Due Process Handbook &IFRS Foundation Constitution

On 20 August, the IFRS Foundation published a revised version of its Due Process Handbook. Readers will remember that this handbook sets out the due process principles that govern the work of the IASB, the IFRS Interpretations Committee, and their staff. The Foundation’s Constitution has also been amended as a result.

Keywords: Mazars, Thailand, IFRS, IASB, IFRS IC, IAS 8, ITCG, DPOC

27 October 2020

The revisions follow the publication of an exposure draft.

The final version of the revised manual is in line with these changes, particularly as regards the due process applicable to the IFRS IC’s agenda decisions. Readers will remember that these agenda decisions are formal explanations published by the IFRS IC on questions that have been submitted to it, but for which the IFRS IC has concluded that the IFRS framework is sufficiently clear and no further standard-setting work is required by the IASB. They are not the same as Interpretations.

Thus, the following rules will now apply to IFRS IC agenda decisions:

  • the IASB will be formally involved in the publication process by confirming that it does not object to publication (nihil obstat): if four or more Board members object, the decision will not be published and the IASB will decide how to proceed;
  • furthermore, the explanations provided by agenda decisions cannot add to or modify the requirements of the standard, but can provide “additional insights” that may change how the standard is applied;
  • there is no longer any question that such changes could be “voluntary”, as proposed in the March 2018 exposure draft of amendments to IAS 8 (Accounting Policy Changes). The IASB decided in June 2020 that it would drop these proposals: agenda decisions must be applied in the same way as the standards themselves (paragraph 8.5). The IASB will thus ratify practice, even though the “additional insights” do not have to go through the EU endorsement process;
  • to facilitate the mandatory application of agenda decisions, the due process principles entitle an entity to “sufficient” time to assess whether a decision requires it to change its accounting policies, and if so, to implement that change. This time delay is intended to allow entities to address technical obstacles and is not a “grace period”.

Other changes include the following:

  • more effect analyses will be carried out when developing standards and amendments and when carrying out post-implementation reviews (PIRs) (paragraph 3.78);
  • enhanced levels of internal review will be required for educational material (paragraph 8.10);
  • the composition of consultative groups (which may change over time) shall be diverse and geographically balanced (paragraph 3.60).

The Annex to the Due Process Handbook deals with the due process for the IFRS Taxonomy. A table now shows which elements of the taxonomy must be approved by the IASB (new standards and amendments) and which fall within the purview of the IFRS Taxonomy Consultative Group (ITCG) under the supervision of the Due Process Oversight Committee (DPOC).

The amendments to the Foundation’s Constitution only relate to the role of the Advisory Council. It will henceforth advise on strategic matters and can provide its views as a supplement to other consultations.

The revised Due Process Handbook is available on the IASB’s website via the following link.

The amended Constitution is available here.