The Australian Financial Reporting Council
(FRC) has issued recommendations on reducing complexity in
financial reporting.

In a report, Managing Complexity in
Financial Reporting, the regulator made recommendations on how
to address complexity concerns, including making the most of
technology such as XBRL, addressing legal impediments and urging
the International Accounting Standards Board to undertake
reforms.

The report stems from the work of the FRC
Managing Complexity Task Force and it calls for simplification
indicating sources of reporting complexity, including:

  • Increasingly complex business
    operations;
  • Complexities in the regulatory
    framework – including a shifting mix of principles and rules,
    too often complicated by exceptions, the hybrid measurement model
    applied – cost and fair value – wide application of IFRS in the
    Australian context, and additional complexities being introduced as
    a result of the global financial crisis;
  • Changing attitudes of businesses and
    stakeholders, resulting from increased aversion to risk by company
    directors, preparers and auditors in response to a more litigious
    business environment; and
  • Developments in integrated reporting, which
    may add another complex set of requirements that companies must
    comply with.

The report stresses it supports the Australian
Accounting Standards Board’s call for the International Accounting
Standards Board to establish a framework on presentation and
disclosure, which should be rationalised, and that the nature of
“other comprehensive income” lacks meaning and consistency.

Deadline for comment on the report is 31
July.

 

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Related link

Australian Financial Reporting Council report:
Managing Complexity in Financial Reporting