The Institute responds to IASB Exposure Draft- Disclosure Requirements in IFRS Standards—A Pilot Approach

The Financial Reporting Technical Committee of Chartered Accountants Ireland has responded to IASB Exposure Draft ED/2021/3: Disclosure Requirements in IFRS Standards—A Pilot Approach.

The IASB, who are responsible for developing and approving International Financial Reporting Standards (IFRSs), issued the exposure draft as part of an ongoing project to address concerns that stakeholders have raised with the IASB that are often collectively referred to as the 'disclosure problem'. These concerns are that financial statement disclosures will sometimes contain;

• Not enough relevant information;
• Too much irrelevant information; and
• Ineffective communication of the information provided

The Exposure Draft included guidance on developing and drafting disclosure requirements in IFRS standards in future and applied this proposed guidance to develop proposed amendments to the disclosure sections of IFRS 13- Fair Value Measurement and IAS 19- Employee Benefits. The objective of the project is to improve how the Board develops and drafts disclosure requirements in IFRS Standards, so that entities applying those requirements provide more useful information to users of financial statements.

The Exposure Draft proposed a reduction in the number of specified mandatory disclosures and a greater focus on objective-based disclosures in IFRS standards.

While the committee supported the IASB's ongoing efforts to address the 'disclosure problem', their response raised some concerns with the approach outlined in the exposure draft. These concerns include;

• That a reduction in the number of specified disclosures in IFRS standards will lead to increased subjectivity in preparing financial statements which will potentially result in reduced comparability between entities.
• The description of some disclosures as "not mandatory" may be seen as an invitation to make less disclosure and may widen the gap between what preparers and other stakeholders consider to be material for disclosure.
• The proposed amendments would increase enforcement challenges, be burdensome for preparers and increase reliance on materiality judgements.

The committee supported the use of overall and specific disclosure objectives within the individual standards but without the minimum level of mandatory disclosures proposed in the Exposure Draft.