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Disclosure initiative

Date recorded:

A Board member kicked off the discussion, noting that he felt that the Board should not be so ambitious on the 'principles of disclosure' research project ("the project"). He noted that, similar to the conceptual framework project, he felt that the project should be carried out based on the presumption that existing presentation and disclosure requirements were generally okay, and investigation should be performed to determine where these could be improved. 

Another Board member noted that she shared some of the concerns of the previous Board member with respect to ambition and moving the project forward, noting that it would be good if the project could be completed expeditiously. She noted that the proposal to look at IAS 1, 7 and 8 together was helpful and noted that the Board should be looking to streamline rather than fundamentally reconsider all of the issues that had been identified with respect to those standards. She made reference to the issue that had come from the IFRS Interpretations Committee (as discussed in paragraph 21 of the staff paper), noting that she would not object to the issue being included as part of the project if the Board thought it would result in the issue being dealt with on a more timely basis, but noted that further progress should be made by the IFRS Interpretations Committee before a decision was made by the Board on this issue. She noted that she concurred with the staff recommendation that the project should address both presentation and disclosure, noting that the two are so interlinked it may be difficult to operationalise the split. With respect to the staff proposal to include disclosure of interim financial information as a topic, she acknowledged that there were valid reasons why it should be looked at, but expressed concern that addressing interim disclosures could slow down progress on the project. However, she suggested that the impact on progress should be investigated to determine whether there would be scope for inclusion in this project.

Another Board member noted that he took the opposite view of the two Board members who had spoken, noting that he believed the Board should be more ambitious not less, noting the ongoing criticisms the Board received with respect to presentation and disclosure. He noted that he would also like to see a performance reporting project running parallel to this project, as he felt that trying to do a bit of presentation in amending IAS 1 was too difficult. He said that he supported having a disclosure framework and amending IAS 1 to make the framework for disclosures clearer, but noted that performance reporting and presentation needed to be tackled more generally also. He also noted that he believed the deliverables from the project would have fairly limited influence on financial statement disclosures overall. He noted that, for the Board to improve disclosure, and deal with the clutter issue and improve quality, standards needed to be changed. He suggested that, in addition to a framework of objectives for disclosures being included in IAS 1, that disclosure objectives were included in all individual standards. He pointed out that the disclosure guidance in a number of the older standards, such as IAS 36, was more checklist based, with disclosure objectives only being included in more recent standards, such as IFRS 7. This led him to believe that the older standards needed updating. 

Another Board member observed the differing opinions of the Board members who had previously spoken. He suggested the Board did some work on IAS 1, 7 and 8 by Q3 2014 and worked with other national bodies and standard setters to consider the work they were doing or may do in the future. Once that work had been performed, the Board could look at how best to continue moving forward. He believed that taking a couple of steps forward at a time was the best way to approach the project and noted the need for the Board to be careful not promise the end result at the beginning.

Another Board member noted that he shared some of the views that had already been discussed by other Board members and that he agreed with the idea of developing a set of overarching principles. He referred to paragraph 12 of the staff paper, which makes reference to the Board’s separate project on materiality, noting that he believed that the materiality and principles of disclosure projects should follow each other very closely. It was very important that there was a strong link between the two projects.

The Technical Principal responded, noting that the first step in the materiality project was looking at how materiality was being applied in the different frameworks. The results of this research would be brought back to the Board and the Board would be asked for guidance on how to proceed. She acknowledged that the Board member had raised a good point and that the staff would incorporate discussion and options for linking the projects in the paper brought back to the Board on the materiality project.

Another Board member noted that she agreed with the scope suggested by the staff in the paper. However, she noted that she saw the area of interim reporting as being more secondary and that the primary focus of the Board should be on the main IFRS financial statements. She found an objective-based approach appealing, but noted she had reservations with respect to how well it would end up being applied in practice. She reiterated the point made by another Board member that some of the disclosure guidance in the older standards was more 'checklist' type guidance, whereas more recent standards had sought to be more objectives-based and suggested that some research could be performed to determine how good disclosures were in the different areas and how well the different words in the different standards worked in application. With respect to the regulatory side of things, she noted that people were concerned about disclosure overload arising from competing requirements. She highlighted that it was important that the Board also considered the wider environment, of which the IASB was only a part, and looked at the ability to cross-reference and what actions should be taken to help achieve this.

Another Board member thought the scope of the project as set out paragraphs 5 through 7 of the staff paper was appropriate. She suggested that it would be wise to stop using the term 'disclosure framework' and that it would be better to refer to 'principles of disclosure'. She noted that there was an expectation gap that arose because constituents translated 'removing clutter' to mean less disclosures, noting that the aim of the project was not to add or remove disclosures, but to rationalise the current guidance to make it easier for preparers to determine whether to include duplicate or unnecessary information. She stressed that the Board needed to handle the expectation gap very carefully and noted that if the Board could rationalise IAS 1, 7 and 8 and introduce more modern and consistent language, it would have taken a big step in the right direction.

