Endorsement of narrow-scope amendments projects

2021 Narrow-scope amendments projects

The UKEB has published a [draft] UK Endorsement Criteria Assessment (DECA) on a set of three narrow-scope amendments to international accounting standards (IAS 1, IAS 8 and IAS 12). These amendments were published by the IASB in 2021, with an effective date of 1 January 2023 with earlier application permitted.

The UKEB secretariat welcomes stakeholders’ views on the potential UK adoption of the set of amendments covered in this assessment. These amendments are narrow in scope.

The UKEB was not able to directly influence the development of the IASB’s proposals for these amendments as they were finalised and published before the creation of the UKEB. However, these amendments have been subject to public consultation and comments from UK stakeholders were fully considered by the IASB when finalising those amendments

The DECA as well as a description of each Amendment can be accessed below.

The comment deadline for the DECA is the close of business on Monday 3 October 2022. Please respond via email to UKEndorsementBoard@endorsement-board.uk .

1. Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

Background

The Amendments to IAS 1 Disclosure of Accounting Policies and IFRS Practice Statement 2 were published by the IASB on 12 February 2021.

The Amendments to IAS 1:

• Amend paragraphs 117–122 of IAS 1 to require entities to disclose their material accounting policy information rather than their significant accounting policies.
• Indicate that accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence the decisions of primary users about the entity.

To support this amendment the IASB also amended IFRS Practice Statement 2 Making Materiality Judgements (Materiality Practice Statement) to explain and demonstrate the application of the ‘four-step materiality process’ to accounting policy disclosures. An IFRS Practice Statement is non-mandatory guidance^[1]. The endorsement and adoption process applies only to the mandatory sections of standards that, if adopted, will become “UK-adopted international accounting standards”.

These amendments are effective for annual periods beginning on or after 1 January 2023, with early application permitted.

^[1]                Mandatory pronouncements are IFRS Standards, IAS Standards, Interpretations and mandatory application guidance. Non-mandatory guidance includes basis for conclusions, dissenting opinions, implementation guidance and illustrative examples, together with the IFRS practice statements. This categorisation is set out in the Introduction to the IASB yearly Bound Volumes.

2. Definition of Accounting Estimates (Amendments to IAS 8)

Background

The Amendments to IAS 8 Definition of Accounting Estimates were published by the IASB on 12 February 2021.

The Amendments to IAS 8:

• Introduce a definition of ‘accounting estimates’ which is anchored in the concept of ‘measurement uncertainty’ in the IASB’s Conceptual Framework; and
• Include other amendments to IAS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates.

These Amendments are effective for annual periods beginning on or after 1 January 2023, with early application permitted.

3. Deferred Taxes related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

Background

The Amendments to IAS 12 Deferred Taxes related to Assets and Liabilities arising from a Single Transaction were published by the IASB on 7 May 2021.

The Amendments to IAS 12 narrow the scope of the initial recognition exemption in paragraphs 15 and 24 of IAS 12 so that this exemption does not apply to transactions that, on initial recognition, give rise to equal and offsetting amounts of taxable and deductible temporary differences. These amendments result in entities recognising deferred taxes by applying the general requirements in IAS 12.

These Amendments are effective for annual periods beginning on or after 1 January 2023, with early application permitted.