As anyone familiar with financial statements can attest, the disclosure requirements for financial statements get more and more complex every year. The International Accounting Standards Board (IASB) recently conducted a survey seeking feedback on whether a disclosure framework should be developed. Over 80% of respondents noted that financial statement disclosures are overly complex and the issue needs to be addressed. The respondents varied among users, preparers, and other entities such as regulators, auditors and industry. Not surprisingly, users felt the disclosures did not have enough relevant information and poor communication of the issues, while preparers believe that there are too many disclosures, causing a disclosure overload. Both groups agreed that the language used was too generic and contained immaterial information.
The information gathered from the survey and disclosure forum held in January was used to prepare the initial draft of the Conceptual Framework discussion paper that was presented at the February IASB Board meeting. No decisions were made at that meeting, and a revised discussion paper was requested for the April 2013 meeting. Since the conceptual framework is only in the discussion paper stage, it does not appear that there will be any changes to financial statement disclosures in 2013. In the discussion forum, the IASB did suggest that preparers and users work together in order to provide more helpful information, and that it might help alleviate some of the shared concerns of generic language and immaterial information. Until the Conceptual Framework is completed, there will most likely remain concerns on the financial statement disclosures, however.
A similar problem exists for financial statement users in the United States of America. The Financial Accounting Standards Board (FASB) has also undertaken a project to provide a Disclosure Framework. In July 2012, the FASB issued an invitation to comment on a Disclosure Framework, with the comment period ending November 30, 2012. The majority of respondents’ issues were similar to the criticisms received in the survey conducted by the IASB. The issues raised indicated burdensome disclosures that had become capacious and were providing irrelevant information to the users of the financial statements.
Coming up with financial statement disclosure frameworks is very time-consuming and requires examining the disclosures from the viewpoints of various stockholders: users, prepares, auditors and regulators. It does not appear that disclosure reform will be implemented in 2013, but given the overwhelming support for it from all parties involved, it is sorely needed.
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