IAS 8 Amendments: Accounting Policy Changes

On 27 March 2018, the IASB issued ED/2018/1 Accounting Policy Changes (the 'ED'). The aim of the ED is to promote greater consistency in the application of IFRS Standards and reduce the burden on entities when they change an accounting policy as a result of an agenda decision issued by the IFRS Interpretations Committee (the 'IFRS IC').

Agenda decisions are non-authoritative in formal terms although they clearly carry some weight in practice. Therefore, neither the IASB nor the IFRS IC specifies transition requirements or an effective date. If an entity changes its accounting policy as a result of an agenda decision, it is currently required to apply the new policy retrospectively unless it is impracticable to do so. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors further clarifies that applying a requirement is impracticable when 'the entity cannot apply it after making every reasonable effort to do so'.

The IASB considers that, for certain voluntary changes in accounting policies, this can create a barrier for entities wishing to adopt, and transition to, 'better' accounting policies. The ED proposes to amend IAS 8 to lower the threshold for relief from retrospective application of such changes by allowing an assessment based on costs to the entity and expected benefits to users. Applying the amendment, an entity would be required to apply voluntary changes in accounting policies resulting from agenda decisions either:

• from the earliest period practicable: or
• from the earliest date for which the expected benefits for users would exceed the costs for preparers.

EFRAG published its draft comment letter on 24 April 2018. In the letter,  disagreed with introducing a distinction between voluntary changes in accounting policies resulting from agenda decisions and other voluntary changes. EFRAG considered that the proposals in the ED raised broader questions about the status and the objectives of agenda decisions.

EFRAG also considered that the proposals in the ED may give rise to practical challenges if finalised in their current form and that further guidance will be needed to:

• clarify their scope and in particular the potential pervasiveness of agenda decisions beyond the narrow fact patterns addressed in the submissions; and
• help preparers assess the benefits for users.

Lastly, EFRAG reiterated its suggestions to the IASB to reconsider whether some additional clarification on the distinction between a change in accounting policy and correction of an error would be useful in finalising the amendments contained in this ED and in the one issued in September 2017.

On 23 August  2018, EFRAG  published a final comment letter reiterating  in substance the initial views above,  and a feedback statement summarising the input received from the consultation and how it had been considered in the final drafting.  

At its December 2018 meeting, the IASB discussed the feedback received and decided tentatively decided not to amend IAS 8 to specify when entities apply accounting policy changes resulting from Agenda Decisions published by the IFRS Interpretations Committee. 

In June 2020,  th IASB  discussed again the feedback received  on its proposal to simplify the application of accounting policy changes that result from an agenda decision. The IASB decided not to proceed with the project.