ASCG comments on IASB ED/2021/3

On 12 January 2022, the ASCG sent their comment letter on the IASB ED/2021/3 Disclosure Requirements in IFRS Standards – A Pilot Approach (Proposed Amendments to IFRS 13 and IAS 19) to the IASB.

In this Exposure Draft, the IASB proposed guidance for itself to use when developing and drafting disclosure requirements in IFRS Standards. In addition, the IASB applied this guidance to the disclosure sections of IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits and proposed amendments to the disclosure requirements of these IFRS Standards (we reported).

The ASCG is clearly supportive of the IASB’s proposed new approach in developing and drafting disclosure requirements. In particular, we support the IASB’s proposal of developing disclosure objectives that describe users’ information needs to enable entities to better assess which information is useful for users of financial statements.

Notwithstanding our general support of new approach proposed by the IASB, in our comment letter, we also raise some concerns about its application in practice. In particular, we are concerned that entities, in practice, will strongly be guided by the items of information included in an IFRS Standard, with the effect that – even though labelled as non-mandatory – these items of information would be perceived as de facto mandatory to disclose. In addition, preparers are concerned that the proposals will increase the effort of documentation with regard to the judgment applied as to which information was to be disclosed. In our comment letter, we therefore recommend that the IASB develop additional application guidance that clarifies how an entity exercises judgement in assessing what (entity-specific) information needs to be disclosed. Such application guidance could clarify that an entity is not necessarily required to disclose all the items of information specified in an IFRS Standard.

Furthermore, we also have some significant comments on the proposed amendments to IFRS 13 and IAS 19. In particular, we are critical of the proposals to disclose alternative fair measurements (IFRS 13) and to disclose a range of reasonably possible alternative values for the defined benefit obligation (IAS 19). In our view, such disclosures could undermine the legitimacy of the amounts that an entity has recognised in its statement of financial position and also pose significant operational implementation challenges. Therefore, we recommend the IASB retain current sensitivity analysis disclosures.

Details are outlined in the ASCG comment letter, which is available on the ASCG’s website.