UK accounting body wants to lighten the load of boilerplate
LONDON Dec 12 (Reuters) - Company reports will continue to balloon with irrelevant disclosures unless regulators are clearer on what can be left out, an international accounting body said on Friday.
There has long been talk of cutting back on boilerplate disclosures and on the need to make them relevant, but little concrete action has been taken, the Institute of Chartered Accountants in England and Wales (ICAEW) said in a report.
Companies and auditors fear regulators will punish them for leaving out some disclosures, such as the lists of potential risks they face, the report said. Consequently, company reports can run to hundreds of pages.
"We need a major culture shift, where everyone is working to ensure that relevant and material information is disclosed, and immaterial disclosures are omitted," Robert Hodgkinson, ICAEW executive director, said in a statement.
"Regulators, standard setters, companies and auditors should all face the challenge of explaining what they are doing to ensure that disclosures are clear and focused, rather than complex and overwhelming."
The ICAEW, which trains accountants from all over the world, is pushing to move beyond rhetoric and actually light the bonfire of the boilerplate some officials have spoken about.
It recommends allowing firms to report separate information to different sets of users, as long as all the information is available online. Enforcement agencies should also encourage firms to omit immaterial information.
Regulators and accounting standard bodies in Britain and the United States are looking at disclosures.
"We are beginning to work on a project looking at materiality. The team is currently working with auditors and regulators in scoping this project," the International Accounting Standards Board (IASB) said. The scope of the IASB's rule on presenting financial statements might be narrowed, it said.
Critics say big investors and analysts have not pushed for change as they have the skills and resources to absorb the vast amounts of information in an annual report which can leave small investors overwhelmed and at a disadvantage.
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