10 January 2012

IFAC: IAASB's feedback statement on the evolving nature of financial reporting

“Disclosures have always been a critical component of financial reporting, but have become more so today as reporting increasingly incorporates fair value information, estimates involving judgement and complex measurements, and narrative disclosures of some of the risks and characteristics of companies and groups. Accordingly, investors and others look to disclosures for vital insights when making investment decisions”, said Prof Arnold Schilder, Chairman of the IAASB. “This underscores the importance of the IAASB’s initiative to gain further knowledge and understanding of the issues and share what it has heard to stimulate further thinking and exploration in this area.”

The Feedback Statement presents a summary of the range of views on some of the more significant challenges faced by participants across the entire financial reporting supply chain, including the impact of trends in financial reporting, applying materiality to disclosures, evaluating misstatements generated by disclosures, the availability of audit evidence to support disclosures, and work effort. To address some of the issues identified, respondents have called for more auditing guidance in certain identified areas. However, the majority of the respondents were of the view that some of the more important issues could not be addressed by the IAASB on its own, but would require international collaboration and cooperation, particularly with both the accounting standard setters—including the IASB and FASB—and regulators.

“Financial information that is reliable, understandable and relevant is essential, as is the assurance on that information that auditors provide. We wholeheartedly agree with the respondents regarding the need for international collaboration and cooperation among standard-setters; securities, audit and prudential regulators; and other stakeholders. We must work together to develop effective responses to the issues being faced today”, notes James Gunn, IAASB Technical Director. “Like others, the IAASB has a role in enhancing the public’s confidence in disclosures as a priority—recognising that individual initiatives must be towards finding a collective solution.”

Press release

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