How to deal with financial disclosures you dreaded the most
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Drafting a full set of financial statements gives a great sense of achievement—however, some may find it dreadful before finalization. The more you dread something, the more it's going to haunt you until you decide to face it. It's worth considering why one might feel uneasy about drafting financial disclosures. There are two general reasons why this happens.
First, certain financial disclosures require a great deal of effort to generate, and preparation doesn't begin until the reporting deadline approaches. In this type of situation, finance must identify the bottleneck and develop a solution that addresses the problem. For instance, some companies only perform a full income tax calculation at year-end and therefore find income tax reconciliation and deferred tax breakdown disclosures challenging to prepare for year-end accounts. If full income tax calculations had been performed even during interim periods, these disclosures would be easier to deal with at year-end.
Second, the proposed disclosures might not reflect favorably on the company. This is where materiality judgment comes into play. If you're able to establish that the disclosure is not material, then there's nothing to worry about. In contrast, if the disclosure is considered to be material, analyze the disclosure requirements from the accounting standards, then identify the points that might not reflect well on the company if disclosed. Then, try to understand why the company would be uncomfortable with the disclosure. The more questions you ask, the less judgmental you may become—and most importantly, it can point you toward a constructive way to address the disclosures so that disclosure requirements are met while mitigating any perceived unfavorable impact on the company.
If you need assistance in designing financial disclosures, contact VMC.
VMC's views are general insights—not one-size-fits-all advice. Every company's situation is unique.
