as such information does not obscure material IFRS information.
  • The PS will make no changes to the current definition of materiality in IFRS.
  • 'Primary users' of an entity's IFRS financial statements - as defined by the Conceptual Framework – should include potential investors, potential lenders and potential other creditors.
  • The PS should include an overview of how materiality judgements can be applied. Although there is no hierarchy among materiality factors, it could be efficient for entities to first assess an item of information from a quantitative perspective, and when an entity assesses whether an item of information is material on the basis of a qualitative factor (e.g. related party transactions), it should also consider quantitative factors.
  • The PS should state that an entity applies a single materiality assessment to all information included in the financial statements (i.e. including notes), selects where best to disclose material information (i.e. primary financial statements vs the notes), and uses a materiality assessment process to decide how much to disaggregate information and how much detail to include.
  • The PS is to specify that the public availability of information does not affect the materiality assessment, and does not relieve an entity of the obligation to disclose material information.

Clarifications to IFRS 8 arising from the Post-implementation Review (exposure draft due Q1/2017)

  • An entity should be required to explain how and why the reportable segments in the financial statements differ from those included in the management commentary or other parts of the annual report, or from other communications published in conjunction with the financial statements.
  • It should be clarified that an entity can disclose segment information beyond that reviewed by, or otherwise regularly provided to, the chief operating decision maker if this helps the entity meet the core principle of IFRS 8 (i.e. disclose information to enable users of the entity’s financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates).

Long-term interests in an associate or joint venture (exposure draft Annual Improvements 2015-2017 due January 2017)

IAS 28 is to be amended to clarify that an entity applies IFRS 9, in addition to IAS 28, to long-term interests in an associate or a joint venture that, in substance, form part of the net investment, but to which the equity method is not applied. The amendments should apply retrospectively, but with transitional provisions.

Proceeds and costs of testing property, plant and equipment (exposure draft amending IAS 16 due 2017)

The deduction of the proceeds from selling items produced while bringing an item of property, plant and equipment (PPE) to the location and condition necessary for it to be capable of operating in the manner intended by management from the cost of that item of PPE should be prohibited.

Financial Instruments with Characteristics of Equity (discussion paper (DP) due 2017)

Under the Gamma approach[1], the liability-vs-equity classification of claims that grant the issuer the right to choose between two alternative settlement outcomes - when each settlement outcome would, in isolation, meet either the definition of a liability or of equity – should not take into account the economic incentives that might influence the issuer's decision to exercise its rights. Thus, classification should still be based, as currently under IAS 32, on the substantive rights and obligations established by a contract.


On 27 October 2016, RSM International submitted a letter of comment to the IASB on ED/2016/1 Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11)


[1] The Board is developing a model (referred to as Gamma) which distinguishes claims between liabilities and equity based on the timing of transfer of the economic resources and on how the amount of the claim is determined: equity is an obligation to transfer economic resources only at liquidation, and for a residual amount;  a liability is an obligation to transfer economic resources at particular points in time other than at liquidation, or for a specified amount independent of the entity’s economic resources.