Media release
1 July 2011
Increasing volume of disclosure requirements risks making financial statements more complex
Financial reporting survey shows reports are longer and the quality of information provided varies significantly
Financial statements run the risk of becoming more complex because of the increasing volume of disclosure requirements
under International Financial Reporting Standards, according to Deloitte partner Denise Hodgkins.
The second annual Deloitte Financial Reporting Survey of 100 listed and other large companies with publicly available
information shows financial statements are on average 42 pages long, up from 39 pages in 2009, and annual reports
average 76 pages in total, up from 68.
Ms Hodgkins says that new disclosure requirements for financial instrument fair values, additional disclosures regarding
the May 2010 budget changes to tax, and the choice to present an income statement and separate statement of
comprehensive income led to some of this increase in length.
With a number of new standards on the horizon covering topics such as revenue, leasing, financial instruments and
insurance contracts, the disclosure burden is expected to increase.
"To counteract this, we note that there are still areas where clutter in financial statements can be reduced, such as
removing accounting policies that are not relevant to the company and avoiding repetition," Ms Hodgkins says.
"The key to disclosure is to focus on primary areas of importance to investors and other stakeholders such as quality of
earnings, risk management disclosures and decisions made that involve assumptions that are subjective or uncertain."
While there are examples of clear and transparent disclosures in these areas, the quality of information provided varies
significantly from boilerplate statements to detailed quantitative and qualitative information.
"With continuing market turbulence and the impact of natural disasters on the economy, transparent information on an
entity's earnings, how it manages its risks and the assumptions it makes in valuing assets or determining impairment is
critical."
The survey considers the financial reporting practices in 2010 annual reports, and includes some examples where
informative disclosures were provided.
To see the Deloitte Financial Reporting Survey series, go to www.deloittecom/nz/financialreportingsurvey.
ends