Prospective financial information

Prospective financial information – There has been increasing demand in recent years for more disclosure of prospective financial information (PFI). Although PFI disclosures are invariably regarded as being relevant to investors, there are also good reasons why they are not made on a regular and comprehensive basis by all companies. Doubts often surround the accuracy, reliability and understandability of such financial information.

In this case the problems arise because of the inherent uncertainty of PFI. A novel feature is the emphasis on verbal explanations to counter the disadvantages of reliance on numbers alone.

Three key principles are: Prospective financial information

  • The reasonable disclosure principle. ‘To be understandable, PFI should contain disclosure that is reasonable, and so PFI should not be presented in situations of such uncertainty that the disclosure becomes too complex or extensive to be understood or used by investors. PFI should be structured in such a way that users encounter more significant information first, including, where appropriate, information relating to the uncertainty attached to the PFI.’

  • The business analysis principle. ‘For PFI to be reliable, it should be supported by analysis of the entity’s business and should faithfully represent factually-based strategies, plans and risk analysis.’ Prospective financial information

  • The subsequent validation principle. ‘For PFI to be comparable, it should be capable of subsequent validation by comparison with outcomes in the form of historical financial information.’ Prospective financial information

Prospective financial informationThese principles are derived directly from the qualitative characteristics of financial reporting information given in the IASB’s Framework for the Preparation and Presentation of Financial Statements. The report also makes use of all the ‘alternative and supplementary approaches’ including principles for the process by which PFI should be prepared, setting out how the process should be planned and what should be considered in preparing PFI.

Something else -   IFRS 15 Revenue Disclosures Examples

This approach shows how problems in the disclosure of information can be contained. It might usefully be applied to comparable financial reporting measurement information, such as fair values based on models or value in use calculations. It also shows that limits sometimes have to be set to what can be disclosed when information’s potential benefits would be outweighed by excessive length or complexity.

banner3

Prospective financial information

These principles are derived directly from the qualitative characteristics of financial reporting information given in the IASB’s Framework for the Preparation and Presentation of Financial Statements. The report also makes use of all the ‘alternative and supplementary approaches’ including principles for the process by which PFI should be prepared, setting out how the process should be planned and what should be considered in preparing PFI. Prospective financial information

This approach shows how problems in the disclosure of information can be contained. It might usefully be applied to comparable financial reporting measurement information, such as fair values based on models or value in use calculations. It also shows that limits sometimes have to be set to what can be disclosed when information’s potential benefits would be outweighed by excessive length or complexity.

These principles are derived directly from the qualitative characteristics of financial reporting information given in the IASB’s Framework for the Preparation and Presentation of Financial Statements. The report also makes use of all the ‘alternative and supplementary approaches’ including principles for the process by which PFI should be prepared, setting out how the process should be planned and what should be considered in preparing PFI.

This approach shows how problems in the disclosure of information can be contained. It might usefully be applied to comparable financial reporting measurement information, such as fair values based on models or value in use calculations. It also shows that limits sometimes have to be set to what can be disclosed when information’s potential benefits would be outweighed by excessive length or complexity.

Annualreporting provides financial reporting narratives using IFRS keywords and terminology for free to students and others interested in financial reporting. The information provided on this website is for general information and educational purposes only and should not be used as a substitute for professional advice. Use at your own risk. Annualreporting is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. For official information concerning IFRS Standards, visit IFRS.org or the local representative in your jurisdiction.

Something else -   IAS 34 Interim financial statements

Leave a comment