Date posted: 20/04/2018 5 min read

The key to financial reporting happiness: give users what they need

More research is needed to ensure the financial reporting framework remains relevant

In brief:

  • The financial reporting framework need to balance user needs and preparer costs
  • A New Zealand study found users often don’t read the notes to financial statements
  • Research is needed to determine exactly who reads financial reports and what information they need

The need for financial reporting frameworks that better balance user needs and preparer costs is a perennial challenge. 

What’s often missing from financial reporting framework debates is evidence to support user needs, particularly when you step away from listed entities and into the world of SMEs and not-for-profits.

We know that, at least anecdotally, people have an insatiable thirst for information. They always want more. But is it actually needed? Have we even asked users what they need? 

“People have an insatiable thirst for information. They always want more. But is it actually needed? Have we even asked users what they need?” 
Ceri-Ann Ross, Reporting Leader at Chartered Accountants ANZ

When it comes to financial reporting requirements, decision-makers and key influencers have been criticised in the past for tending to judge for themselves what they think users want to see.  However, if we are going to achieve a better balance in financial reporting frameworks, it’s vital that more research is undertaken to establish who uses financial reports and what information they actually need.

New Zealand’s External Reporting Board (XRB) has publishing research on the needs of users of Tier 2 for-profit entity financial reports in New Zealand. It found the majority of users (62%) do not require additional information. The financial statements were seen as the most valuable source of information, and many found the notes to the financial statements too complex and did not use them.

In Australia, there is a need for similar research to be undertaken. In our submission to the Australian Charities and Not-for-profit Commission legislative review, Chartered Accountants ANZ recommended that more detailed research and consultation with stakeholders takes place to determine who uses charity reports, what information would be useful to them and how these needs can be addressed though the reporting framework.

If financial reporting is to remain relevant, frameworks must be set with a clear understanding of who the users of financial reports are and what information they need.

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