Steps to improve you financial statements
At the same time as having to get to grips with AASB 9, 15 & 16, financial accountants also need to deal with the disclosure initiative, which is driven by the need to make the financial report more meaningful to investors and users. The basic premise will see accountants having to apply the “4 R's” to their financial reports:
Remove is to remove all disclosure that is not relevant to the entity. For example if the entity does not use hedge accounting, there is no need for a hedge accounting policy.
Reorder involves setting the entity’s notes in the order of importance to the user, rather than simply being driven from the order an item appears in an entity’s balance sheet and income statement. It is most likely that an entity’s segment note will be promoted to a much earlier position in the financial report.
Regroup includes moving accounting policies and key estimate disclosures to sit alongside the transactions or balances to which they rebate, and also to group disclosures for similar assets and liabilities.
Re-emphasise is to try to explain to users key transactions, key balances and key areas of judgement, including transactions that materially impact a user’s understanding of the financial report. In many cases, this will involve more disclosure than is currently presented, avoiding “boiler plate” descriptions and writing in plain English.
How BDO can help
- Review your financial reports
- Apply the 4 R's to your financial reports
- Provide appropriate narrative to improve the level of understanding and communication with users of your financial reports
- Provide assurance your financial reports comply with disclosure requirements.