It is also notable that two IASB board members dissented from the issuance of IFRS 8 (refer to the dissenting opinion in IFRS 8) because of the lack of definition of segment profit or loss and because IFRS 8 does not require consistent attribution of assets and profit or loss to segments. In addition, these board members also believed that the changes from IAS 14 were not justified by the need for convergence with US GAAP because IAS 14 is a disclosure standard and therefore does not affect the reconciliation of IFRS amounts to US GAAP.
The preparer’s viewpoint is argued, for example, in the submission by the Association of German Banks to the European Commission’s questionnaire referred to above. This letter argues that IFRS 8 should be endorsed and that the information provided under the management approach will be more relevant and reliable because it will, inter alia, enable investors to evaluate the entity on the same basis as that used by management in its decision making and that any concerns about understandability are addressed by the reconciliation requirements of IFRS 8.
Despite the objections, IFRS 8 was finally endorsed by the European Parliament in November 2007. In its endorsement resolution, the European Parliament stated that the IASB should carry out a review of the new standard two years after its implementation. Further, the parliament’s requirement that the European Commission ‘follow closely the application of IFRS 8 and (to) report back to Parliament no later than 2011, inter alia regarding reporting of geographical segments, segment profit or loss, and use of non-IFRS measures; underlines that if the Commission discovers deficiencies in the application of IFRS 8 it has a duty to rectify such deficiencies’.
The message from the European Parliament to European companies is therefore that entities will be watched closely to determine whether they are taking advantage of the discretionary approach of IFRS 8 in order to control reported information. Only time will tell whether concerns about the approach eventuate.
In Australia, IFRS 8 was issued as AASB 8 by the Australian Accounting Standards Board in February 2007, with little fanfare, although Australian commentators had expressed similar concerns about the management approach and the US GAAP convergence issue discussed in part 1.Part 1