Disclosure initiative (education session)

Date recorded:

Agenda Paper 11A: Project Update

The Technical Principal introduced the agenda paper that included a presentation on the current and future activities in the Disclosure Initiative (DI). The Senior Director for Technical Activities reminded the Board that the session was educational in nature.

Slide 4 of the presentation illustrated the different sub-projects within the DI. These were split up into implementation projects, research projects and ongoing activities. Regarding the implementation projects, the amendments to IAS 1 had been finalised in December 2014 at the same time when the Exposure Draft on IAS 7 had been published. The main research projects were ‘Materiality’ and ‘Principles of Disclosure (POD)’. The ongoing activities comprised mainly the IFRS Taxonomy as well as filing and access requirements.

Slide 5 included a timeline of the project. The project had been initiated through the 2011 Agenda Consultation. In response to that a Discussion Forum had been held in 2013 that had led to a Feedback Statement. The Technical Principal said that with the progress of the DI they saw a behavioural change in standard-setters around the world who were now also looking into disclosure-related projects. She also said that the amendments to IAS 1 could be applied at any time as they were of clarifying nature.

Slide 6 pointed out that the DI aimed to improve the effectiveness of disclosures. The issue was not only disclosure overload but disclosing irrelevant information or bad communication of relevant information.

Slide 7 took another perspective on the DI. The Senior Director for Technical Activities said that some aspects of the project were about standard-setting whilst others were about standard-setting guidance. The core of the DI was the POD sub-project which would result in a standard that would, for example, describe the composition of the financial statements and mandate which information went into the notes.

One Board member asked about the relationship between the DI and the Conceptual Framework (CF) project as the results of the DI could potentially influence the CF project, where an Exposure Draft was expected soon. The Senior Director for Technical Activities replied that the DI would be more on a standards-level but it would be too early to make an assessment of how the DI would influence the CF. The Technical Principal added that much attention would be given to consistency between the two projects.

One Board member referred to a survey performed by the CFA Institute that showed that there was no evidence of excessive amounts of immaterial information in financial statements. He asked the Senior Director for Technical Activities whether the staff had evidence to the contrary. The Senior Director for Technical Activities replied that he had seen some evidence that excessive risk disclosures distracted the users of financial statements from the actual main risks. The Technical Principal added that the CFA had said that information on accounting policies were mostly ‘boilerplate’ and therefore irrelevant. The Board member replied that this information would be useful to some users, for example, users that were new to an industry and wanted to know about the accounting policies in that industry.

One Board member said that in Brazil the highest hurdle for entities to adopt IFRS was the high amount of disclosures. He said that the Brazilian standard-setter had issued new guidance that consolidated requirements and by that would reduce the volume of financial statements by an estimated 30%. This had been very well received by Brazilian constituents.

A Board member said that the investors’ expectations of the DI should be understood as they were focused on comparability and might not agree with some of the decisions made. Also, she said that there was no evidence that objective-based disclosures had worked in the past. She said that IFRS 7, for example was objective-based and had thus been difficult to enforce.

The Senior Director for Technical Activities continued with Slide 8 which concerned materiality. He said that the staff planned to bring an agenda paper to the March 2015 meeting which would be accompanied by an early draft of the Practice Statement. The Exposure Draft for the Practice Statement was planned to be published in the second quarter of 2015.

Slide 9 outlined the POD sub-project. The Technical Principal said that the output from this sub-project would be a Discussion Paper and some educational guidance.

One Board member asked as to how the cooperation with IOSCO would look like. The Technical Principal said that the cooperation with IOSCO was mostly on materiality.

Another Board member said that the project on the cash flow statement was very comprehensive and therefore suggested uncoupling from the performance reporting project. The Senior Director for Technical Activities agreed but said the projects would be interlinked. The Board member suggested defining the scope of both projects as there was uncertainty amongst constituents.

For slide 16, the Senior Director for Technical Activities pointed out that there was good progress on the ten point plan that had been introduced by the Chairman in 2013. The first five points had been addressed by the IAS 1 amendments, the sixth point would be addressed if the IAS 7 Exposure Draft were to be finalised and further work to address the last four points had already begun.

One Board member suggested inserting disclosure objectives in standards that did not have any disclosure objectives as of yet. The Chairman asked the staff whether this would be part of the tenth point in the ten point plan. The Technical Principal replied that this would be after step 10. The Chairman suggested merging points nine and ten and then adding as a tenth point the actual changing of the standards. A Board member said that the Discussion Paper on POD should illustrate how the principles would change the standards on an exemplary standard.

The practice fellow explained that slide 22 gave an overview over the filing requirements in different jurisdictions. Slide 23 described the methodology of the project. The staff had asked standard-setters to provide information on the filing requirements in their jurisdictions. About half of the responses which the staff had received back had indicated that XBRL was used in their jurisdiction with most of them using the IFRS Taxonomy. However, ten of the G20 countries had not yet replied. The practice fellow asked Board members to utilise their contacts to facilitate replies from those countries. On slide 24 it was explained that detailed surveys had been sent to those organisations where the standard-setters had indicated that they used IFRS Taxonomy. Slide 25 revealed that the project was slightly behind schedule.

The Chairman suggested integrating the received profiles into the country profiles.

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