The Necessity Of Having More Meaningful IFRS Disclosures

In my last article, I discussed how the International Accounting Standards Board (IASB) aims to significantly improve financial statement disclosures and to provide the preparers with clearer guidance on applying the requirements set out in accounting standards. This article will go into the concerns raised in reaction to the IASB's March 2017 discussion paper on disclosures.

The seven principles of effective communication

Communication between financial statement preparer and user must indeed be made more effective. To this end, the IASB's discussion paper introduced seven key principles to help entities in their communication to stakeholders. The seven principles are:

information that is more entity-specific simpler and more direct descriptions and sentence structures better organised disclosures highlighting important matters information better linked within the financial statements better format for the type of information provided no duplications enhanced comparability among companies and across reporting periods Most respondents generally agreed with these seven principles in the comment letter feedback. Views were mixed, however, on whether they should be mandatory or not—though a majority expressed a preference for non-mandatory.

Feedback

The IASB received the following feedback (summarised) on the discussion paper:

Preparers are concerned about the amount and content of disclosure requirements and particularly about the application of the materiality judgement. Users find a lack of relevant disclosures in the financial statements. More specifically, they find that: preparers comply with IFRS requirements due to the expectations of regulators and auditors, rather than doing so as an opportunity to convey useful information materiality judgement is not properly applied, as a result of possible compliance risk with the standard requirements IFRS standards are not clearly...