Last update 10/08/2019
Uncertainty about whether an asset or a liability exists.
Further explanations:
There are sections in IFRS that discuss cases in which it is uncertain whether an asset or liability exists. In some cases, that uncertainty, possibly combined with a low probability of inflows or outflows of economic benefits and an exceptionally wide range of possible outcomes, may mean that the recognition of an asset or liability, necessarily measured at a single amount, would not provide relevant information. Whether or not the asset or liability is recognised, explanatory information about the uncertainties associated with it may need to be provided in the financial statements.
- financial statement preparers to estimate the future outcome of the uncertainties inherent in many business transactions,
- auditors to verify the subjective judgements about those uncertainties, and
- investors to understand those uncertainties and assess their potential impact on future earnings or cash flows.
For example, seemingly small changes from a management-selected input used to determine fair value could have a material impact on the reported result at any specific date. For example, when a fair value measure is determined primarily based on a discounted cash flow analysis, use of a discount rate that is 100 basis points different could mean the difference between a material goodwill impairment charge, or none at all.
This round-table will bring together investors, preparers, and auditors to provide input about those measurements (and associated disclosures) where the outcome depends on future events that by definition are presently unknown. As the initial step in gathering input on this topic, the round-table discussion will focus on:
- Measurement and recognition — whether measurements that involve uncertainty provide investors with useful information.
- Disclosure — the information that investors find important to understand and assess measurement uncertainties and the challenges or impediments that preparers face in providing that information.
