An initiative was launched internationally to explore how disclosures in IFRS can be amended to improve the way in which information is disclosed and presented in financial statements. Narrow-scope amendments to IAS 1 were issued by the IASB and approved by the NZASB for use in NZ IFRS.

The conundrum with current presentation and disclosure requirements

Users of the financial statements feel that there is not enough communication of relevant information, and the relevant information that is communicated is obscured by the disclosure of irrelevant and immaterial information, magnified by generic language.

On the other hand, preparers feel inundated with never-ending disclosures.  They also want to tell their story but are impeded by the standards themselves which they feel compel rather than guide, and by auditors and regulators who focus on compliance rather than communication.

Financial reports are an important communication tool and thus their usefulness would be maximised if the story told in them was concise, relevant and complete.

The amendments

To address the issues faced by preparers and users, the standard-setters have embarked on a disclosure initiative, and have issued some narrow-scope amendments, which are part of an ongoing project to improve the presentation of financial reports.

Materiality and aggregation

Paragraphs within NZ IAS 1 were amended to clarify that:

  • An entity shall not aggregate or disaggregate information in a manner which obscures useful information;
  • Materiality should be applied for the notes as well and not only the financial statements;
  • An entity need not provide a specific disclosure if the information resulting from that disclosure is not material.  This is the case even where NZ IFRS contains a list of specific requirements or describes them as minimum requirements.

These amendments enforce the concept of communication over compliance and the importance of judgement in assessing materiality.

Disaggregation of line items within the statements of financial position, profit and loss and other comprehensive income

The words “at a minimum” have been removed when referring to the line items to be disclosed on the face of the statement of financial position.  These words caused confusion for preparers as it appeared that there was a prescriptive list of items in the statement of financial position.

This amendment is aligned with the above amendment to enforce the concept of materiality when considering whether to aggregate certain line items, if those items are not material.

Provision has also explicitly been made for an entity to disaggregate line items in the statement of financial position and profit or loss section of the statement of financial performance when such disaggregation results in information that is more relevant.  This could be the case for example, where an entity feels it is more useful to separate on the statement of financial position, property accounted for under the revaluation model from property accounted for at cost.


Prior to these amendments, NZ IAS 1 allowed an entity to present additional line items and subtotals in the statement of financial position and the statement presenting profit and loss and other comprehensive income when such line items are relevant to a user’s understanding.

The amendments clarify what factors should be considered when presenting additional subtotals, including a requirement that a subtotal in the profit and loss section of the statement of financial performance shall not be displayed with more prominence than the subtotals specified in IFRS.

This could be the case when, for example, an entity displays earnings before interest, tax, depreciation and amortisation in a big, bold format which dwarfs the earnings after tax figure.

The line items that reconcile any additional subtotals with the subtotals required by IFRS are now also required on the statement presenting profit or loss and other comprehensive income.

Notes structure

The amendment has clarified that entities have flexibility when determining the order of their notes.  However, it is still of utmost importance to order their notes in a systematic manner and consider both understandability and comparability when determining that order.

This flexibility allows entities to give prominence to areas of its activities that the entity considers to be most relevant to an understanding of its financial performance and financial position, such as grouping together information about particular operating activities.

An entity is also required to group accounting policies together with their related notes.  This could reduce duplication, and enhance the understanding of relationships between the policies and the disclosure.

What is next for the disclosure initiative

A discussion paper has been issued and focuses on identifying and better understanding disclosure issues, and developing new or clarifying existing disclosure principles to address those issues. Once these disclosure principles have been developed, research will commence on whether to consider making targeted improvements to disclosure requirements in existing Standards.

A practice statement is expected in June from a Materiality project which will provide guidance in making materiality judgements as well as clarifying the definition of “material”.