Financial statements not a matter of 'mere compliance', says IASB
The International Accounting Standards Board (IASB) has published draft guidance in an attempt to help corporations avoid mistakes within financial statements.
The guidance, delivered in the form of a draft practice statement, has been developed in response to concerns that management are unnecessarily referring to disclosure requirements as a result of uncertainty regarding the concept of materiality.
According to the IASB, an unnecessary reliance upon disclosure requirements in the standards “can result in excessive disclosure of immaterial information that can obscure useful information and also make financial statements cluttered and less understandable”.
Hans Hoogervorst, IASB chairman, noted that financial statements should not be used as “a mere compliance exercise”.
“Management needs to take a step back and consider whether they are providing the right level of information in the financial statement and whether it is useful,” said Mr Hoogervorst.
“The practice statement should help guide management’s judgement, encouraging them to remove repetitive and uninformative wording and improve the overall quality of financial statements,” he added.
As part of the development of the practice statement, the IASB added that it has consulted with both the International Auditing and Assurance Standards Board (IAASB) and the International Organization of Securities Commissions (IOSCO).