Questions On Financial Statements And Disclosure

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Disadvantages Information is classified as material if misstatements influence decisions that users make rely on entity’s financial information, However, regulators are concerned about financial statements providing material and meaningful information to users and will discourage disclosure of information that does not contribute to such usefulness. Due to preparers are lack of understanding about which disclosures are material, the result is that material disclosures may be omitted from financial reports and immaterial disclosures included. there is a tendency that company include immaterial disclosures in the financial reporting, Even though IFRS has stated that companies are required to obey recognition, measurements and disclosures requirements, otherwise, resulting in some misleading information that influence users’ decisions. the increasing number of companies are choosing include all disclosures without materiality test, as prepares use their professional judgement to state material disclosures from financial statement, it is most likely that some material judgements that prepares made are mistakes, preparers are afraid of making false information that result in litigation of risk, avoiding extra discussion with company auditors. It is regarded as risky to remove immaterial disclosures, from safety perspective, preparers may be reluctant to change from the current position. Plain English Advantages Plain English does not mean excluding complicated

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