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distinguish material from immaterial information.

Siemens therefore had the objective to actively turn

this trend around in the reports issued for its fiscal year

2015, while staying compliant with presently relevant

regulations. By particularly focusing on information

relevant for decision making, the volume of the

financial reports could be significantly reduced while

transparency increased at the same time.

To accomplish this goal, a bundle of measures was

used. The financial section of the annual report alone

could be shortened by over 100 pages. Much of the

information which is no longer disclosed in the annual

report, including e.g. the multi-year financial summary,

is nowmainly provided through other suitable channels,

especially the company’s internet presence. This new

approach was received positively by almost all user


But the companies’ approach to bundle information

which must be provided or to distribute it over various

channels of communication is only one way to make it

more understandable and more accessible to the users.

As a further step, a change of approach is needed from

those that decide in the first place which information has

to be disclosed and to which extent, which is the standard

setters and the regulators. It goes without saying that the

existence of strict accounting standards and disclosure

requirements as such are achievements which have to be

maintained by all means. But even here there is a need

to always weigh whether particular standards effectively

contribute to the desired transparency or whether they

rather achieve the opposite.

This is now truer than ever as the increase of regulations

has led to a phenomenon which in professional circles

is called “disclosure overload”. Standard setters and

regulators have recognized this in the meantime and

have started first initiatives which deal with approaches

to resolve these issues. However, numerous projects of

the standard setters in the past have shown that they

take a long time and often end with a compromise on the

smallest common denominator.

In order to work against “disclosure overload”, the

regulatory framework must be adapted. It would be

desirable if respective authorities and standard setters

accompanied a future development in this sense. Here

are three examples where a change of mind must occur:

• New respectively revised regulations should really

contain principle-based requirements rather than

numerous regulations of individual cases, which

make it possible to interpret the information

provided even without extensive additional

disclosures in the form of “footnotes”.

• The cooperation of the national and international

standard setters and regulators must be significantly

intensified. Indeed, several institutions set regulations

for companies, which partly leads to significant

redundancies. As an example, German disclosure

regulations for the use of performance measures in

the group management report which are not defined

in the accounting standards are being expanded by

new standards on the European level.

• Astringent analysisof costsandbenefitsof a regulation

should not only occur before the introduction of a

new disclosure requirement, but should also take

place regularly several years thereafter. The world is

changing continuously, many products and processes

are aging ever faster and are no longer necessary or

useful. Accordingly, accounting standards and other

reporting requirements should also be analyzed

regularly to determine whether the requirements are

still adequate.

Another development which is expected to lead to more

transparency will be introduced this year by the national

implementation of the European Union Directive on

external auditor reform: the expansion of the auditor’s

opinion by so-called key audit matters. In this new

paragraph, the external auditor in future will not only

have to report what was audited, but also how and

which areas of the audit needed particular attention.

In this case, it is worth the effort to look at examples in

Great Britain or the Netherlands, where the expanded

auditor´s report is already being applied. Depending

on the preparer and external auditor, there are great

differences as to the details of the explanation of the

external auditing procedures. Especially when these

explanations are extensive, it is not always clear at first

sight why the explanations are so detailed because

many of the auditing measures presented are difficult

to understand for the layman, but appear obvious to

experts. The expansion of the external auditor´s opinion

is to be welcomed as an additional contribution to

increasing transparency, but it should be limited to the

really material information.

Trust is the highest good of a successful capital market


from Frankfurter Allgemeine Zeitung, Frankfurt am

Main, Germany, April 11, 2016.

Article provided by GEFIU, The German IAFEI Member

Institute. Responsible for English translation: GEFIU,

the Association of Chief Financial Officers Germany.

Translator: Helmut Schnabel