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The Australian Accounting Standards Board (AASB) is working with the International Accounting Standards Board (IASB) on a range of initiatives to address concerns about disclosure overload in financial statements.
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AASB working to limit 'disclosure overload'
03 February 2015
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As part of that effort, the AASB has issued amendments to AASB 101 Presentation of Financial Statements to clarify that entities should not be disclosing immaterial information and that the presentation of information in notes can and should be tailored to provide investors and other users with the clearest story of an entity’s financial performance and financial position.
Kris Peach, chair of the AASB said she wants to make it clear that entities are not required to disclose immaterial information in their financial statements.
“Just because a standard contains a list of disclosures does not mean that an entity must always make each of those disclosures in its financial statements. Judgement is required to determine whether the relevant line item is material and also whether the specified disclosure is material,” she said.
“It is pleasing to see that some companies, not-for-profit entities and public sector entities have already taken the initiative to cut some of the clutter of immaterial information from their financial statements and they have proved that this can be achieved without affecting compliance with the accounting standards."
Ms Peach singled out accounting firms PwC and KPMG for making significant inroads to "declutter" their financial statements and called on others to follow suit.
“With the issue of these amendments and given supportive statements from the corporate regulator, the Australian Securities and Investments Commission, this is an opportune time for directors and CFOs to take action to address disclosure overload in their financial statements."
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They can do this by eliminating immaterial information from their financial statements and by reordering their notes to the financial statements to draw focus towards the most important and relevant information in the financial statements,” Ms Peach said.
The amendments made to AASB 101 are contained in the amending standard AASB 2015-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101. These amendments will be effective for annual reporting periods beginning on or after 1 January 2016. Earlier application of the amendments is permitted.
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