Many of us became accountants for a reason – we prefer
numbers to words. So it is not surprising that qualitative
disclosures are less popular with preparers of financial
statements. Following the financial crisis, many blamed the
accounting rules for the lack of sufficient warning. But disclosure
of the financial risks of the entity, as required by IFRS 7, should
have given some sign of what was to come.
Let's focus on the qualitative aspects of disclosure. IFRS 7
is a perfect opportunity for management to 'tell their
story' about exposure to financial risks. But management can be
reluctant to say more than the 'bare minimum' or reveal
more than what their competitors might say. The regulators are
starting to catch on. ESMA referenced IFRS 7 disclosures in their
2013 enforcement priorities emphasising the need to include better
qualitative and quantitative disclosures about financial risks.
