How to make financial reporting decisions
ICAS has published a new guide, A professional judgement framework for financial reporting decision making, to help you make financial reporting decisions.
Alice Telfer, Head of Business Policy & Public Sector at ICAS tells us what it’s all about.
Q: Why have you produced this guide?
We are increasingly applying principles-based standards. Making a judgement in a complex world, with principles-based accounting standards is not an easy task, but the success of narrative and financial reporting relies on our ability to be able to make sound judgements and to demonstrate our reasoning for making these judgements.
Q: ICAS produced a similar guide in 2012, what is new in this guide?
We have updated the guide to include a new section for decision making by audit committees to complete the loop on financial reporting. It aims to help audit committee members to challenge and assess the information and opinions provided by both management and auditors
The guide has also been refreshed to make it more user friendly for online readers.
Q: What is the purpose of the guide?
It offers practical guidance for decision makers involved in narrative and financial reporting.
The guide provides a structure to help you come to a sound judgement when you have a complex financial or narrative reporting decision to make.
Q: Who is it for?
It can be used by accountants and non-accountants, whether in the private or not-for profit sectors, irrespective of the size and type of organisation. It is relevant at an international level and is promoted by IFAC (the International Federation of Accountants).
It is targeted at preparers, auditors, audit committee members and regulators.
Q: Is it useful for those new to making professional judgements?
Yes, the guide can provide a useful training guide for students or those new to decision making who wish to share the experience of those who have been there and done it before. It also enables individuals to recognise situations where they need to seek assistance from others.
Q: What does the framework do?
It identifies core principles and provides a structured process to guide the key decision makers in financial and narrative reporting.
This framework supports each part of the process from preparers making and documenting the judgement, auditors assessing and challenging, audit committees reviewing and concluding on the judgement as well as assisting regulators, understanding why key judgements have been made and in assessing whether judgements were appropriate given the facts available at the time.
Q: What else does it include?
ICAS firmly believes that a principles-based approach to standard setting is a key driver of quality reporting. Our guide therefore also includes recommendations for standard setters to ensure that standards provide the scope for professional judgement.
Read more about The professional judgement framework.