The International Accounting Standards Board (IASB) is consulting on future steps to improve the quality and effectiveness of disclosures in financial statements with a view to overhauling IAS 1 Presentation of Financial Statements
The 110-page discussion paper, Disclosure initiative - principles of disclosure, seeks public feedback on disclosure issues the IASB has identified through outreach as well as its preliminary proposals to resolve these issues under International Financial Reporting Standards (IFRS). The consultation will be open for six months to allow stakeholders to review the options.
The feedback from the consultation is likely to result in amendments to IAS 1, the standard covering general disclosure requirements.
It could even lead to development of a new general disclosure standard if the feedback indicates that the current standard is not fit for purpose.
Stakeholders have said that financial statements often include too little relevant information, too much irrelevant information and information disclosed ineffectively.
The IASB believes that the development of clear principles governing what, how and where information should be disclosed in the financial statements will improve the information provided to users of financial statements. It will do so by helping companies communicate their disclosures more effectively and by assisting the IASB to improve disclosure requirements in IFRS standards.
The discussion paper sets out some key principles for review, including:
- seven principles of effective communication, which could be included in a general disclosure standard or described in non-mandatory guidance;
- possible approaches to improve disclosure objectives and requirements in IFRS Standards; and
- principles of fair presentation and disclosure of performance measures and non-IFRS information in financial statements, to ensure that such information is not misleading.
Hans Hoogervorst, chairman of the IASB, said: ‘Investors and companies have told us that there is room for improvement in the disclosures in the financial statements. Agreeing which principles underpin effective disclosures is a vital step towards encouraging the behavioural changes required to make financial statements better communication tools in the future.”
The discussion paper is the latest instalment of the IASB’s Disclosure Initiative, which was established in 2013 with a 10-point plan to deliver tangible improvements to disclosures in financial reporting.
The Principles of Disclosure project complements a number of other projects already taken by the Board, including amendments to IAS 1 Presentation of Financial Information and IAS 7 Statement of Cash Flows, and the development of guidance to help companies make materiality judgments when preparing financial statements.
The closing date for comments is 2 October 2017.
The Discussion Paper, Disclosure Initiative - Principles of Disclosure, can be accessed here.
A 16-page Snapshot, Disclosure Initiative - Principles of Disclosure, provides an overview of the Discussion Paper, can be found here