The International Accounting Standards Board Essay example

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Recently the International Accounting Standards Board (henceforth, IASB) published an Exposure Draft concerning a proposed Practice Statement (“Application of Materiality to Financial Statements”) (August 2015). “The Draft Practice Statement proposes guidance to help management apply the concept of materiality when preparing general purpose financial statements in accordance with International Financial Reporting Standards (henceforth, IFRS).” But this guidance has garnered criticism for lacking clarity. The European Financial Reporting Advisory Group (henceforth, EFRAG), for instance, urged the IASB to explicate the guidance when it submitted these comments to IASB Chairman, Hans Hoogervost, on March 8, 2016:

EFRAG considers that the guidance should be drafted in a more concise and practical way and focus on areas where it is most difficult to exercise judgement on the application of materiality and, in particular, better illustrate how materiality is applied in line with the specific roles of the primary financial statements and of the notes. The inclusion of illustrative examples may be useful if they illustrate both decisions to include and to leave out information.

This is not the first time the IASB has faced this type of condemnation. Our work examines a recent episode that saw consternation expressed by constituents over the IASB’s equivocal guidance for applying the acquisition method to the accounting for business combinations. The IASB formally unveiled…

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