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Standard-setters split on whether to prohibit non-IFRS information in financial statements

  • IASB (International Accounting Standards Board) (blue) Image

19 Oct 2017

In March this year, the IASB published its discussion paper DP/2017/1 'Disclosure Initiative — Principles of Disclosure'. Comments were requested by 2 October, and 100 comment letters have by now been made available on the IASB website. An analysis shows that standard-setters are split on the question whether a general disclosure standard should prohibit an entity from including "non-IFRS information" or information that is inconsistent with IFRSs in its financial statements.

Some standard-setters are strictly against including any non-IFRS information in financial statements. Canada's AcSB argues that non-IFRS information "could undermine other information in the financial statements that conforms with IFRS Standards" and could "further reduce the relevance of financial statements". Similarly, the Austrian standard-setter AFRAC argues that "the content and quality is what makes [financial staements] valuable". Mexico's CINIF ("we do not believe there are situations where 'non-IFRS information' is warranted") and Korea's KASB (including non-IFRS information "would impair the credibility of the financial statements") argue along the same lines.

Some standard-setters argue in favour of allowing information that is not IFRS information in financial statements. The FRC notes that it "does not support a principle which prohibits information". The HKICPA from Hong Kong warns that prohibiting non-IFRS information "may limit [preparers'] ability to provide information that is relevant to users". And the AOSSG adds that "the IASB should not prohibit the inclusion of any types of additional information in the financial statements if it is necessary for users understanding the financial statements" which is seconded by New Zealand's NZASB noting that prohibiting the inclusion "could prevent an entity from telling its story.". Italy's OIC also argues in favour of including non-IFRS information but adds that the issue is complex.

Many standard-setters draw a line between non-IFRS information and information that is not consistent with IFRSs (with some of them again pointing out that it would be difficult to distinguish between the two types of information). Among these are France's ANC, Malaysia's MASB, Singapore's ASC, and India's ICAI. The FRSC from South Africa stresses that "a clearer definition of 'inconsistent with IFRS' will need to be developed in order to prohibit such information from being presented".

Other standard-setters again simply acknowledge that prohibiting non-IFRS information is impractical. The Chinese CASC notes that this "is difficult to execute in both standard-setting and practice" and Norway's NRS stresses "a prohibition for non-IFRS information is not operational".

The middle ground is held by standard-setters who see pros and cons and weigh them carefully but who also stress two points: (i) in some jurisdictions there are legal requirements to include certain non-IFRS information in financial statements and (ii) IAS 1 already requires "to provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance". Thus, EFRAG notes that "some information that is (or could be viewed as) non-IFRS is provided in accordance with laws or regulations" and Germany's ASCG concurs and adds that "IAS 1 guidance already includes tools an entity may use if it considers that the application of IFRS recognition and measurement guidance would not result in a fair presentation". The Japanese ASBJ notes that given the IAS 1 requirements "the IASB cannot explicitly define information that should (or should not) be provided within financial statements as it attempted to do in the DP".

All comment letters cited or referred to are available on the IASB website. The questions regarding non-IFRS information and information that is inconsistent with or contradicts IFRS information are questions 6 and 7. Our IAS Plus summary of the DP is available here.

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