Disclosure initiative

Date recorded:

Disclosure Initiative: Principles of Disclosure – Preliminary comment letter overview - Agenda paper 11A


The Board published the Discussion Paper Disclosure Initiative—Principles of Disclosure (DP) in March 2017. The comment period ended on 2 October 2017. The purpose of this session was to provide the Board with a high-level overview of the feedback received.

Preliminary overview of feedback received

Overall, respondents think that the project lacks focus and depth. They believe that the Board should focus on areas that will make a real difference to the disclosure problem and analyse them in sufficient detail so that stakeholders can assess the practical consequences of those views. There was also concern over a lack of cohesiveness between the different Disclosure Initiative projects, with some suggesting that all such projects should be combined into one, with better delineation between the different aspects of how to achieve better communication to avoid overlap.

Respondents also suggested that the Board take digital reporting into account because the disclosure problem is not the same if information is viewed electronically. Some of the paper-based disclosure problems are also not relevant in the digital world, e.g. location of information.

Another key comment relates to the need to establish and distinguish between guidance on disclosures that (1) assists the Board in setting standards (i.e. Conceptual Framework level material), and (2) assists entities in preparing financial statements (i.e. Standard-level material).

The following section presents a high-level overview of the feedback received by topic.

  1. The disclosure problem

    Although there was consensus that there is a disclosure problem, there were differing views between regulators, preparers and users on the primary cause of the problem.

  2. Principles of effective communication

    There was general agreement with the principles expressed in the DP; however, there were concerns over their practical application and enforceability.

  3. Roles of the primary financial statements and the notes

    Respondents generally agreed that it would be helpful to clarify the meaning of ‘present’ and ‘disclose’ and to use these terms consistently throughout the Standards.

  4. Location of information—IFRS information outside the financial statements

    Most stakeholders agreed that this could be useful in some circumstances and cited similar pros and cons as detailed in the DP. They also cautioned that there is a need to define the boundaries of where IFRS information could be located properly because terms such as ‘annual report’ may mean different things in different jurisdictions. The audit implications will also have to be considered when setting the boundaries.

  5. Location of information—Non-IFRS information inside the financial statements

    Again, most stakeholders agreed that this could be useful in certain circumstances. The main concerns relate to defining what constitutes non-IFRS information, and the risks of including misleading information or information that is inconsistent with IFRS information in the financial statements. Audit implications must again be considered.

  6. Use of performance measures in the financial statements

    This is discussed in AP 21A.

  7. Disclosure of accounting policies

    Respondents preferred that the Board establish principles on which accounting policies should be disclosed, rather than setting rules. Apart from the fact that entities should avoid making boilerplate statements, the principles should include a consideration of materiality, relevance and the entity-specific nature of the accounting policies.

    There were mixed views on the guidance specifying the location of accounting policies. Some respondents thought it unnecessary and unhelpful.

  8. Centralised disclosure objectives

    Respondents generally disagreed with having a single disclosure standard. They believed that disclosure requirements should be read in the context of the related recognition and measurement requirements for each transaction. Only then would the disclosure requirements make sense to preparers and users of the financial statements, which would in turn promote better communication of information by the preparers.

    Some respondents also doubted the effectiveness of having centralised disclosure objectives given that anything that is centralised must by nature be high-level and generic. They acknowledged that in theory this may be a good move, but they were wary of the costs versus benefits of any radical change.

  9. New Zealand Accounting Standards Board (NZASB) approach

    In general, some respondents found it difficult to understand the practical consequences of the NZASB approach without further development. They also had mixed views on whether the Board should spend time developing this approach further.

Next steps

The Staff will present a detailed summary of the feedback received in the February 2018 Board meeting. They plan to bring an analysis of the potential next steps on the project and related recommendations to the March 2018 Board meeting.


Some Board members expressed support for having objectives-based disclosure requirements. However, the Vice-Chair and a few other Board members were wary of that suggestion, given evidence from Staff research that preparers do not give additional disclosures when the Standards are objectives-based (e.g. establishing the minimum line items in IAS 1 but requiring entities to disclose additional information if relevant) or when the Standards are less prescriptive in the disclosure requirements (e.g. the disclosures in IAS 7 regarding cash restrictions). Another Board member said that objectives-based disclosures is good in theory but difficult to apply in practice.

Some Board members were also concerned about the continued request for the removal of using prescriptive language in the Standards. One member noted that the Board had amended IAS 1 a few years ago with consequential amendments to other Standards to remove the prescriptive language. It had also issued the Materiality Practice Statement this year which provides further guidance on how to apply materiality judgements when preparing disclosures. The continued requests indicated a lack of visibility and reach of these disclosure initiatives and the Board should consider how to ‘get the word out’ to the public about these significant existing improvements.

Another Board member asked the Staff to consider change management when recommending proposals to address the feedback received to prevent having Standards that are in perpetual change.

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