New Zealand to Consider Ways to Reduce Excessive Disclosures under IFRSs
The New Zealand Accounting Standards Board (NZASB) is to consider a short-term action plan to encourage the reduction of excessive disclosures at its upcoming meeting on 2 November 2011.
A staff paper to be considered at the meeting discusses the NZASB's response to the report Losing the excess baggage: reducing disclosures in financial statements to what's importantissued by The Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) in July 2011. The paper notes that "although the project was commissioned by the IASB, with the expectation that it would be exposed for comment, it appears that the IASB is unlikely to take any action before it considers comments on its Agenda Consultation 2011."
The staff paper explores the options available to ensure any advice or guidance issued by the NZASB is of sufficient standing that not only preparers but also auditors and regulators will consider that it is persuasive, whilst at the same time ensuring New Zealand's ongoing compliance with IFRSs in relation to for-profit entities. The paper discusses the options of a domestic New Zealand standard or Interpretation, an explanatory guide or an informal communication such as a communiqué.
The staff paper recommends the NZASB issue an explanatory guide, which would not have any legal status but which would provide guidance on applying the materiality concept in relation to disclosures. The guidance would be based on the recommendations in the ICAS-NZICA report that users of IFRSs should consider separately (i) whether an item is material and (ii) whether individual pieces of information are material such that they warrant disclosure in the additional notes. Consideration would be given to individual pieces of information relating to material items, as well as information that does not relate to specific items but is required for the financial statements to meet the objective of financial reporting. It would not extend to the removal of various IFRS disclosures identified for possible removal in the report.
This New Zealand development gives additional impetus to global calls for disclosure relief in financial reporting.