Current Issues and New Accounting Standards: Disclosure Initiative, IFRS 18, IFRS 19 and IFRS 20

Financial reporting changes continually: new standards, amendments, new ways of presenting information and new questions about what a report should say. A professional accountant needs to know what is coming, why, and how to prepare.

This topic covers the main current issues in financial reporting: the “disclosure problem” and the International Accounting Standards Board (IASB)’s Disclosure Initiative, the principles of effective communication, where information should be disclosed, the treatment of management-defined measures, the move to objective-based disclosure requirements, and the new standards and amendments that are issued or in the pipeline at 5 November 2026: International Financial Reporting Standard (IFRS) 18, IFRS 19, the third edition of the IFRS for SMEs, IFRS 20, amendments to the standards on financial instruments, the revised Management Commentary Practice Statement and the sustainability standards covered earlier.

The next topic covers technology in financial reporting.

No question in the diets reviewed asked for the Disclosure Initiative as such, but new and recent standards are examined in their own topics (the presentation of the statement of profit or loss is in the earlier topic on IFRS 18), and the examiners ask about current developments in the compulsory sections of the paper. Read ethics in financial reporting and the professional code first.

The disclosure problem and the Disclosure Initiative

Investors and others complained that financial reports had too many disclosures and too little information. The disclosure problem has three parts:

• Not enough relevant information: items that users need are missing or described in generic terms.
• Irrelevant information: boilerplate and immaterial disclosures that hide the information that matters (“disclosure overload”, a checklist approach).
• Ineffective communication: information that is poorly organised, repetitive, unclear or not linked to related information.

The Disclosure Initiative is the International Accounting Standards Board’s programme of projects to improve the effectiveness of disclosures in financial reports. It includes targeted amendments to the standards, work on materiality (the Practice Statement on making materiality judgements), a discussion paper on the principles of disclosure, a review of the disclosure requirements in individual standards, and, in time, the new standard on presentation and disclosure (IFRS 18).

Principles of disclosure

• Principles of effective communication. Disclosure should be entity-specific (not boilerplate), described simply and directly, organised in a way that highlights important matters, linked to related information, free of unnecessary duplication, and in a form that is comparable and suited to the format (paper or digital).
• Where to disclose. The primary financial statements are for the most important information, the notes explain and supplement them. Information that is not part of the financial statements, such as strategy and risks, can sit in management commentary or other reports. Cross-referencing should be clear. Information must be placed where users will find it and where it can be audited if it is within the statements.
• Specific concerns. Users also asked for rules on performance measures that are not defined by the standards (measures outside generally accepted accounting principles (GAAP)), such as adjusted earnings and earnings before interest, tax, depreciation and amortisation (EBITDA), so that the numbers are transparent and reconciled.
• Disclosure objectives and requirements. Instead of long lists of mandatory items, a standard states the objective that the disclosures must meet, with specified items as the minimum needed to meet it, leaving the entity to judge what else is needed and not to give what is not material. The IASB tested the approach on the disclosures of the standards on fair value measurement and employee benefits.

Management-defined measures and IFRS 18

IFRS 18 Presentation and Disclosure in Financial Statements replaces International Accounting Standard (IAS) 1 for annual periods beginning on or after 1 January 2027 (see the earlier topic for the new categories and subtotals).

Its disclosure rules for management-defined performance measures, which are subtotals of income and expenses that the entity uses in public communications outside the financial statements to express management’s view of performance, require them to be in a single note, with an explanation of why the measure is useful, how it is calculated, and a reconciliation to the most directly comparable subtotal in IFRS Accounting Standards, showing the effect of tax and non-controlling interest on each reconciling item.

For example, operating profit is ₦200 million. Management reports an “adjusted” measure that adds back depreciation of ₦40m and restructuring costs of ₦15m: ₦200m + ₦40m + ₦15m = ₦255m. The reconciliation shows each item and the tax effect (30% × ₦15m = ₦4.5m on the restructuring cost) and any non-controlling interest effect, so that the user can see the link between the measure and the statement of profit or loss.

New standards and amendments (at 5 November 2026)

IFRS 19 is available to a subsidiary that has no public accountability (no publicly traded instruments, not a bank or insurer or similar) and whose ultimate or intermediate parent produces consolidated financial statements available for public use that comply with IFRS Accounting Standards. It is optional: the entity states that it applies IFRS 19, uses the recognition and measurement of full standards, and gives fewer disclosures.

The standards apply in Nigeria in accordance with the Financial Reporting Council’s pronouncements, and the dates for local application should be checked on the Council’s website.

The ideas in more depth

Why more disclosure is not better disclosure

Users read the report to find the few facts that matter for decisions. A long list of required items, each of which the preparer ticks off, can bury those facts. The shift to objectives asks the preparer to judge what the user needs and to omit what is not material.

Why management measures are regulated

An unaudited adjusted profit can be more favourable than the statutory result and is easy to misuse. Requiring a note, a rationale and a reconciliation lets users see exactly what has been excluded and what it cost.

Sources and references

• International Financial Reporting Standard (IFRS) 18 Presentation and Disclosure in Financial Statements; IFRS 19 Subsidiaries without Public Accountability: Disclosures; IFRS 20 Regulatory Assets and Regulatory Liabilities; IFRS Practice Statement 1 Management Commentary (revised, June 2025); the IASB Disclosure Initiative.

These points are stated as at 5 November 2026.

Worked examples

1. Measure.
   ₦120m + ₦30m + ₦10m = ₦160m.
2. Tax effect.
   30% × ₦10m = ₦3m, so the after-tax effect is ₦7m.

1. First period. The year beginning 1 April 2027 (to 31 March 2028).
2. Comparative. Restated for the year beginning 1 April 2026 (to 31 March 2027), so the new presentation must be prepared from 1 April 2026.

1. Answer. Yes: it has no public accountability and its parent produces public consolidated IFRS statements. It may choose to apply it, with reduced disclosures.

How to answer in the exam

• State the problem, then the response, with the name of each standard or project.
• Give effective dates and note that some are optional.
• Link to earlier topics (IFRS 18 categories, management commentary, sustainability).
• Mention the Nigerian position where relevant: the Council’s pronouncements.

Common mistakes in the exam

• Describing the disclosure problem as too little disclosure only.
• Stating wrong effective dates for IFRS 18 and IFRS 19.
• Saying IFRS 19 changes recognition and measurement.
• Saying that management commentary is mandatory under IFRS.
• Forgetting the reconciliation for management measures.
• Ignoring the need for comparatives in the first year of IFRS 18.

Quick revision

• Disclosure problem: not enough relevant, irrelevant, ineffective communication.
• IFRS 18 and IFRS 19: 1 January 2027. SME standard (third edition): 1 January 2027.
• Management measures: note, rationale, reconciliation with tax and non-controlling interest effects.
• Practice Statement 1 (June 2025): non-binding.

Practice questions

These are original questions written in the style of the Institute’s exams. Try each one before you open the answer. Section A is a recall check, because the paper itself is written.

Recall check: multiple choice

Section B style: written questions

A further written question

Model answers

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