Update on the Disclosure Initiative

13 June 2014

Welcome to the first Disclosure Initiative update. The Disclosure Initiative is a portfolio of projects designed to improve the quality of information provided in financial reports.  

A lot has happened since the Disclosure Initiative was launched following the Discussion Forum at the beginning of 2013. This update highlights the main work being undertaken and our plans over the next few months.

The Disclosure Initiative sections on the IFRS Foundation’s website contain more detailed information, including the Agenda Papers discussed by the IASB, recordings of IASB discussions and links to podcasts and other information.

The topics covered in this update are:

Principles of Disclosure

The Principles of Disclosure (POD) project is a key project of the Disclosure Initiative. The aim is to develop a disclosure Standard(s) to replace three of our current Standards: IAS 1, IAS 7 Statement of Cash Flows and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

In April 2014 the IASB discussed the scope of the POD project, for which there was strong support. The IASB asked the staff to prioritise work on establishing principles:

  1. for the notes to the financial statements, including establishing the objective and boundaries of the notes and principles for organising, placing, formatting and linking information; and
  2. that apply to the information in a complete set of IFRS financial statements, including non-IFRS financial information and comparative information.

We have been hearing some concerns that developing disclosure principles and replacing IAS 1, IAS 7 and IAS 8 will not bring improvements quickly enough. Many people are asking for more immediate improvements to disclosure requirements. We understand those concerns and are looking at ways to accelerate the development of the Discussion Paper. In Quarter 3 of 2014 we plan to discuss with the IASB an outline of the topics to be covered by the Discussion Paper. In addition, we will propose targeted changes to disclosure requirements if we identify improvements or simplifications that can be developed relatively quickly and are not dependent on the publication of the Discussion Paper.

Targeted improvements to disclosure requirements

 Amendments to IAS 1

In March we published an Exposure Draft of proposed amendments to IAS 1 Presentation of Financial Statements. The proposed amendments are intended to clarify, instead of significantly change, existing IAS 1 requirements. Although the proposed amendments are relatively modest, it is expected they will help to address some perceived barriers to exercising judgement in areas such as the application of materiality and determining the order of the notes to the financial statements.

The Exposure Draft is open for comment until 23 July 2014. The IASB will consider the comments received in Quarter 3 of 2014, with a view to publishing the final amendments towards the end of 2014.

Reconciliation of liabilities arising from financing activities

In another short-term project, the IASB is considering proposals to amend IAS 7 to require the disclosure of changes in liabilities classified in financing activities

In the early part of 2014 we undertook a short survey with investors to understand what information investors require when reviewing an entity’s cash flow statement and how they use cash flow information. The results of the survey were presented to the IASB in March 2014.

These proposals respond, in part, to requests from some analysts and investors for improved disclosures about debt. We are currently undertaking outreach on the draft proposals and will return to the IASB in Quarter 3 for further discussions.

Accounting Policies

As part of our work on materiality (see below), we are developing proposals designed to help entities determine which of their accounting policies are ‘significant’. The goal is to ensure that users of financial statements understand which accounting policies are important to a particular entity, instead of being confronted with descriptions of all of the policies being applied by an entity. We plan to bring a paper on accounting policies to the IASB in September 2014.


A meaningful review of the disclosure requirements in individual Standards involves assessing the related recognition and measurement requirements. The staff have started systematically analysing and categorising the disclosure requirements in all Standards to identify ways to simplify the disclosure requirements without reducing the usefulness of the information available to users of the financial statements.

We will also take steps to address specific concerns in individual Standards when they are reviewed for other reasons. For example, the Post-implementation Review of IFRS 3 Business Combinations has highlighted some perceived problems with excessively prescriptive disclosure requirements, as well as some information that investors have told us is important to an understanding of a business combination that is not being disclosed.


The aim of the materiality thread of the Disclosure Initiative is to identify steps, if any, that the IASB can take to help preparers, auditors and regulators apply the concept of materiality to assessing what should, and what should not, be disclosed in financial statements. The IASB discussed this topic in March 2014.

We are currently reviewing how materiality is defined, interpreted and applied in different jurisdictions and for different purposes related to financial reporting—securities law, auditing standards and local GAAP. Our review includes an assessment of the academic literature and court judgements. National and regional standard-setters are also providing us with information from their jurisdictions.

We plan to discuss the research with the IASB in September 2014 and ultimately publish the results of our research as a paper setting out our assessment of the core issues influencing how materiality is perceived and applied. We expect this analysis to raise awareness of the main issues and help us identify possible actions that the IASB could take.

Thank you for your interest in the Disclosure Initiative.