Adam Deller is a financial reporting specialist and lecturer



Studying this article and answering the related questions can count towards your verifiable CPD if you are following the unit route to CPD, and the content is relevant to your learning and development needs. One hour of learning equates to one unit of CPD.
Multiple-choice questions

Many people play fantasy football based on the English Premier League. For lots of us football fans, beating our work colleagues or friends at this is may be the only chance of success in a season. This is especially true for me, working in the football-mad city of Liverpool but supporting lowly Grimsby Town.

As part of this, you make individual changes to specific areas of the team to replace players who may be injured or out of form. Eventually, often through a mixture of frustration and desperation, you are forced to hit the ‘wildcard’ button, allowing you to make widespread changes across many players in the team.

The improvements include areas that are unrelated but sufficiently minor to be packaged together

In terms of the work of standard-setters, the updates that get the most attention are often the big individual items. These could be new standards, such as the new sustainability standards issued, or significant projects that have been under way for some time, such as the Primary Financial Statements project or work around goodwill impairment and disclosures.

Once a year, the International Accounting Standards Board plays its wildcard, though hopefully out of less frustration than most fantasy football managers. Instead of being one significant change to a standard, this releases a number of tweaks to existing projects all at one time. This is in the form of its Annual Improvements to IFRS Accounting Standards document.

Consistent approach

This contains areas that are unrelated to each other but sufficiently minor or narrow in scope to be packaged together in one document. Most of these situations are likely to be based around the language used, particularly where there may be possible inconsistencies between different standards.

The most recent Annual Improvements to IFRS Accounting Standards was issued in September and covers proposed amendments to IFRS 1, First-Time Adoption of International Financial Reporting Standards; IFRS 7, Financial Instruments: Disclosures; IFRS 9, Financial Instruments; IFRS 10, Consolidated Financial Statements; and IAS 7, Statement of Cash Flows.

The tweak to IAS 7 may qualify as one of the smallest changes ever made to a standard

As stated above, a common situation that arises can be where terminology becomes inconsistent with other standards when new ones are issued. This is the case with some of this year’s annual improvements.

The change to IFRS 1 is a simple rewording in relation to hedge accounting to remove an inconsistency with IFRS 9, as IFRS 1 was originally written to be consistent with IAS 39, Financial Instruments: Recognition and Measurement. Similarly, changes to IFRS 7 involve the removal of an obsolete cross-reference and updates to terminology to make it consistent with IFRS 13, Fair Value Measurement.

The final language-based tweak relates to IAS 7, which includes a reference to the ‘cost method’, which is no longer defined under IFRS Standards. This is now replaced with ‘at cost’, which may qualify as one of the smallest changes ever made to a standard.

Other changes seek to clear up potentially confusing terminology or language, even within the same standard. For this year, the change to IFRS 10 clarifies a potential inconsistency in determining whether investors are ‘de facto agents’. Paragraph B73 discusses the need for judgment, but paragraph B74 then went on to use more conclusive language. In this case, B74 will be amended to use less conclusive language to reflect the judgment involved in making the determination.

It may not have a dramatic effect, but the document is an important part of the standard-setting process

Application ambiguity

Some of the clarifications have a potentially bigger impact on the treatment preparers could have been applying. In IFRS 9, the section talking about derecognition of a lease liability cross-referenced one paragraph (3.3.1) explaining when the derecognition criteria were met, but not another (3.3.3), noting that any gain or loss goes to profit or loss.

While this appears incredibly narrow, the lack of cross-reference did potentially open the door for ambiguity about whether a gain or loss needs to be recognised and where it should go.

Unlike a wildcard in fantasy football, it may not have a dramatic effect on things, but the Annual Improvements to IFRS Standards is an important part of the standard-setting process. Combining these often narrow changes together into one document hopefully means that this package of changes is looked at by preparers who will be more likely to potentially see if a change affects them.

Consultation on the changes is open until 11 December.

Watch and learn

Watch Adam Deller’s ‘back-to-basics’ series of short videos on IFRS Standards