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October 29, 2013

FRC calls to action for improved disclosures

The UK Financial Reporting Council (FRC) has set out a series of calls to action for preparers and auditors to consider improving the quality of disclosures in annual reports.

In order for annual reports to be fair, balanced and understandable, the FRC has made six recommendations:

– Disclosures should focus on communication of relevant information to investors– Core information that is relevant for investors is separated from supplementary information that only meets the needs of a wider stakeholder group– Placement of information outside the annual report may be more appropriate for supplementary information, where the law permits this– Immaterial information should be excluded– Boilerplate language should be avoided with a focus on entity specific disclosures– Related information is linked to tell the story of a company

These recommendations were based on feedback received on the FRC’s thought leadership paper ‘Thinking about disclosures in a broader context.’

The FRC also noted that it was pleased that the International Accounting Standards Board (IASB) intends to update IAS 1 Financial Statement Presentation, provide guidance on the application of materiality and focus on disclosure objectives and use less prescriptive language.

However the FRC also recommended the IASB develops a disclosure framework that considers disclosures in the financial report as a whole defines the boundaries of financial reporting and develops placement criteria.

It also recommended the IASB reduces and defines the "magnitude" terms used in IFRS’s such as significant, key and critical.

Related Link

Financial Reporting Council

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