Business Management zone

Clarity not complexity. By Richard Mallett

The accountancy profession is slowly getting to grips with the challenge of making reports and methods clearer to people without losing elements of information. Both the IASB (International Accounting Standards Board) and FASB (Financial Accounting Standards Board) have the intention that standards will become easier to understand and a principles-based approach is on hand to tackle standards complexity.

Clarity and simplicity are also priorities for the International Federation of Accountants, the Securities and Exchange Commission and the Financial Reporting Council in part as a result of the collapse of Enron six years ago where reports hid the trading and solvency realities.

The latest catastrophe – the mortgage-backed securities crisis – retained complexity in reporting and often reflected a checklist mentality; an increased awareness of the value of good governance is often not sufficiently translated into high quality narrative reporting.

There are guidelines on how to handle the 'financial reporting supply chain' and they must be based in high levels of corporate governance.