Material Accounting Policies

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pub_acco
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Material Accounting Policies

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Not a question. IASB recently issued an amendment that required to disclose material accounting policies instead of significant ones.

https://www.ifrs.org/projects/2021/accounting-policies/

What kind of changes in the actual disclosure do you guys expect by this amendment? I've personally looked forward this amendment because I expected this amendment would improve the most boring footnote that nobody really read through by removing many obvious, useless statements like "an entity controls a subsidiary if and only if the entity has power over the subsidiary".

But once it is issued, I'm wondering if this amendment really changes the disclosure. It's helpful that the amendment clarifies accounting policies related to immaterial transactions are also immaterial. But other than that, I find it difficult to apply the amendment to cut down redundant paragraphs. How would you deal with the amendment?
JRSB
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Re: Material Accounting Policies

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I guess the difference between whether significant or material are defined
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pub_acco
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Re: Material Accounting Policies

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One more useless paragraph :lol:
JRSB
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Re: Material Accounting Policies

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It does surprise me when stuff like this comes out but then other genuine ambiguities are rejected for further clarification work.
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pub_acco
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Re: Material Accounting Policies

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True. For example, "standardised descriptions or information that only duplicates requirements of IFRS Standards" was a key area of discussion at first but the outcome about this is highly ambiguous.
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Marek Muc
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Re: Material Accounting Policies

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I do hope that this is an important step in decluttering disclosures of accounting polices, but the change in mindset is needed as well. "Material" is a much higher threshold than "significant" and this amendment is a 'weapon' against those who prefer 'checklist approach'
pub_acco
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Re: Material Accounting Policies

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That's a good point. We might be able to leverage this amendment to fight against "checklist" people (auditors in mind :roll:). It's good news that IASB seems really concerned about the checklist approach as discussed in the recent ED https://www.ifrs.org/news-and-events/20 ... -approach/ , though it's somewhat scary IASB wants to require judgements on every aspect of an annual report.
JRSB
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Re: Material Accounting Policies

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The problem being that, in practice, there is no penalty for including too much (that I've seen), whereas a risk of not having enough disclosure, so auditors will play it safe.
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Marek Muc
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Re: Material Accounting Policies

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@JRSB - and this is hard to change, there was an additional amendment to IAS 1 and IAS 8 in 2018, where obscuring material information is also considered to be a material misstatement:
New definition: Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.
but again, a change in mindset is needed...
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Re: Material Accounting Policies

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That's why I put 'in practice' - it would be good for a regulator (FRC in the UK) to hand out a penalty for obscuring relevant information resulting in material error. there are certainly plenty of candidates for annual reports of many hundreds of pages to pick from :geek: that might make people pay attention...
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Marek Muc
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Re: Material Accounting Policies

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true, such enforcement decision would speed up the change of mindset a lot :)
pub_acco
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Re: Material Accounting Policies

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I do have experience to rebut an auditor's comment using the "obscuring" provision. It could take decades to change the mindset of regulators, but it would be really nice if they focused more on "obscuring" disclosures.
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Re: Material Accounting Policies

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pub_acco wrote: 07 Apr 2021, 13:24 I do have experience to rebut an auditor's comment using the "obscuring" provision.
that's something!
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Re: Material Accounting Policies

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Actually I heard an example today of Grant Thornton insisting that the full list of (minor) future IFRS changes is included, along with specific details of changes in the standards, including all ones that are completely irrelevant and will continue to be irrelevant.
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Re: Material Accounting Policies

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GT wants to obscure material information with this BS!
pub_acco
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Re: Material Accounting Policies

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As if obsessed with disclosing accounting standards rather than disclosing the accounts of an entity!
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