This page contains a Flash digital edition of a book.
Photo: Paul Orenstein


Five Steps to Simplifying Financial Statements


NCREASINGLY COMPLEX TRANSACTIONS. A heightened regu- latory environment. Ever-expanding standards containing more disclosure. A checklist mentality toward financial

statement preparation. “This is today’s business reality and it’s leading to complicated financial statements,” says CPA, CA Alex Fisher, principal, International Financial Reporting Standards, at CPA Canada. “Financial statements are supposed to be core communication tools but too often they contain unnecessary information or poorly presented information,” he says. “This makes them less useful than they could and should be. If users can’t find what they need, then they aren’t benefiting and we need to revisit what we’re providing.” In order to address disclosure overload, CPA Canada has

created the guide “Five steps to simplifying financial state- ments — today.” The steps are in the context of IFRS but can be applied equally to financial statements prepared under other accounting standards. These best practices help management, auditors working with management and practitioners advising management to create easy-to-read, useful financial state- ments. Specifically, these steps provide practitioners with a framework and opportunity to actively engage with manage- ment. They provide practical advice that can be implemented immediately, with very little investment of time, money or other resources. Fisher, a co-author of the publication, breaks down what you need to know.

Step 1: make financial reporting strategic View financial reporting as an opportunity to benefit from something you have to do anyway. Beyond meeting regulatory requirements, why are you reporting? To build goodwill? To gain trust? To attract investors? Identifying why you are doing it and who you are doing it for

will allow you to decide what you need to include and how. Once you recognize that good financial communication is a strategic advantage, you can make it a priority. Step 2: focus on materiality There is a misperception that just because something is a disclosure item you have to disclose it. You don’t. Everything should be done within the context of materiality and relevance. Materiality also applies to the notes and how much you describe. Talk to the stakeholders who will be using the statements and ask specifically what’s relevant to them in their decision-making. Step 3: refine formatting and presentation Be well organized. Use more headings, subheadings and tables. Make it possible


to download the statements in portions. Group connected information together. Include cross-references between the statements and notes. The key is to think like your readers and make it easy for them to find what they need. In many cases, less is more. Step 4: apply a truly condensed approach to interim reporting Interim reporting under IFRS gives you an option: you can produce a complete interim report (similar to a year-end report) or you can do a condensed report, focusing on what’s new and/ or different. Condensed means exactly that — you are allowed and encouraged to put less in the interim report. Most companies do too much.

Think like your readers; make it easy for them to find what they need

Step 5: keep looking ahead You’re not alone in wanting to simplify reporting. Regulators, standard-setters and auditors — to name a few — are investigating how they can make finan- cial reporting more meaningful. With that in mind, monitor how standards are changing. This is not a static process. Change is coming. The International Accounting Standards Board already has a number of initiatives looking into how dis- closures under IFRS can be streamlined. For more information, visit

cialstatements to download a copy of “Five steps to simplifying financial statements — today” and to view a short video. The publication also includes 20 questions preparers should ask themselves about how to simplify financial statements. “Everyone has a role to play here — regulators, standard-set-

ters, auditors — but management has the most power to act immediately,” says Fisher. “These five steps can help you and your stakeholders benefit from more effective financial state- ments today.”

TARYN ABATE, CPA, CA, CPA (ILL.), is a principal in the research, guidance and support group at CPA Canada

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68