The paper, entitled Thinking about disclosures in a broader context: A road map for a disclosure framework, follows on from an earlier FRC paper published in 2009.

The FRC notes that the paper complements the discussion paper Towards a Disclosure Framework for the Notes which it joint published in July 2012 with the European Financial Reporting Advisory Group (EFRAG) and the Autorité des Normes Comptables (ANC) in France.

In contrast to the narrower focus of the EFRAG/ANC/FRC paper, the FRC paper sets out the FRC’s thinking on how a disclosure framework might apply in a broader context - particularly considering placement criteria, which in the FRC’s view, are an integral part of a disclosure framework.  In doing so, the paper focuses on 'financial reporting' as a subset of overall corporate reporting and sees placement criteria as providing a structure for the financial report so that disclosures are organised in a way that is more informative to the reader and can be consistently applied.

The paper reiterates the 'disclosure problem', which it describes in terms of both quantity and quality issues, which result in disclosures that are "more about compliance than communication".  The paper sees a disclosure framework as a coherent framework that draws together all the various strands of financial reporting that relate to disclosures, within which standard setters and other regulators can set disclosure requirements and preparers and auditors can apply them.

The paper sets out the following benefits of such a disclosure framework:

• Ensuring that regulators only add disclosures to financial reports where those disclosures meet the objective of financial reporting
• More consistent setting of disclosure requirements across standards
• A reduction in the burden of disclosures arising from setting proportionate disclosure requirements
• The elimination of duplicate information within financial reports
• Better organisation of disclosures, which will make financial reports easier to navigate, as information fulfilling set objectives will be positioned within the same section of a financial report
• Empowering preparers to apply materiality more robustly to disclosures
• Elimination of boilerplate disclosures.

The paper also provides insights into how to reduce the disclosure burden through the application of the concepts of proportionality and materiality, and develops some principles for the communication of disclosures.

Recommendations for the IASB

The paper outlines what the FRC believes the IASB should do to contribute to the development of a disclosure framework, including setting the principles as part of its conceptual framework project.  For this purpose, the paper recommends the IASB should:

• Define the boundaries of financial reporting for their purposes
• Develop placement criteria for establishing where information should be disclosed
• Develop a clear objective for disclosure, as well as a distinct objective for presentation.

In addition, there are other steps that the FRC believes the IASB can take to enable preparers and others to critically assess the disclosures they should provide within financial reports. The paper suggests the IASB should:

1. Engage with users at an early stage in the development of a disclosure framework
2. Provide guidance on what materiality means from a disclosure perspective
3. Reduce and define the terms used within IFRSs, e.g. significant, key, critical, and then use the defined terms consistently
4. Provide overarching principles for disclosures and present these within one standard
5. Update IAS 1 so that presentational and disclosure aspects are clearly separated
6. Make it clear that measures not defined within IFRSs (e.g. net debt) and adjusted measures (e.g. EBITDA) can be disclosed within the notes to the financial statements (as a type of disaggregation) as long as these measures are defined, reconciled back to IFRS figures, include comparative information and are consistently calculated and presented
7. Where disclosure requirements within individual standards are not mandatory, these should be moved into implementation guidance that is not part of the standard.

The FRC is requesting comments on the Discussion Paper by 31 January 2013.  Click for press release (link to FRC website).

Agenda for the meeting

Sheila Fraser. Ms Fraser is a Chartered Accountant and has served as the Auditor General of Canada from 2001 to 2011. She was also the former Chair of the Canadian Public Sector Accounting Board and is currently a member of the International Public Sector Accounting Standards Board (IPSASB).

Professor Wiseman Nkulu. Professor Nkulu is a Chartered Accountant currently serving as a chancellor of the University of Pretoria. He was a former Economic Adviser in South Africa, the first Chairman of the Steering Committee and Chief Executive of the Secretartiat of the New Partnership for Africa's Development (NEPAD), a former President of the South African Institute of Chartered Accountants, a former Chairman of the South African Council of Higher Education and a former President of the International Organization of Employers.

Dr Heidi Miller. Dr Miller has over 30 years of experience in the financial services industry, where she held senior executive positions at firms such as JPMorgan Chase & Company, Bank One, Citigroup and Travellers Group.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS.   ESMA considers the publication of the decision, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, twelfth in the series, include:

Click for access to the full report.

The newsletter contains a summary from the EFRAG meeting held in October 2012 between the EFRAG Technical Expert Group and Consultative Forum of Standard Setters. The topics discussed were:

• The FRC note for the IFRIC’s The Sharman Report and disclosure of material uncertainties under IFRS,
• Update on IAS 28,
• EFRAG operational and due process improvements,
• Update on the latest developments on the proposed EU Accounting Directive,
• IFRIC draft interpretation Put-option written on non-controlling interests,
• Canadian Institute of Chartered Accountants paper Toward a Measurement Framework for Financial Reporting by Profit-Orientated Entities,
• Autorité des Normes Comptables paper Proposals for Accounting for GHG Emissions Rights reflecting companies’ business models,
• IASB Review Draft General Hedge Accounting,
• IASB Project Leases, and
• EFRAG’s Proactive Project The Role of the Business Model in Financial Reporting.

Click for the EFRAG Update (link to EFRAG website).

Agenda for the meeting

We support the IFRS Foundation’s change to separate the role of IASB Chair and the Executive Director and commend them for acting quickly to implement the change recommended by both the Trustees’ Strategy Review Report and the IFRS Foundation Monitoring Board governance review.

The comment letter notes the following:

[W]e support the changes to the IFRS Foundation's Constitution, subject to our proposed changes that aim to reinforce the separation between the IFRS Foundation Executive Director and the IASB Chair.

Please click for access to our comment letter.

See our previous articles on:

• IFRS Foundation draft review.
• Trustees' Strategy Review Report and Monitoring Board governance review.

The full agenda for the meeting, dated 8 October 2012, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

The updated report reflects that the Accounting Regulatory Committee (ARC) has voted in favour of the adoption of the Amendments to IFRS 1 Government Loans.

Click to download the Endorsement Status Report as of 8 October 2012.

You can find all past endorsement status reports here.