Summary
The referred FASB news release speaks of a new FASB project to simplify accounting disclosures and make them more meaningful. In this analysis I look at the relevance of such a major project in the realm of accounting and how this could make financial statements more meaningful.
Analysis
1. The new FASB project on accounting disclosure is intended to address the following issues (according to the FASB press release):
- Apply to all entities or perhaps exclude private or nonprofit entities
- Apply to interim reporting
- Focus only on high-level principles
- Focus only on notes to financial statements or extend to ways to better integrate information provided in financial statements, MD&A, and other parts of a company’s public reporting package.
2. The importance of such a project cannot be overstated especially at a time when the global capital markets have undergone upheavel on a unprecedented scale.
3. Notes to accounts tend to proliferate and make simple accounts complicated.
4. The fact that financial statements have been signed by a professional accountant gives them a credibility which in some cases they would not have if the reader of the financial statement understood the full import of the disclosures in the notes to accounts, qualifications in auditors report and the MD&A.
5. The relevance of the project is immense and I hope it addresses effectively all the issues which it seeks to address.
6. If the project actually succeeds in simplifying financial statements then there would be a major improvement in global capital markets functioning due to increased availability of financial information.
Nitish Grover consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
