The accounting profession’s in the US and Europe have launched consultations on ways to improve the effectiveness of disclosures in the financial statements of public, private, and not-for-profit organisations.
In the US, the Financial Accounting Standards Board (FASB) issued its paper Disclosure Framework calling for comment on the following areas:
- A decision process that could aid the FASB in establishing disclosure requirements that address relevant information and only relevant information;
- Flexible disclosure requirements that could be adapted by each reporting organisation to focus on information that is relevant in its specific circumstances;
- A judgment framework that could help each reporting organisation determine which disclosures are relevant in its specific circumstances; and
- Organisation and formatting techniques that could make the information users need easier to find and understand.
The FASB said when the framework has reached a sufficient level of development it plans to apply that framework to existing standards.
FASB chairman Leslie Seidman said many stakeholders have expressed concerns about the relevance and sheer volume of information in notes to financial statements, and some information is either missing or difficult to find.
“The ultimate goal is to enhance users’ abilities to analyse the information in the notes to financial statements while minimising the burden on reporting organisations,” she added.
The European Financial Reporting Advisory Group (EFRAG), Autorité des Normes Comptables (ANC) in France, and the Financial Reporting Council (FRC) in the UK have also jointly issued a combined European (EU) consultation, Towards a Disclosure Framework for the Notes.
Similarly to the US EFRAG said the three bodies have launched the consultation to draws attention to concerns regarding the growth of notes that currently explain financial statements.
The group said the notes have become extensive and have reached the point where investors and creditors can no longer “see the wood for the trees”.
Many users of financial statements now feel these notes are a burden rather than a help to the statements.
The joint EFRAG, ANC and FRC paper outlines key principles and proposes guidelines on how to set and apply disclosure requirements regarding the notes
The deadline to comment on the US consultation is 16 November and the 31 December for the EU.