Principles of Disclosure Project

The project consists of three chapters whereby chapter one is the introduction which provides history, background information and current status of the project. Chapter two entails discussion of the proposed disclosure principle by comparing the standards in the US GAAP and those in IFRS. Chapter three concerns the implications of the disclosure principle project. Contents Chapter 1: Introduction 2 History and Background Information 2 Current Status of the project 4 Chapter 2: Discussion of the proposed change 4 Similarities and Differences between IFRS and US GAAP 5 Similarities 5 Differences 5 Chapter 3: Implications of the project's adoption 7 Conclusion 8 References 8 Chapter 1: Introduction Full disclosure principle is one of the generally accepted accounting principles. This principle means that all relevant information relative to the business should be reported in the notes or content of the financial statement.

The main aim of this plan was to investigate opportunities to foresee how businesses applying international accounting standards can improve as well as simplify disclosures (Dumay, 2016). The IASB carried out a fundamental survey in order to implement the disclosure initiative. A discussion was held to bring together auditors, investigators, regulators, and preparers. In May 2013, the IASB issued feedback statements concerning financial reporting Disclosure. The feedback statement summarized IASB’s plan to take into consideration further initiatives such as research projects and short-term projects (Gullifer, & Payne, 2015). However, some auditors, regulators, and entities appear to deal with financial statements predominantly as compliance documents instead of using it to facilitate communications with users. Therefore it is clear that IFRS disclosure requirements sometimes are applied mechanically (Zeff, 2016).

These requirements are utilized as checklists since some entities apply them without judgment to ascertain what is more relevant to users. This is one of the key drivers of disclosure ineffectiveness. Entities lack guidance on how to assess relevant information and how it should be applied in disclosures in the content of financial statements. The project focuses on identifying the ways to make sure that financial reports offer information that is most important to investors and is communicated more effectively. The revised project of principle of Disclosure is projected to consider certain issues which include; cash flow reporting, differential disclosure and proportionality, disclosure of interim financial information, information that need to be added in a complete set of financial statement which focus on presentation of comparative information as well as non-IFRS information, and the principles of disclosure for notes to financial statements which include the objectives and boundaries of the content as well as the principles for the business, format, linkage, and placement of the information (Zeff, 2016).

The project is expected to be executed in phases whereby the initial phases of the project will focus on the principle of disclosure for content to the financial statements, and the information that needs to add in a complete set of financial statements. In March 2017, the DP issued a discussion paper and comments were requested by October 2017. Subsequently, a discussion forum was held to discuss the feedback received on the disclosure principles. The decision made is yet to be implemented. Chapter 2: Discussion of the proposed change Amendments have been proposed to eliminate the outdated, overlapping, superseded, and redundant disclosure requirements as well as necessitate firms to offer investors what they require in order to make informed decisions. The proposed amendment covered several issues; first, whether to remove disclosure requirements that duplicate the IFRS, U.

S GAAP and any other requirements (Russo-Spena, Tregua, & De Chiara, 2018). Second, whether to remove disclosure requirements which overlap with IFRS, GAAP and other requirements such that they will not be useful to the investors or else integrate additional information or refer them to FASB to be incorporated in GAAP. Besides, both US IFRS and GAAP disclosure requirements are based on management (Russo-Spena, Tregua, & De Chiara, 2018). Decision makers are required to regularly review an entity’s operating results to ensure that all relevant information is provided. Despite the fact that Disclosure principles in US GAAP and IFRS are similar, there are some notable differences. Differences There exist differences between IFRS and US GAAP with respect to financial statement and financial reporting. Many of the differences that noted in this project relate to industry-specific guidance existing in U.

Therefore the people who prepare IFRS financial reports and statements follow general disclosure principles. The U. S GAAP was designed to address the specific U. S centric activities. The IFRS principles have been designed for a broad region regardless of regulator or jurisdiction specific considerations. Besides, there are certain explicit temporary disclosure requirements under US GAAP. Many of these disclosure requirements are linked to derivatives and valuation of financial assets, for instance, information concerning the fair value of financial instruments apart from credit quality of financing receivables and temporary impairments (Richardson, 2015). On the other hand, explicit disclosure requirements are not required under IFRS. The IFRS have disclosure objectives as well as illustrative examples concerning specific transactions and events. The U. Furthermore, there are exists numerous differences in disclosure principle requirements between US GAAP and IFRS in areas such as assumptions used, investment strategies and policies, reimbursement rights, accumulated benefit obligation, interim disclosure requirements, changes related to defined contribution plan including employer contribution, and future benefit to be paid (Richardson, 2015).

Under the US GAAP, there is sufficient room for dishonest accountants to distort figures unlike under the IFRS. Therefore if a company utilizes GAAP, it needs to examine its financial reports. Another difference is that IFRS necessitate disclosure requirements in areas such as pension plan, leases, plant and equipment, property acquisition, and financial assets which are pledged as collaterals. On the other hand, US GAAP requires disclosure in areas such as the obligation to reduce debts, unused letter of credit, restrict dividends, maintain working capital, and commitment relating to unconditional purchase obligation. Financial statement reports are vital for outsiders because of lack of insights into the company’s internal affairs. This causes investors to make decisions which they would not have made.

When full information is provided, investors, creditors, and shareholders will be fully informed concerning the firm particularly when making important decisions regarding the company. An unscrupulous accountant may fail to disclose all the relevant information for their own selfish gain (Michelon, Pilonato, & Ricceri, 2015). Therefore disclosure principles serve as a savior to investors and the general public. Worth noting, disclosure principle does not imply the publication of the company’s intellectual property, trade secrets or developed systems that provide the company competitive advantage over its competitors. The disclosure principles project will help counteract losses. It will also help in averting the misuse of the company’s assets (Krumholz, & Waldstreicher, 2016). This is because potential investors study open accounting standards and decide the company to invest.

In this essence, companies will be in a position to prevent losses in order to attract investors. Full disclosure necessitates both financial and non-financial information to be disclosed to users. The disclosure principle is one of the ongoing projects which necessitates review and update of the current accounting standards. The IASB noted some gaps existing in the disclosure principles. Reviews are ongoing to ensure to address the identified gaps. According to IASB reports, three main problems were identified. 3 Description of the proposed project UMUC Disclosure principle Financial reports keyword The article provides the differences between IFRS and US GAAP accounting standards 4 Implications of the project Internet Disclosure, accountants, investors, financial statements keyword The sources offer comprehensive information on the project adoption implications.