26 June 2013

FRC thought leadership on disclosures to improve financial reporting receives broad support

The FRC issued feedback on its discussion paper, 'Thinking about disclosures in a broader context'. Overall, respondents welcomed the FRC's initiative and noted that the Paper is a valuable contribution to the disclosure debate. The responses indicated broad support for a disclosure framework.

In October 2012, the FRC published a discussion paper setting out a roadmap for a disclosure framework designed to encourage more relevant financial reporting including beyond the confines of the financial statements. There was broad support for FRC‘s suggestions that:

• Improving disclosure should be a shared responsibility between preparers, regulators, auditors and users.
• The main end-users of reports are investors and disclosures should be framed with that in mind, having regard to communication, relevance and materiality.
• There should be a move away from piecemeal approach to disclosures by standard setters and regulators and that a framework would provide a benchmark for measuring suggested disclosures.

Melanie McLaren, Executive Director Codes & Standards said: “We were pleased to see so many positive responses to our discussion paper, 'Thinking about disclosures in a broader context'. It is clear that there is a will to tackle the level of 'clutter' in financial reports and that establishing clear principles against which to measure proposed disclosures is seen as being helpful.

"There was particularly strong support for an increasing focus on relevance to investors as providers of risk capital.  Voluminous disclosure may be given in the interests of transparency but may in fact introduce opaqueness. Respondents emphasised the need for international coordination and so we are pleased that the IASB has said that it will look at disclosures as part of its current important review of its conceptual framework for financial reporting.

"We will be taking forward our thinking at a practical level through projects in the Financial Reporting Lab and in developing our narrative reporting guidance.”

Press release

Feedback statement

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