Financial statement preparers’ concerns about disclosure overload came through loud and clear in a survey recently conducted by the International Accounting Standards Board (IASB).
Most preparers participating in the survey said the primary problem with the way financial information is disclosed is that disclosure requirements are too extensive, and more needs to be done to exclude immaterial information.
The IASB released results of the survey ahead of a public forum discussion it has scheduled for Monday on disclosures in financial reporting. The forum will be held in London, and will be available by webcast at the IASB’s site.
Respondents from Africa, Asia, Europe, and North America participated in the survey. About half of the respondents were preparers, and about 1 in 5 was a financial statement user.
More than 80% said improvements could be made to the way financial information is disclosed. Half of those respondents said improvements are needed across all parts of the annual report, not just the financial statements.
Many financial statement users said preparers could do more to improve the communication of relevant information in financial statements instead of leaving users to sift through large amounts of data.
A variety of views on the causes of disclosure overload were identified. Some respondents said accounting standards could be improved. Others said preparers, auditors, and regulators are approaching financial reporting as a compliance exercise rather than as a means of communication.
IASB Chairman Hans Hoogervorst said in a statement that the survey “indicated a need for standard-setters, auditors, preparers, regulators, and investors to work together in order to deliver much-needed improvements to all disclosures, not just those contained within the financial statements.”
In a financial reporting world grappling with increased complexity, the IASB is not the only standard setter trying to come up with solutions for disclosure overload. FASB also is in the midst of a project designed to streamline disclosures in the footnotes to financial statements.
The comment period on FASB’s Invitation to Comment ended in November. A comment letter from CFO G. Scott Spendlove of Texas-based petroleum refining company Tesoro illustrated the scope of the disclosure problem. Spendlove’s letter said the number of pages in Tesoro’s Form 10-K statement grew 36% from 2005 to 2011.
—Ken Tysiac (firstname.lastname@example.org) is a JofA senior editor.