A commentary on accounting standards and the disclosure problem: Exploring a way forward
Journal of Accounting
Hamilton Elkins
Department of Accounting, Edwards School of Business, University of Saskatchewan, Canada
Gary Entwistle
Department of Accounting, Edwards School of Business, University of Saskatchewan, Canada

Keywords

Disclosure problem Standard setting
Enhancing qualitative characteristics Conceptual framework
Note disclosure IAS 1
Capital structure

Abstract

The ‘disclosure problem’ continues to pose a challenge to the accounting standard setting community. To help confront this problem, in this commentary we present an exploratory approach for the review and evaluation of note disclosure standards rooted in the conceptual framework’s enhancing qualitative characteristics of comparability, verifiability, timeliness, and understandability. In our approach, note disclosure – an enhancement – is necessary and justified when it rectifies a material information deficiency in the primary financial statements. Our approach requires that the information deficiency, the traceable enhancing qualitative characteristic, and the materiality rationale, are each clearly evident in the written accounting standard. We demonstrate an application of our approach with a case study using the International Accounting Standard (IAS) 1 disclosure guidance on capital structure.