IASB issues Disclosure of Accounting Policies (amendment to IAS 1 and IFRS Practice Statement 2) and Definition of Accounting Estimates (amendment to IAS 8)
12 February 2021
The IASB has issued following amendments to IAS 1 Presentation of Financial Statements, IFRS Practice Statement 2 Making Materiality Judgements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors:
1. Disclosure of Accounting Policies, which amends IAS 1 and IFRS Practice Statement 2:
In order to help entities apply materiality judgements to accounting policy disclosure, the IASB has amended paragraphs 117–122 of IAS 1, which will require entities to disclose their material accounting policies rather than their significant accounting policies. To support this amendment, the IASB has also amended IFRS Practice Statement 2 to explain and demonstrate the application of the ‘four-step materiality process’ to accounting policy disclosures.
2. Definition of Accounting Estimates, which amends IAS 8:
Entities find it difficult to distinguish between a change in accounting policy and a change in accounting estimate, especially when it relates to a change in a measurement method. Therefore, to help entities distinguish accounting policies from accounting estimates, the IASB has amended IAS 8 to introduce a definition of ‘accounting estimates’ and provide other clarifications.
The amendments to IAS 1 and IAS 8 will be effective for annual reporting periods beginning on or after 1 January 2023, with early application permitted.
The press release by the IASB on these amendments may be accessed here.