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Quality of non-comparable disclosure under IFRS is insufficient, says ICAEW

The Institute of Chartered Accountants in England and Wales (ICAEW) has published a briefing on disclosure quality and international comparability claiming that non-comparable disclosure under IFRS is a problem.

The briefing Disclosure quality and international comparability under IFRS: evidence from pension discount rates, impairment and capitalisation of development costs reported the difficulties met in order to study international differences in IFRS practice.

ICAEW head of financial reporting Nigel Sleigh-Johnson said that the quality of disclosure differs markedly around the world, making it difficult to compare practices across companies and countries.

“Disclosure which can’t be compared undermines the rationale for the use of international accounting standards, which is to help international investors to make informed economic decisions,” he said.

The largest amount of non-comparable disclosure was found in pension discount rates as only 67% of financial statements were found to be comparable for analysis. Pension discount rates were often not distinguished by country and were disclosed as a wide range, found the research. Sleigh-Johnson said that some of the thinness in disclosures may be due to immateriality.

“The research identifies areas which hint at some non-compliance with IFRS disclosure requirements. This should concern auditors and regulators and indeed all parties interested in good financial reporting,” warned Sleigh-Johnson.

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