Solving the ‘disclosure problem’ in financial reporting

Solving the ‘disclosure problem’ in financial reporting

Principles of Disclosure discussion paper aims to contribute to better communication



KPMG in the UK


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This discussion paper is a key step towards solving the ‘disclosure problem’.

The IASB has made better communication in financial reporting a central theme for the next five years. To that end, the Board is focusing on its Disclosure initiative and its project on Primary Financial Statements.

Its long-awaited discussion paper (DP) Principles of Disclosure (PoD) – which is a significant milestone in the Disclosure initiative – is relevant to all stakeholders involved in financial reporting: investors, preparers, regulators, auditors and the IASB in its role as the standard-setter.


“To achieve better communication, the real ask is for behavioural change. The IASB’s role is to act as a facilitator, encouraging preparers to use their judgement to provide information that is more relevant to the needs of users of financial statements.”


David Littleford, 

KPMG’s global IFRS presentation leader


A foundation for improved disclosures

The main objective of the PoD project is to identify current issues with disclosures and develop principles in IFRS to address them.

Together with the revised Conceptual Framework expected to be issued later in 2017, it lays the foundation for improved IFRS disclosures.

The project is no small task. Stakeholder expectations are high and often conflicting – while some want to see more information, others want less. To master the challenge of addressng disclosure issues, the Board is seeking input on the scope and direction of the project.

Challenges to address

The PoD DP aims to help preparers judge what
information to disclose in financial statements and how best to disclose it.

The IASB has identified three main concerns it would like to address:

  • Insufficient relevant information, which can lead to inappropriate decisions by users of financial statements.
  • Irrelevant information, which can obscure relevant information and reduce understandability.
  • Ineffective communication, which can make financial statements hard to understand, time-consuming to analyse, and misleading.

A full list of the discussion points that the IASB is seeking feedback on can be
found below.

Expected outcomes and next steps

At this stage of the project, the final deliverable has not yet
been defined, but the options include:

  • amendments to IAS 1 Presentation of Financial Statements;
  • a new disclosure standard to replace parts of IAS 1; and/or     
  • non-mandatory guidance.

The DP is also being used by the IASB as a means to gather
feedback informing other projects, such as:

  • the Primary Financial Statements project, which will draw on the feedback on (alternative) performance measures.
  • The Standards-level Review of Disclosures research project, which
    will be based on the disclosure principles developed in the PoD project.

Have your say

Stakeholders expect the PoD project to address a number of controversial issues and provide a solid foundation to solve the ‘disclosure problem’.

Therefore, it is vital that all stakeholders contribute to the discussion by sharing their views about which disclosure issues the Board should focus on and how they should be tackled.

Comments are due to the IASB by 2 October 2017. Don’t miss this opportunity to join the debate and make your views heard.





Discussion points covered in the PoD DP

Discussion points that the
IASB is seeking your feedback on
1. Overview of 
‘disclosure problem’
and objective of
the project

  • Are there other factors – besides the three
    concerns identified by the Board – that contribute to the ‘disclosure problem’?
  • Do you agree that the development of disclosure principles in a general disclosure standard would address this problem?
2. Principles ofeffective communication
  • Do you agree that the following principles should be applied when preparing financial statements?
    • Entity-specific
    • Clear and simple
    • Organised to highlight important matters
    • Linked to related information
    • Free from unnecessary duplication
    • Comparable
    • In an appropriate format
    • Do you agree with the roles of the different components, and the implications of those roles, as set out in the DP?
4. Location of information
  • Can information required by IFRS be provided
    outside of the financial statements if it is clearly identified and cross referenced?
  • Should an entity be allowed to include ‘non-IFRS information’ in its financial statements if it clearly identifies it and explains its usefulness?
5. Use of performance measures in the financial statements
  • Should the Board clarify the use of ‘subtotals’
    like EBITDA/EBIT?
  • Should the Board develop definitions of, and requirements for, the presentation of unusual or infrequently occurring items?
  • How can performance measures be fairly presented – e.g. consistent with guidelines published by securities regulators?
6. Disclosures of
accounting policies
  • Should requirements for determining which accounting policies to disclose and where to disclose them be included?
7. Centralised disclosure objectives
  • Do you agree that the Board should develop centralised disclosure objectives?
  • What method should be used to develop them – i.e. should the Board focus on balance sheet/profit or loss items or on an entity’s activities?
  • Do you think that all disclosure objectives and requirements should be located within a single standard/set of standards for disclosures?
8. New Zealand ASB staff’s approach to drafting IFRS disclosure requirements
  • Do you think that the development of this two-tier approach – based on the use of judgement and
    less prescriptive language – would encourage more effective disclosures?
  • Do you think that this approach should be considered by the Board in its Standards-level Review of Disclosures project?
  • Do you think that the way the Board currently drafts IFRSs contributes to the ‘disclosure problem’?

© 2017 KPMG IFRG Limited is a UK company, limited by guarantee. All rights reserved. KPMG IFRG Limited, registered in England No 5253019. Registered office: 15 Canada Square, London, E14 5GL, UK.

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