Disclosure Initiative — Principles of Disclosure

Joint submission by the Chartered Accountants Australia and New Zealand (CA ANZ) and the Association of Chartered Certified Accountants (ACCA), responding to a discussion paper issued for public consultation by the International Accounting Standards Board (IASB), the Disclosure Initiative—Principles of Disclosure.

CA ANZ and ACCA appreciate the opportunity to comment on the Principles of Disclosure Discussion Paper. 

We have considered this consultation essentially in relation to disclosure in the financial statements. Increasingly, however, corporate reporting needs to be seen as a whole principally because there is a demand for reporting which provides a more holistic, strategic and forward-looking depiction of the business.

The boundary between the financial statements and the rest of the corporate report will become less absolute for those reasons and because the possibilities of digital presentation are encouraging and enabling that. 

We broadly agree with the IASB's analysis of the disclosure issue that in some cases financial statements may contain insufficient relevant information and yet excessive irrelevant or immaterial information. 

Much of the solution to this disclosure problem lies in changing the behaviours and attitudes of those involved with the financial reporting process – preparers, auditors, regulators for example – to improve the quality of the reports. There are however further changes that the IASB can make to try to assist these developments. We agree with much of what is proposed and specifically the development of 

  • Centralised disclosure objectives in the Conceptual Framework 
  • The principles of effective communication in a standard 
  • A general disclosure standard as outlined in the paper 

Changes in attitudes and behaviours, however, are unlikely to be achieved in our view without changes in all of the standards requiring disclosures. The Standards-level Review of Disclosures project is essential and needs to 

  • Provide disclosure objectives that are specific to the subject covered by the standard 
  • Make clear in consistent language which of the more detailed disclosures needed to achieve those objectives are always going to be required and which are needed if material 
  • Remove any excessive, repetitive or redundant disclosures 

The need for a more holistic approach to corporate reporting referred to above will also mean that there may be information required by IFRS that may be better provided outside the financial statements and vice versa the financial statements may contain information beyond that required by the standards. These may be for reasons of better understanding of the corporate reporting as a whole or to reduce repetition.

We support these possibilities, but they must be subject to safeguards.

We agree with most of the proposals whether for the specific cases of alternative performance measures or more generally. The inclusion of non-IFRS information or the cross-referring to other corporate reports, also raise important issues about the responsibility for the information. That of the management of the reporting entity and of the auditors needs to be clear and the extent of any 'safe harbour' provisions. IASB may need to work in step with other standard setters and regulators to resolve the responsibility issue. 

Our responses to the specific questions raised in the Discussion Paper follow in the attached document.