The International Auditing and Assurance Standards Board (IAASB) has found that today’s financial reporting frameworks do not adequately articulate the role and objective of disclosures in the financial statements and the criteria for including them.
The IAASB said applying materiality to disclosures, evaluating misstatements, the availability of audit evidence and work effort are some of the biggest challenges faced by the entire financial reporting supply chain.
The IAASB findings based on a discussion paper, The Evolving Nature of Financial Reporting: Disclosure and Its Audit Implications, also found more auditing guidance is required in certain areas indentified.
IAASB chairman Arnold Schilder said disclosures have always been a critical component of financial reporting.
“But it has become more so today as reporting increasingly incorporates fair value information, estimates involving judgment and complex measurements and narrative disclosures of some of the risks and characteristics of companies and groups,” he said.
The report also found there is a need for the IAASB to further engage with the International Accounting Standards Board and its US counterpart, the Financial Accounting Standards Board, in order to explore collaborative solutions to many of the key disclosure issues.
The IAASB based its feedback report on 51 responses from financial reporting participant groups around the world.