We do not think that any of the changes proposed should give rise to changes to auditing standards.
Q4. Transition method
We have responded to the appropriateness of the transition method – prospective, full retrospective or partial – in response to the consultations on individual standards. The implementation of a series of new standards should lead to no overall impact on this.
Q5. Single date or sequential approach for mandatory adoption
Some of these changes are going to have a very widespread effect on all companies using full IFRS and others will be affecting only certain companies (particularly banks and insurers) but where the impacts will be fundamental on their financial statements. For these reasons it is right for special consideration to be given to the adoption approach.
Of the raft of standards coming through
- financial instruments
- revenue recognition
are the most significant and will be making fundamental changes to existing accounting. For these reasons we support a single date approach for them. The mandatory adoption date should be 18 months after the publication of the last standard in the package.
The adoption of
- Fair value measurement
- Joint arrangements
- Defined benefit plans
- Other comprehensive income
will primarily close certain existing optional treatments or elaborate existing guidance. We think there is merit in including these other standards into the same single-date package, but do not regard it as of such importance.
Our reasons for supporting the single date approach are mainly
- Greater comparability between companies as the application period would not be extended over several years with successive changes
- effects of the restatements, given that they will not all be fully retrospective, can start to work themselves out over a shorter period
- A 'big bang' generates awareness and so focuses the attention of preparers and users on the significance of the restatements which might be involved
- May be easier to plan for if sufficient time is allowed to assess the impacts
The disadvantage will primarily be the extra demands of time on accounting staff at preparers in the transition period. This will fall disproportionately on smaller preparers who may have fewer staff to spread the work over. This may lead to extra costs for them as they are more likely to need external assistance from consultants.
Q6. Early adoption
We support a ban on early adoption. As with the date of adoption, for the four fundamental projects this is more important than for the group of other projects identified above. Our principal reason for not permitting early adoption is to improve the comparability of financial statements.
Q7. Same dates in US GAAP and IFRS?
If practicable the same dates of implementation should be available. However given the existing lack of comparability this is not a very significant matter.
Q8. First time adopters
As an exception to our answer to Q6 above, we would like to see early adoption available to first time adopters of IFRS to avoid their having to make double changes for the same item in a relatively short space of time. There may in any case be other reasons why their IFRS financial statements would not be fully comparable with those of existing IFRS preparers.