22 August 2011

Dear Mr Marshall

Cutting Clutter

The Group of 100 (G100) is an organization of chief financial officers from Australia's largest business enterprises with the purpose of advancing Australia's financial competitiveness.

The G100 supports efforts to reduce the volume and complexity of financial reports and addressing the factors which lead to what is referred to as clutter in annual reports. We agree that efforts to reduce clutter and to make annual reports, including financial reports, more useful and relevant to shareholders and other users requires significant changes in behaviours by all parties involved in the annual reporting process.

The G100 believes that much of the information in annual reports is of a 'boilerplate' and repetitive nature which does not change from year to year. In many cases this information could be included in the annual report on an exception basis with the detail being reported on the company's website. For example, in respect of corporate governance, after the initial reporting there is no value added by repeating the same information in the annual report each year – what is of interest to shareholders and other users are the material changes that have occurred since the previous report. Likewise the detail of the accounting policy note is a major source of clutter. Where companies are required to comply with IFRSs as issued by the IASB there is little information value in providing a statement of accounting policies which summarises the requirements of those standards. We suggest that users of financial reports find disclosures about accounting policy choices, the effects of forthcoming standards and changes in accounting policy more relevant and understandable rather than them being buried in a note of several pages. In this regard the "Disclosure Aid 2: Accounting policies" provides a useful basis for an approach to satisfying this disclosure requirement while providing useful information to shareholders and other users.

The G100 agrees that behavioural barriers are a principal influence on the extent of the clutter in annual reports. The behaviours of auditors and regulators and the desire to minimise the risk of actions by users of annual reports contributes to an environment in which disclosures are made irrespective of their materiality or significance to the activities of the company. Often providing the information is less time consuming and costly to the company than justifying its omission to auditors and other parties. For example, the model sets of financial reports prepared by the major audit firms tend to become a template for compliance and are regarded as necessary to achieving a clear audit opinion. Practice surrounding the use of these model accounts was also identified in the G100 report, prepared in conjunction with PricewaterhouseCoopers, "Less is More" (see publications) influencing the presentation of disclosures that were not material.

In respect of the nature, volume and usefulness of disclosures the G100 believes that a disclosure framework project to develop principles to be applied by the standard-setter when developing standards should have a high priority on the IASB's work program. The outcome of the EFRAG project "Considering the Effects of Accounting Standards" and the NZICA/ICAS paper 'Losing the excess baggage – reducing disclosures in financial statements to what's important' are also relevant to efforts to reduce clutter.

Yours sincerely
Group of 100 Inc

Peter Lewis
President