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CFA Institute says the disclosure reform should not aim at reducing quantity but at improving quality

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10 Aug 2013

The CFA Institute, a global association of investment professionals, has published a report entitled 'Financial Reporting Disclosures: Investor Perspectives on Transparency, Trust and Volume' providing investor views on disclosure reform priorities.

There have been a number of reports and projects initiated by national standard-setters and others on the topic of disclosure, and in May 2013 the IASB issued a Feedback Statement Discussion Forum – Financial Reporting Disclosure and announced that it would start a short-term initiative to explore opportunities to improve and simplify disclosures.

However, the CFA Institute felt that the investors' perspective has not been sufficiently considered and notes "that such efforts were heavily informed by reports based on interviews, surveys, and the work of preparers, accountants, and auditors rather than investors". Therefore, the CFA Institute initiated its own survey among its members in February 2012, and the report reflects the opinions expressed in 332 valid responses received on a web-based survey. Of these responses roughly 2/3 came from the Americas and roughly 1/6 each from Asia Pacific and Europe/Middle East/Africa.

The results presented in the report suggests that many investors and financial analysts feel that they already have the tools at hand to "cut through the clutter", so reducing the amount of disclosure is not their foremost priority. Rather than trying to develop a disclosure framework aimed at reducing the disclosure overload, the CFA Institute believes that accounting standard-setters should focus on improving presentation in and transparency of financial statements themselves. Many inefficient disclosures would disappear when the underlying financial statements are more effective and disclosures no longer need to compensate for poor presentation.

The CFA Institute report also discusses other ways that standard-setters will need to consider to improve disclosures, such as materiality, technology, cost-benefit analysis, and underlying behavioural elements. (These aspects have of course not been disregarded by the standard-setters, and materiality and behavioural aspects were central points of Hans Hoogervorst's "Breaking the boilerplate" speech given in June 2013 at the IFRS conference in Amsterdam.)

Please click for access to the report on the CFA Institute website.

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