LONDON Dec 12 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
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.