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.

European
consultation

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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.