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The current levels of complexity in financial reporting cannot be allowed to continue, stresses the Global Accounting Alliance [9]in its report "Making financial reporting simpler and more useful: The way forward [10]," which is based on a series of roundtable events held in London, Beijing and New York in 2009. The report outlines actions which should lead to financial reporting becoming simpler and more useful.

The report states while there is still no solution to expedite the demise of complexity, the problem is not wholly a technical issue. The GAA says that a financial reporting process based, to a greater extent, on principles and judgement would make the whole process simpler. "The challenge is in generating the necessary leadership, commitment and actions to achieve this in practice," notes the report. "It is a question of human behaviour. The continual urge to add more and more refinements and additions to the financial reporting process has to be curtailed."

GAA stresses that action is required to keep the issue in the minds of everyone in the financial reporting world so that they would be deterred from creating further complexity which could be avoided and encouraged at every opportunity to remove redundant complexity.

To help curtail further complexity in financial reporting, the GAA states it will support the following:

• A single set of globally accepted financial reporting standards, as called for by the G20
Governments – with a primary focus on transparency and the needs of the capital markets, rather than stability and the needs of prudential regulators.
• Such standards to be part of an outcome oriented, principles based financial reporting framework.
• The preservation of the independence of the International Accounting Standards Board, subject to appropriate governance and oversight, and free from undue influence of vested interests other than through the normal due consultative processes.
• Proportionate regulation to support a principles based financial reporting framework, including
a framework for professional judgement agreed by regulators to provide guidance to preparers
and auditors involved in judgements on accounting treatments.
• Preparers and other stakeholders in financial reporting moving away from a legally constrained ‘tick box’, or compliance, mentality, to a focus on quality communication.

The GAA will be pursuing these goals by seeking to "nudge" all the players in the financial reporting debate – standard setters, preparers, auditors, regulators, analysts, investors and other users - to make the necessary changes so as to achieve the objective of a simpler, principles based standard setting framework, and more accessible and understandable financial statements.

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