IASB clarifies time limits for entities to implement IFRS agenda decisions
As noted in our previous article, we continue to update you on recent agenda decisions issued by the IFRS Interpretations Committee. While not authoritative guidance, in practice these agenda decisions are regarded as being highly persuasive, and should be considered because they could impact the way particular transactions and balances are accounted for.
But the question remains – When exactly do these agenda decisions apply, what is their start date, and how should entities be treating changes in accounting policies resulting from these agenda decisions?
These questions have been addressed in a recent feature article written by Sue Lloyd, Vice-Chair of the International Accounting Standards Board (Board) and Chair of the IFRS Interpretations Committee.
Error or change in accounting policy?
The IASB have acknowledged that agenda decisions often provide new information that should be seen as helpful and persuasive, for example, by integrating requirements in IFRS standards with material in the Basis for Conclusions and Illustrative Examples.
This means that changes to a particular accounting treatment are not necessarily errors simply because a previous treatment deviated from that outlined in an agenda decision.
Start date for agenda decisions?
Unlike changes to accounting standards and new interpretations, agenda decisions do not have start dates because they are intended to clarify the appropriate accounting treatments on various topics based on existing standards and related guidance.
Up to now, the IASB has not publicly stated what their expectations are in this regard, but this feature article now lays out the IASB’s thinking on the appropriate time frame for implementing agenda decisions, including acknowledging that it may take time for companies to implement the new policies.
How long is ‘sufficient’?
The amount of time needed to implement new policies will depend on the particular facts and circumstances. Preparers, auditors and regulators will need to apply judgement to determine how much time is sufficient.
“But as a rule of thumb I think it is fair to say that we had in mind a matter of months rather than years.”
Sue Lloyd (extract from feature article)
While an element of judgement is involved, Sue Lloyd makes it clear that a reasonable time frame for implementing new policies as a result of agenda decisions would be on the shorter side (a matter of months) rather than the longer side (years).
However, where the policy change requires a number of steps, such as collecting additional information or changing processes or systems, companies should explain their implementation process if it is going to take a longer period to implement the agenda decision.
Generally, agenda decisions consider specific transactions or narrow fact patterns, and as such, the IASB does not anticipate that companies would require extensive periods of time.