Financial statements represent the final output of most accounting systems, with the most common statements being the income statement, balance sheet, and statement of cash flows. IFRS disclosures are statements made regarding the statements in order to provide additional information to stakeholders. There is really no end to the number or type of IFRS disclosures a company may make regarding its financial statements. The most common types of disclosures include general information, accounting policies, income statements, and balance sheet notes, among other things. While requirements may exist as to what information needs disclosure, the content is often left up to the company.
IFRS disclosures are for information purposes only in most cases. A big drawback to financial statements is that the documents simply contain numbers; short comments on certain items on each statement help clarify a company’s financial position. Publicly held companies are usually the biggest users of IFRS disclosures due to the necessity for copious information on financial viability. Another significant purpose of these disclosures is to indicate how a company applies IFRS to its business transactions as IFRS is an international group of accounting standards. A company’s external accountants may have a say about the type and nature of content necessary for disclosures.
A common disclosure for users of IFRS is one that relates to currency valuation and the effects of inflation on currency. Many different international countries use IFRS as their national accounting standards. Therefore, there may be a need to present a short discussion as to how the currency in a country is presented on the financial statements. IFRS does not allow for currency adjustments due to inflation, so this may need reiteration in a financial statement disclosure. Business activities in multiple countries with different currencies may also require a separate financial statement or disclosure for informing stakeholders about the value of such activity.
Other IFRS disclosures typically relate to more common accounting techniques or the use of certain accounting measurements in the company’s activities. For example, the valuations of inventory for accounting purposes, income statement model or formula, depreciation methods, or subsequent transactions are all quite common. An external accounting firm can provide valuable information on what items need disclosure and how a company should present the information on its financial statements. Information that requires a more lengthy statement may need a secondary document that allows for more discussion on the accounting topic.