The effectiveness and consistency of disclosures in the notes to financial statements: an analysis of the standards setters efforts

Over the past decade, fi nancial reporting has begun to include more detailed disclosures in the notes than in the past increasing so signifi cantly (Deloitte, 2010) that it has been recognised that the excessive disclosures can lead to overloading of information, missing the vital purpose of disclosures and creating some extra unnecessary work for prepares of fi nancial statements (Financial Reporting Council, 2009). In order to enhance the effectiveness and consistency of disclosure to fi nancial statement many standard setters have increased their efforts to develop a framework for disclosures. One of the fi rst projects was proposed by and the Financial Reporting Council (FRC) in October 2012 with the Discussion paper “Thinking about disclosure in a broader context” that aimed to address the underlying principles and content of corporate disclosure to assist standard setters in developing disclosure requirements on a more consistent basis using a set of agreed principles. After two years, the Financial Accounting Standard Board (FASB) in March issued a proposed Concept Statement related to improving the process for evaluating current and future disclosures requirements for the notes to the fi nancial statements. In this paper we analyse these documents in order to verify if the FASB initiative followed the suggestions of FRC, if it fi ts with the results of the main studies on the matter of the interest and if it present a coherent approach that could be used in the generation of a general accepted Disclosure Framework. The paper in paragraph 2 explains the qualitative analysis process applied in the paper, in paragraph 3 presents the main studies on corporate disclosure in order to set out the critical issues on the subject, in paragraphs 4 and 5 examines the main characteristics of the FASB and FRC initiatives on disclosure frameworks, in paragraph 6 verifi es how it fi t in with the necessity to rationalize and simplify the current disclosure regime and highlights the necessity to increase the debate on the disclosure framework.