Disclosure on judgements and estimation uncertainty under IFRS: a multidimensional framework

Under IAS 1, disclosure on judgements and estimation uncertainty should enable users to assess the company financial position and performance and to understand the extent to which these are sensitive to changes in managerial assumptions. Despite such a crucial role to primary users’ decision making, companies seem to adopt a ‘checklist’ requirements approach, overlooking the rationale underpinning the accounting standard. Triggered by the debate arisen in the accounting community, prior literature focuses on determinants of these behaviours and employs measures of disclosure specifically aimed at synthetizing the extent to which companies comply with requirements, without specifically focussing on the peculiar nature of this disclosure. This paper shifts the focus on how IFRS companies disclose information on judgements and estimation uncertainty and aims at developing a framework for capturing the features of this type of disclosure. In doing so, we address the peculiar nature of such disclosure (mandated by IFRSs but with high latitude left to managers) by developing a multidimensional framework organised into three key dimensions, namely variety, depth, and visibility of disclosure. The paper provides a methodological contribution to research on disclosure on judgements and estimation uncertainty. We propose, indeed, a framework particularly useful for research on the impact of disclosure on sophisticated users. The framework is particularly timely as it would assist professionals, standard setters and regulators that take an active part in the debate on the ‘disclosure problem’.