Financial Statements 'far too large'
Annual reports should be slashed in size to prevent readers being "drowned by the detail", a report has suggested. The Institute of Chartered Accountants of Scotland (Icas) and the New Zealand Institute of Chartered Accountants said reports had grown in size by 44% in recent years. They have recommended a cut in the volume of disclosure requirements. The joint working party report observed that "so much financial data is hindering, not helping, communication." It concluded this had led to readers "being blinded by so much data that many key messages about a company's performance are drowned by the detail".
The working party said more focused information would bring a greater clarity and understanding to those seeking to assess the financial performance of leading companies. It has called for financial statements to be cut by 30%.
The work was carried out by the accountancy bodies after a request from Sir David Tweedie, recently retired chairman of the International Accounting Standards Board (IASB), to help reduce the volume of disclosure requirements in International Financial Reporting Standards (IFRS).
The working party said it hoped the IASB would implement its recommendations so the suggested improvements could be introduced around the globe as soon as possible. The group said this would would ensure financial statements focused more on what was important to the user and help reduce the costs of producing, printing and distributing large, unwieldy financial reports.
Isobel Sharp, a senior partner with Deloitte who co-chaired the joint working party, said: "We have carried out a massive spring cleaning exercise, throwing out those disclosure requirements which simply add clutter to the financial statements and helping preparers be bolder in deleting details which are simply not important to readers of their financial statements. "The current excess disclosure baggage carries the penalties of extra cost and poorer communication. We are recommending that preparers pack only the essentials into their reports."