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IASB outlines steps to improve disclosures in financial statements

The International Accounting Standards (the IASB) has published a Discussion Paper that suggests principles to make disclosures in financial statements more effective.

The 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. Ultimately, it is expected that the Discussion Paper could lead to amendments to IAS 1, the Standard covering general disclosure requirements, or the development of a new general disclosure Standard.

Stakeholders have said that financial statements sometimes 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 in improving disclosure requirements in IFRS Standards.

Some specific suggestions in the Discussion Paper include:

  • 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.

The Discussion Paper is the latest instalment of the IASB’s Disclosure Initiative, which was established in 2013 with a ten-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 IASB, 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 judgements when preparing their financial statements.

The Disclosure Initiative is an important part of the IASB’s central theme, Better Communication in Financial Reporting.

The IASB’s Press Release can be accessed at www.ifrs.org.

31 March 2017