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Can financial reporting be made simpler?

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15 Feb 2009

The Global Accounting Alliance (GAA) has published a report Getting to the Heart of the Issue – Can Financial Reporting Be Made Simpler and More Useful?

The GAA is an alliance of professional accountancy bodies in nine significant capital markets, with total membership of 750,000 professional accountants in over 140 countries. The report is based on interviews conducted in 2008 with financial regulators from Australia, Canada, China, France, the European Commission, South Africa, the United Kingdom, and the United States of America, international regulators, and major accounting firms. Interviewees included IASB Chairman Sir David Tweedie and Jeff Willemain, Global Managing Partner–Regulatory and Risk, Deloitte Touche Tohmatsu. The research was undertaken to consider the barriers to a more principles based accounting regime, and the increasing complexity and detail in company financial statements. The GAA is arranging a number of roundtable events where regulators and other stakeholders in financial reporting around the world can begin discussing ideas emerging from the research.

The GAA proposes that a number of questions be considered by the key stakeholders in financial reporting, such that some agreed recommendations might emerge. The GAA is intending to facilitate a series of events internationally where these debates can take place. These questions are as follows:

  1. Should an agreed international framework for accounting standards be adopted with a clear hierarchy comprising (i) a conceptual framework; (ii) principles based standards; and (iii) limited authoritative guidance?
  2. Should guidance be provided for preparers and auditors on the exercise of judgement in the application of principles based standards and on the documentation of reasons for the judgements made?
  3. Should regulators be encouraged to accept a reasonable degree of variation in accounting treatments and to take a more effective, outcome oriented approach to regulation?
  4. Should a single definitive set of general purpose financial statements be retained?
  5. Should standard setters be encouraged to drop requirements considered redundant?
  6. How can company boards be encouraged to provide better quality communication?
  7. Should an international framework for high level summary financial statements be developed in order to provide information suitable for retail and less sophisticated investors?
  8. Should general purpose financial statements be developed and published in XBRL format to allow users to drill down to whatever level of detail is required?
  9. Should company communication be improved through the use of clearer language, less jargon and coded language, and a focus on clarity and transparency?
  10. How has the recent financial crisis affected the debate on these issues?

Click to view GAA's Getting to the Heart of the Issue – Can Financial Reporting Be Made Simpler and More Useful? (PDF 880k).

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