Complexity Hindering Purpose of Financial Reporting, Says Panel at Baker Tilly International Summit
18 Jun 2012
Complexity in financial statements is making them increasingly
difficult to interpret, hindering users as they seek to understand
the performance of companies, according to an international panel
of high-profile industry experts.
Disclosure overload, internationally consistent accounting
standards, unification of the profession and harmonisation of
regulation were among the topics addressed by speakers from
organisations including the US Financial Accounting Standards Board
(FASB), the American Institute of Certified Public Accountants, and
the Canadian Institute of Chartered Accountants at Baker Tilly
International's annual North America Summit held last week in
Jim Castellano, chairman of Baker Tilly International, said:
"Disclosure has ballooned in recent years with companies and
governments required to provide more and more financial
information. This additional complexity is hindering the very
purpose of financial reporting - to provide shareholders, creditors
and other users with useful information. The profession needs to
stand back and make financial reports simpler and easier to
understand. What we heard from the experts on the panel is clear
evidence in North America of positive steps towards this goal".
Relevant and Scalable Statements
The newly created Private Company Council (PCC) in the US will
identify, deliberate, and vote on proposed changes for private
companies, using a decision-making framework currently under
"The ultimate aim is to narrow down what is relevant for users
of private company financial statements, making them more relevant
as well as less costly and complex to prepare," said Castellano.
"It's a question of scalability; to come up with a better
cost-benefit balance within the reporting regulations, that is
responsive to the private company sector.
"Issues that we expect will fall initially under the gaze of the
PCC include variable interest entities, uncertainties in income tax
and issues around fair value measurement and disclosures,
especially for non-financial
Unification of the profession at every level will benefit the
users of financial statements and recent legislative moves to unify
the profession in Canada should be seen as a benchmark for other
countries, believes Castellano.
"Having one set of rules for all accountants in Canada will help
will help to enhance trust and respect in the profession and
eliminate confusion in the market place that currently exists
through uncertainty about what all these different accounting
bodies are doing," he said.
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