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EFRAG final comment letter on disclosure principles

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

12 Oct 2017

The European Financial Reporting Advisory Group (EFRAG) has issued its final comment letter on the International Accounting Standards Board (IASB) discussion paper DP/2017/1 ‘Disclosure Initiative — Principles of Disclosure’.

In its comment letter EFRAG “fully supports the aims of the IASB’s Principles of Disclosure project and the overall Disclosure Initiative”. EFRAG also agrees with the description of the ‘disclosure problem’ in the DP “insofar as [it] acknowledges that the problem is multifaceted, includes behavioural aspects and that the requirements in IFRS Standards are not the only root cause” and indicates that not all of the factors identified as contributing to the ‘disclosure problem’ can be addressed by the IASB alone.

EFRAG notes the IASB's "lack of progress" related to the disclosure initiative project as a whole because it "has not yet reached standards-level stage”. It considers that the IASB should prioritise the standards-level review of disclosure requirements in the next stage of its project indicating that it considers that this is a “critical element of the Disclosure Initiative”. It comments:

EFRAG considers that this standards-level review is a critical element of the Disclosure Initiative the objective of which should be to develop a clear, effective, coherent and comprehensive but concise package of disclosure requirements. The review should, in particular, aim to identify and remove any disclosure requirements that are disproportionate or redundant.

In undertaking this review, EFRAG encourages the IASB to further consider how users currently use the information in the financial statements and to explore whether there is any information that would be helpful but is not currently provided in the financial statements. In doing so, that the IASB should consider the balance between benefits of the information to users and costs to preparers of providing that information.

EFRAG notes its regret that "a number of other issues" identified in its joint 2012 DP, Towards a Disclosure Framework for the Notes, are not addressed in the IASB's Principles of Disclosure DP. In particular:

  • the boundaries of the financial statements;
  • the impact of technology on the presentation of financial statements and on disclosures; and
  • exploring a tiered approach to disclosure requirements.

EFRAG particularly “encourages the IASB to consider the implications of developments in technology on the disclosure problem and on the presentation of financial statements in general in greater depth”. Such consideration would include:

  • the relationship between general purpose financial reporting and electronic filing;
  • how information is linked across the different elements of financial reporting; and
  • how technology might affect the way financial information is delivered and accessed.

The press release and full comment letter are available on the EFRAG website.

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