Disclosures to Meet Behavioral Change, says Hoogervorst
IASB chairman Hans Hoogervorst said that the communicative value of financial statement is being damaged by auditors, preparers and regulators due to their box ticking mentality.
He further said at the IFRS Foundation conference in Amsterdam, the opposing culture has ballooned in size as everything is being thrown in disclosure annual report which is damaging. He believed that disclosures are very important and relevant set of information but should be sacked producing voluminous disclosure.
While outlining measurements he added that application of materiality principle in IAS 1 and assessment applies to the whole of the financial statement is of significant importance, including the notes. In order to make it simple and comprehend able the non-material disclosure must be eradicated.
Also, it the items can’t make up to the face of primary financial statements, doesn’t mean they are of less significance. We need to explain this as even if they are mentioned only in the notes are of equal significance, he added.
In order to understand the company policy regarding net debt, IASB will add net-debt reconciliation requirement that will clarify the agenda. In order to create expected-loss model to acknowledge bank assets and liabilities the company is still going strong and nothing has been lost in this regard.
US counterpart FASB and IASB are already working along to create a model that will acknowledge credit losses, though the two standard setters. These setters have provided the approaches to identify the techniques to achieve it.
Banks will provide unrealized profits without any force and loans will be provided with the use of "incurred loss" model of IFRS.
With the application of IASB’s so-called three-bucket approach, FASB will start a credit loss model which will display losses up-front and distance itself from three-bucket approach of IASB.
Hoogervorst the chairman of IASB gave the confidence in the IFRS Foundation conference held at Amsterdam that no hope is lost but in fact things are still in our capacity to mold them. He believes that we can and will achieve convergence and both boards are well aware of the need of it, says Hoogervorst in his speech.
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