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

Zeta plc, an IFRS reporter, is finalising its financial statements. An Exposure Draft has been issued that would change the recognition criteria for a type of provision Zeta holds. Which treatment is appropriate?

Zeta should keep applying the existing IAS 37 requirements because the Exposure Draft has no authority. It may give voluntary commentary on potential effects, but it must not remeasure or restate using the proposals, and IAS 8 does not forbid such discussion.

  1. AApply the existing IAS 37 requirements and consider whether disclosure of the potential impact is useful, without adopting the draftCorrect
  2. BRemeasure the provision under the Exposure Draft and restate opening equity
  3. CApply the draft prospectively because it is more prudent
  4. DIgnore the matter entirely, since IAS 8 forbids any disclosure of future changes

Explanation

The draft has no authority, so IAS 37 continues to apply. IAS 8 requires disclosure of issued but not yet effective Standards, and an entity may sensibly discuss expected developments, but IAS 8 does not prohibit disclosure and the draft itself cannot be applied.

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