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June 18, 2012

Australian FRC calls for simplified financial reporting

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.

 

Related link

Australian Financial Reporting Council report: Managing Complexity in Financial Reporting

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