IASB told disclosure notes too bloated

Disclosures made in the footnotes of a firm's financial statement are becoming an exercise in compliance rather than a means of transparency and communication, according to an International Accounting Standards Board (IASB) survey.

A strong majority (80 percent) of the roughly 225 survey respondents, comprised of both preparers and users of financial statements from all parts of the globe, agreed that improvements could be made to the way financial information is disclosed. Preparers, such as private equity firms and their portfolio companies, say the problem stems from disclosure requirements becoming too extensive, adding that not enough is being done to exclude immaterial information.

A few days after the survey was released HSBC chief accounting officer Russell Picot, speaking at the IASB Disclosures in Financial Reporting forum, said preparers are finding it easier to include all material information in their disclosure notes rather than attempt to filter what they feel is only relevant. 

Picot added that the trend is being driven by regulators who are demanding preparers provide a high-level of transparency, but which has resulted in investors having to sift through large amounts of data to find valuable information. 

The survey and forum mark the start of a short-term initiative from the IASB to see how it can improve its rules on disclosure notes. The board is expected to produce a feedback report on its forum and research sometime this quarter. 

The move follows similar efforts made by the Financial Accounting Standards Board, the US accounting standard-setter, which last year released a 75 page consultation paper asking stakeholders how to improve the effectiveness of disclosures by making them more useful and less redundant.