![]() ![]() Stakeholders get lost in the maze of voluminous prescriptive requirements leaving them little or no time to apply materiality judgment. ![]() The use of prescriptive language leads the stakeholders into using the accounting standards as a checklist to ensure compliance.Lack of specific disclosure objectives that the organizations find difficult to comprehend or evaluate its importance adequately to make effective judgments.The feedback on the discussion paper further led to the understanding certain aspects of IFRS accounting standards might be contributing to the disclosure problem, like: Instead of making materiality judgments, business entities use the IFRS accounting standards as a checklist to decide the disclosure requirement, and this led to the identification of three major problems: However, this is where most businesses and disclosure report face problems which are in ensuring the quality and effectiveness of the disclosures, referred to as the ‘Disclosure Problem.’ The information disclosed in the financial statements helps stakeholders gauge the financial performance of a business entity, and investors make their decisions based on that information. As a part of the project, a new set of disclosure requirements for IFRS 13 Fair Value Measurement and the IAS 19 Employee Benefits, was attempted to test the efficacy of the proposed guidance.īased on the research and the discussion paper feedback, IASB concluded that the disclosure problems can only be addressed by involving all the stakeholders including preparers, regulators, auditors, and users to collaborate with each other. The Exposure Draft – Disclosure Requirements in IFRS Standards-A Pilot ApproachĪs a part of the project, IASB published the Exposure Draft named Disclosure Requirements in IFRS Standards-A Pilot Approach, which proposes a new approach for developing and drafting disclosure requirements. To make disclosures useful and relevant for the information users, IASB has undertaken several Disclosure Initiative projects over the years and the project in discussion is a continuation in the series. In addition to the above information, financial disclosures must include details about transactions that happen even after the reporting period if that information is necessary to meet the objective of financial statements or is useful to users of financial statements. ![]() It specifies that the financial statements should include “information about the entity’s assets, liabilities, equity, income, and expenses that is useful to users of financial statements in evaluating the prospects for future net cash inflows to the reporting entity and evaluating management’s stewardship of the entity’s economic resources.” Before we discuss the project in detail, it will be insightful to understand the purpose of the disclosure requirement as per IFRS’s Conceptual Framework for Financial Reporting. IASB based its disclosure requirement framework for developing and drafting disclosure requirements in IFRS Accounting Standards based on the guidance developed as a part of the project. IASB recently released the project and feedback summary of the project which will be discussed in this blog. ![]() The objective of the exercise was to develop accounting standards that will enable the companies to gain a deeper understanding of the materiality of financial information to author better quality disclosure reports that are useful and relevant to the investors. IASB undertook a project in 2021, called the Disclosure Initiative-Targeted Standards-level Review of Disclosures, to improve its approach to developing and drafting disclosure requirements. As a part of its commitment to maintaining the quality, consistency, and comparability of disclosure standards, IASB engages in exercises to constantly review and revise the existing standards and process. The International Accounting Standards Board (IASB), is the leading accounting standards body that sets the IFRS accounting standards used in over 140 countries. The disclosure management process is getting increasingly intricate, and complex disclosure requirements have a lot to contribute to that complexity.īusinesses need to ensure that the quality of their disclosures meets the stakeholder’s definition of materiality and follows the accounting standards and taxonomies and the disclosure mandates stipulated by the regulatory bodies. Conclusion IASB’s Disclosure Initiative-Targeted Standards-level Review of Disclosures – Key Findings ![]()
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