| Amendments to GRAP 1 to “cut clutter” in financial statements |
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During 2018, the ASB undertook a project, based on international developments at that time, to improve financial reporting disclosures, and reduce clutter in the financial statements.
This resulted in amendments to GRAP 1 on Presentation of Financial Statements to clarify the application of materiality to all parts of the financial statements. These amendments will become effective for periods commencing on or after 1 April 2023 but may be early adopted.
Clarifying materiality and aggregation
Materiality applies to all parts of the financial statements.
The amendments to GRAP 1 clarifies that entities should not reduce users’ understandability of the financial statements by obscuring material information with immaterial information, or by aggregating material items that have different natures or functions.
When a Standard of GRAP requires specific disclosures in the financial statements, an entity still applies materiality. This means that disclosures that are immaterial, should not be provided even if they are a minimum requirement of a Standard.
How should materiality be applied in presenting information in the statements of financial performance and position?
In presenting specific line items in the statements of financial performance and position, line items may be aggregated.
Guidance is included in GRAP 1 on how additional subtotals should be presented in the statements of financial performance and position. This amendment clarifies that subtotals must: - comprise line items made up of amounts recognised and measured in accordance with Standards of GRAP;
- be presented and labelled in a manner that makes line items that constitute a sub-total, and must be clear and understandable;
- be consistent from period to period; and
- not be displayed with more prominence than the sub-totals and totals required in Standards of GRAP for the statement of financial position.
Flexibility on the structure of financial statements
GRAP 1 also clarifies that entities have flexibility as to the order in which they present the notes to the financial statements. An entity should consider understandability and comparability when deciding on an order.
Examples of possible ways of ordering the notes may include: - giving prominence to the areas of an entity’s activities that it considers to be most relevant in understanding its financial performance and financial position. This may include grouping together information about particular operating activities;
- grouping together information about items measured in the same way, such as assets measured at fair value; or
- following the order of the line items in the statements of financial performance and position, such as
- a statement of compliance with Standards of GRAP;
- a summary of significant accounting policies applied;
- supporting information for items presented on the face of the statements; and
- other disclosures including contingent liabilities, unrecognised contractual commitments, and non-financial disclosures.
The amendments to GRAP 1 removed guidance and examples on the identification of significant policies that were perceived as being unhelpful.
A copy of the amendments to GRAP 1 can be accessed on the ASB’s website. |
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