Digital Financial Reporting Strategy

Date recorded:

Cover note (Agenda Paper 25)

In February 2022, as part of the IASB’s Third Agenda Consultation on its priorities for 2022 to 2026, the IASB agreed to increase its current level of focus on digital financial reporting. In this meeting, the IASB provided feedback on the priority digital financial reporting activities that the staff should undertake.

A digital financial reporting strategic framework (Agenda Paper 25A)

Background

This paper set out a strategic framework that is intended to provide strategic direction and boundaries to help identify possible digital financial reporting activities that the IASB could undertake and provide consistent language for communicating the digital financial reporting strategy. The IASB is asked to provide feedback on the strategic framework.

Staff recommendation

The staff did not make any recommendations or ask the IASB to make any decisions in this paper.

IASB discussion

IASB members were supportive of the direction as set out in the paper. Some IASB members asked the staff to clarify that the strategic objective of the IASB and the ISSB is the same but differences arise because of timing of projects. IASB members did not want to imply that the IASB taxonomy is contingent on the ISSB taxonomy and vice versa. The staff confirmed they anticipate the discussions with the ISSB will be in early 2023.

One IASB member asked the staff to highlight the drawbacks of digital financial reporting. For example, it is difficult for entities to provide additional context in a digital reporting world which makes it more challenging for users to appreciate the relationships between the line items in the financial statements. Some IASB members emphasised the importance of engaging with all stakeholders, including the preparers of the financial statements and not only the end users of those financial statements.

Another IASB member suggested the staff provide additional information on ‘digital ecosystem partners’. One IASB member suggested the staff reconsider the description of the vision of the strategic framework to focus on the digital aspect of financial reporting. In addition, the IASB member asked the staff to clarify the meaning of accessibility to be making information available to stakeholders and the ability to accurately access the information in machine-readable form.

One IASB member asked the staff to clarify that the emphasis is on the primary users to be able to access digital financial reporting rather than the investors. Another IASB member asked the staff to clarify whether IFRS Standards strategic components would require a change in the current IFRS Standards.

Priority digital financial reporting activities (Agenda Paper 25B)

Background

This paper outlined the priority digital financial reporting activities that the staff think the IASB should undertake. The IASB was asked to provide feedback on the possible digital financial reporting activities to undertake.

Staff recommendation

The staff did not make any recommendations or ask the IASB to make any decisions in this paper.

IASB discussion

IASB members were supportive of the types of activities as well as the prioritisation of those activities as set out in the paper. One IASB member believed optimal digital reporting requirements should be part of the fundamental purpose of the digital financial reporting vision and suggested the staff include this activity as part of the foundation in digital reporting hierarchy of needs. Some IASB members asked the staff to consider how digital financial reporting can be applied holistically by the IASB and ISSB. In addition, whether any lessons learned can be shared by both boards.

Some IASB members suggested the focus should be on embedding digital financial reporting processes within the internal financial reporting processes as this will facilitate external financial reporting. However, the staff clarified the focus is on how stakeholders will consume digital financial reporting information rather than on the needs of the preparer of digital financial reporting information. One IASB member emphasised the importance of understandability of financial reporting information regardless of whether it is digital or paper based.

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