Another Board member noted that he agreed with the scope and direction of the project for the reasons already expressed by other Board members, noting that, on its own, the work being performed on the principles of disclosure project might be insufficient, but noted that with the materiality and conceptual framework projects that were being undertaken concurrently, collectively the Board was doing a lot of data gathering and research. He noted that, ultimately, the end result needed to be standards that made the financial statements, particularly the notes, more relevant and that what might make them more relevant was an important aspect. He agreed with the comment made by another Board member that interim reporting should be regarded as a secondary part of the project. He referred to paragraph 40 of the staff paper and questioned how the staff was proposing to perform the outreach on this, noting that a lot of other organisations were doing the same thing, and questioned whether the IASB would be working with other groups.

The Project Manager responded that the staff was already working with IOSCO and IAASB with respect to materiality and noted that this could be extended, noting that the ability to work with other groups often depended on the particular topics.

Another Board member noted that he believed the Board needed to take an integrated approach to the project. He pointed out that one of the key issues that had come out of the research forum the previous year was that many constituents had commented that the regulators and the IASB needed to work in concert to reduce repetitive disclosures. He also stressed the importance of the project, and questioned whether everything the Board wanted to achieve could be completed within the proposed timetable.

Another Board member noted that he considered the scope of the project to be too broad. He acknowledged that there was a need to address all the presentation and disclosure issues, but noted that from the agenda consultations it was clear that the Board should focus primarily on disclosure. He noted that there was a need for the Board to develop disclosure principles, though work was also needed at the standards level. He believed that without disclosure objectives in the standards it was difficult for preparers to apply materiality and judgement.

Another Board member agreed with the comments made by the previous Board member. He believed the Board should be ambitious, but not in this project. He agreed with the comment made by another Board member that the Board should have a separate project dealing with performance reporting presentation, but that should not be part of this project. He stressed the importance of the board staying focused in this project and suggested eliminating some topics from the scope and just dealing with the main message from the exposure forum which was to improve the readability of financial statements and their use as a communication tool. He noted that having an objective at the beginning of every standard with respect to disclosure was critical, but the Board should not stop there. He added that a description of the key investor considerations with respect to that topic should also be included. He noted the importance of focusing on readability and usefulness, and balancing the fact that financial statements were both compliance and communication documents for an investor. He said that the topics of interim reporting and cash flow reporting should be eliminated from the scope of the project and that the Board should focus on topics (a) (on the principles of disclosure for the notes) and (b) (information in a complete set of IFRS financial statements) in paragraph 10 of the staff paper, acknowledging that the other topics did require attention, but not in this project.

The Chairman stressed the importance of delivering tangible results with the project and noted that a good start had been made with the proposed scope for the project delivered in a very short time period. He believed that the Board should not only deliver general principles, but also test those principles to determine the ultimate disclosures that would result from application of the principles developed. He also noted that introducing a clear disclosure objective in all standards could help preparers, and stressed that the project was completed as expeditiously as possible. He highlighted the comments that kept surfacing with respect to the need for the Board to start again on the financial presentation project, stressing that the Board needed to make a decision one way or the other with what should be done on this. He noted that he was not in favour of adding it to this project given the desire for this project to be completed as expeditiously as possible, but questioned whether it could be done as a parallel project. He asked the staff to look into what could be done, noting that it was vital a decision was made. Lastly, he also raised the issue of the layering of disclosure requirements by different bodies and questioned whether it would be a good idea for the IASB to talk directly with those other organisations that set global disclosure requirements, for example, the Basle Committee.

Another Board member responded that the Basle Committee had been spoken to, but one of the issues that had been identified was that the Basle Committee was very focused on a template approach, and therefore, would not rely on the IASB’s more general objectives (for example, in IFRS 7). She also pointed out the differing boundaries that arose because the consolidation rules were different for regulatory purposes as well as the focus on risk weighted assets, which differed from IFRS requirements. She further noted that the IASB had encouraged the Basle Committee to cross-reference to IFRS financial statements to the extent that they could, but noted that their preference was for a stand-alone, concrete document of their own. She concluded, noting that there was an ongoing dialogue between the organisations.

The Chairman concluded, noting that he believed the Board was on the right track, and asked the staff whether, based on the above discussion, there would be too many changes to the proposed approach.

The Technical Principal responded, noting that the staff would move forward concentrating on topics (a) and (b) set out in paragraph 10 of the staff paper. The first paper that would be brought back to the Board would be a paper on cross-referencing. She noted that the changes in themselves were not significant, rather more a reshifting of priorities. She concluded saying that the disclosure of interim financial information would take a more secondary role in the project.

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