As IFRS (International Financial Reporting Standards) are evolving fast, we continue our focus on the latest IASB’s (International Accounting Standards Board) updates. Since our last blog published in July 2018, the following publications have been issued by the IASB:
Definition of a Business (Amendments to IFRS 3)
The Post-Implementation Review (PIR) of IFRS 3 highlighted that many stakeholders had concerns about how to interpret and apply the definition of a business. This definition is key as it determines whether a transaction should be accounted for as a business combination or as an asset acquisition.
The amendments clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. They narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs. They also add guidance and illustrative examples to help entities assess whether a substantive process has been acquired.
Definition of Material (Amendments to IAS 1 and IAS 8).
These amendments refine the definition of material: “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity” (IAS 1 § 7).
The definition of material helps companies determine whether information about an item, transaction or other event should be provided to users of its financial statements. The Board expects the amendments will help entities make better materiality judgements without substantively changing existing requirements.
Update of the Board’s Work Plan
The latest workplan published in December 2018 is available here on the official IFRS website.
In the next months, we will pay particular attention to the “Better communication” project that may have significant impact on the primary financial statements.