When the IFRIC decides not to initiative a new project in response to a submitted question, it issues a tentative agenda decision for comment, setting out its reasons. If nothing new comes out of the comments, it usually confirms its decision and publishes a new agenda decision, often including various explanatory material. The IFRS Foundation’s recent exposure draft of proposed changes to its Due Process Handbook, for which the comment period closed at the end of July, proposed the following new paragraph:

• The process for publishing an agenda decision might often result in explanatory material that provides new information that was not otherwise available and could not otherwise reasonably have been expected to be obtained. Because of this, an entity might determine that it needs to change an accounting policy as a result of an agenda decision. It is expected that an entity would be entitled to sufficient time to make that determination and implement any change (for example, an entity may need to obtain new information or adapt its systems to implement a change).

The IASB’s Sue Lloyd recently wrote an article on the issue of what constitutes “sufficient time.” Here’s some of what she had to say:

• The short answer is that it depends on the particular facts and circumstances. It will depend on the accounting policy change and the reporting entity. Preparers, auditors and regulators will need to apply judgement to determine what is sufficient. But as a rule of thumb I think it is fair to say that we had in mind a matter of months rather than years.
• The Board’s comments on timing relate to the time needed to implement accounting policy changes that result from an agenda decision. Once an agenda decision is finalised it becomes a relevant piece of information in applying IFRS Standards. Explanatory material set out in agenda decisions, in essence, affirms the application of existing requirements. Therefore, companies need to consider agenda decisions and implement any necessary accounting policy changes on a timely basis—in other words, as soon and as quickly as possible.
• Sometimes, assessing that an agenda decision necessitates an accounting policy change and implementing that change may be straightforward, and implementation may be quick. In other circumstances, effecting an accounting policy change may require companies to undertake a number of steps, such as collecting additional information to apply the new policy or to provide disclosures, or changing processes or systems. If necessary, companies should be in a position to explain their implementation process and, if material, consideration should be given to whether disclosure related to the accounting policy change is required.
• Given that agenda decisions typically consider specific transactions or narrow fact patterns, reflect existing requirements and the Committee has determined that standard-setting is not required, the Board does not anticipate that companies would require extensive periods of time.
• Some have asked whether sufficient time includes the time needed to undertake related steps, such as changing affected covenants in documents. Or whether companies should be allowed to wait to see whether any of the Board’s projects could remove the need to make an accounting policy change (to avoid two changes in accounting in a short period of time). To my mind, such considerations go beyond what the Board intended.

At the risk of seeming to pay too little attention to serious technical complexities and resource constraints, this mostly seems to me like another example of the almost unparalleled neurosis of technical accounting, with its capacity to detect looming disaster around every corner. In other walks of life, entire corporations or countries may initiate major changes in direction without everything falling apart, and yet a corner of the accounting world worries about being able to respond within years to something that’s usually little more than an announcement of nothing much to see. Honestly, if the tech industry worked this way, we’d still be carrying around mobile phones with a half-hour battery life, assuming we had the strength to lift them…

Anyway, CPA Canada’s IFRS Discussion Group recently discussed the issue and the article, agreeing with the conclusions in the latter (rather depressingly, the meeting report says that “specifically, the Group found the rule of thumb being months, not years to be useful,” implying that in its absence, it might have been hard to establish that such matters shouldn’t take years). As cited above, the IASB article noted that if material, consideration should be given to whether disclosure related to the accounting policy change is required. The group made the point that where an entity hasn’t yet implemented such an anticipated change, it should provide the disclosures required by IAS 8 for new standards issued but not yet effective, setting out any known or reasonably estimable information relevant to assessing the possible impact in the period of initial application. It’s a fair point, although given the arcane nature of most such matters, readers are probably as likely to be perplexed as informed by the information…

The opinions expressed are solely those of the author