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The Financial Reporting Council (FRC) welcomes improved debt disclosure standards.
Commenting on the publication of ‘Amendments to IAS 7’, by the International Accounting Standards Board (IASB), Director of the FRC's Financial Reporting Lab, Sue Harding, commented:
"The Financial Reporting Lab's work on net debt reconciliations demonstrated that investors need more information on significant cash and non-cash changes in debt. The new requirements will provide welcome transparency on this. We encourage the IASB to continue its consideration of enhanced disclosure of the accessibility of cash and cash equivalent balances.”
Notes to editors:
The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
The Financial Reporting Lab was set up, and is funded by, the FRC as a hub, bringing together companies and investors to support improvement and innovation in reporting. More information about the Lab’s work can be found at: Financial Reporting Lab
In 2012, the Lab published a series of three reports on the topic of debt and cash flow disclosure: Net debt reconciliations, Debt terms and maturity tables, and Operating and investing cash flows. These reports included disclosure suggestions and provided a range of examples illustrating what investors highlighted as good disclosure. The reports can be found via Lab Reports.
The IASB’s Amendment to IAS 7 makes mandatory the disclosure of information to enable an understanding of significant cash and non-cash changes in reported liabilities arising from financing activities. The amendment suggests that one way to fulfill the disclosure requirement is providing a reconciliation. Importantly, it also highlights that the requirement can be met through the disclosure of a net debt reconciliation, subject to certain formatting considerations.