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ACCA Strategic Professional · Strategic Business Reporting (International) · Discussion of issues in financial reporting

The IASB publishes an Exposure Draft proposing amendments to an existing IFRS Accounting Standard. Which statement best describes the status of the proposals and the effect on an entity preparing its financial statements now?

An Exposure Draft is only a proposal inviting comment and carries no authority. Entities must keep applying the existing IFRS Standard and cannot adopt the draft early, because it becomes requirements only when the IASB issues a final Standard or amendment after considering the responses.

  1. AThe proposals are not yet requirements, so the entity continues to apply the existing Standard and cannot apply the proposals earlyCorrect
  2. BThe proposals apply immediately to any entity that wishes to follow best practice
  3. CThe proposals become mandatory once the comment period closes
  4. DThe proposals replace the existing Standard for entities that disclose them in the notes

Explanation

An Exposure Draft is a consultation document and has no authority until a final Standard or amendment is issued. Until then the existing Standard applies, and the draft cannot be adopted early. Treating it as mandatory after the comment period is wrong because the IASB must still consider responses and issue a final Standard.

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