Financial Statement Disclosure Checklist

Providing accurate financial information about your company to the relevant internal departments and external regulatory agencies is incredibly important. Making sure that all this information is complete, up-to-date, and error-free can be a huge headache for businesses, and used to take many many hours of time and frustration. But it doesn’t have to be this way! Fluence Disclosure Management streamlines this process and seamlessly integrates with Office 365, so you don’t have to start from scratch and learn a whole new system.

What Is a Disclosure Checklist?

You know your business needs to prepare disclosure documents, but getting started and staying organized while preparing these important financial documents can feel daunting. A disclosure checklist is one tool that can help manage all the moving pieces around financial statement disclosure. Because each company will have different requirements for their disclosures, we will keep this disclosure checklist general, so it can give you a good jumping off point to customize a checklist specific to your needs.

• What external and internal groups will you be giving these financial disclosures to?
• What specific requirements does each of these groups have?
• Where inside the company is the required information that needs to go into these disclosures?
• How do you prepare a financial disclosure document, including proper formatting?

What Types of Disclosures in Financial Statements Do You Need?

Every business will have its own unique set of regulatory agencies, government bodies, and internal structure that requires different financial disclosures. Before a company can start to answer the question of “what is a financial statement disclosure”, they first need to know who they are preparing this disclosure for.

Financial disclosure internally, within a company, may look like management packs that are referenced by the C-suite or heads of different departments. Or, they could be used in making reports to the board of directors, investors, financial institutions, or other interested parties.

External disclosure will need to be made to different government bodies and regulatory agencies, depending on where a company is based and what they do.  These could include regulatory bodies such as the Securities and Exchange Commission (SEC) in the United States, the European Securities and Markets Authority (ESEF/ESMA, UKSEF) in Europe, and the International Financial Reporting Standards more broadly.

What Are the Disclosure Requirements in Financial Statements?

After you have identified all of the parties receiving a financial disclosure, it is important to determine the mandatory disclosures in financial statements for each. Fluence Disclosure Management makes this step easy, because each major type of disclosure form is pre-formatted within our program to make sure you meet all requirements.

Some of the most common financial disclosure statement examples are:

• 10-K (annual) or 10-Q (quarterly) reports: comprehensive report on publicly traded US company
• 20-F: foreign-based companies with securities trading in the US
• 8-K: announce significant events relevant to shareholders (acquisitions, bankruptcy, etc)
• IRFS 1: International Financial Reporting Standards first time adoption
• ESG reporting: disclosure of environmental, social, and corporate governance to shareholders
• iXBRL/XBRL: software standard that makes financial data easily referenced and comparable
• Internal financial disclosure documents specific to each company
• NFRD: Non-Financial Reporting Directive developed by the EU to give investors and stakeholders non-financial information and encourage responsibility for environmental and societal concerns

Where Is Disclosure Information Being Collected?

Now that you know what disclosures in financial statements are needed, it is time to consider where this information is being collected, analyzed, and stored. Within most companies there are several different departments that will each have a piece of the full financial picture of your company. All of the relevant staff and departments need to be identified and given access to add this information into one centralized place. This way, the data and narrative can all be compiled as needed.

Fluence Disclosure Management makes this easy by offering specific access to different parts of the disclosure that are updated in real-time. This way, the HR department can link their spreadsheets directly for the information they need to deliver, while the sales team can do the same. Each section can be accessible only to the people who need them, making it easy to maintain confidentiality with sensitive information.

What is a Disclosure Statement Document and How Do You Prepare It?

After you have compiled all the needed information for your required disclosures, it’s time to actually create the documents themselves. In some cases, these will have very specific formatting requirements, such as a financial disclosure statement to the federal government or jurisdiction regulators. In other cases, the exact format will be more open-ended, but there will be a list of information that must be included.

Why Are Financial Statement Disclosures Important?

In many cases, financial statement disclosures are important because they are legal requirements that must be fulfilled in order for a company to continue to do business. If you do not submit the correct financial disclosures to the right organizations at the required times, you may face fines, revoked licenses, or other legal action.

Another way in which disclosure is important is to ensure investors in a company have accurate information before they decide if they wish to invest in a company. Requiring specific information be released, and maintaining organizations that check the accuracy of this data, supports everyone’s ability to make sound financial decisions.

A third reason disclosures are so important is to inspire trust in your company’s customers and the public with transparency about your business. Even if this disclosure weren’t required by law, providing internal and external stakeholders with relevant details about how your company does business helps build trust in your brand.

For private companies, internal disclosure is important so that the board or other company decision makers can make the best business decisions. Important planning about how to run, grow, and adapt a business all require accurate financial disclosures so they can be made based on the best data.

What Is a Disclosure Checklist Example?

We’ve looked at a general disclosure checklist that works for any disclosure that your company might be submitting, now let’s go through a few specific examples, looking at the International Financial Reporting Standards (IFRS) 1: First-time Adoption of International Financial Reporting Standards and the Canadian Form 51-102F2 Annual Information Form.

When making a specific checklist for your disclosure, the first thing you should be asking is “what is the purpose of a disclosure checklist?” The answer is to make sure all the important elements of your disclosure are collected, verified, and included in the final report in the required format. A checklist can help make sure all the steps are completed in the order that makes the most sense, and that nothing gets left out.

In the case of the IFRS 1, these are the requirements for what must be included:

• Three statements of financial position
• Two statements of profit or loss and other comprehensive income
• Two separate statements of profit or loss (if presented)
• Two statements of cash flows
• Two statements of changes in equity
• Related notes, including comparative information

The requirements are different for the Canadian Form 51-102F2 Annual Information Form:

• Cover page
• Table of contents
• Corporate structure
• General development of the business
• Describe the business
• Dividends and distributions
• Description of capital structure
• Market for securities
• Escrowed securities and securities subject to contractual restriction on transfer
• Directors and officers
• Promoters
• Legal proceedings and regulatory actions
• Interest of management and others in material transactions
• Transfer agents and registrars
• Material contracts
• Interests of experts
• Additional information
• Additional disclosure for companies not sending information circulars

It is obvious that some regulatory agencies provide more exact requirements than others, and creating each disclosure document will require different information and formatting. But compiling a checklist of all the requirements will allow you to assign each task to the relevant department and make creating the final disclosure documents an easier task.

Something that is mentioned within many of the guidelines for applying for this and other disclosures is GAAP-compliance, or a GAAP checklist. So what is a GAAP checklist? GAAP stands for generally accepted accounting principles, and this is the standard that all accounting statements are expected to follow. A GAAP checklist will be similar to the general checklist for preparing your disclosure statement, but it will be best suited to answering the question “what is disclosure in accounting?” and should already be familiar to your accounting department.

‍Fluence Technologies: Make Disclosure Easier

Preparing disclosure statements doesn’t have to be a painful process. With our disclosure management solution you don’t have to spend long hours copying and pasting numbers, or doing a lot of complicated coding to get things done. We also simplify internal disclosure and preparing narrative reporting, for a full disclosure solution.

At Fluence, we allow you to seamlessly connect your Office 365 tools and export the exact information you need quickly and easily. Let us slash your reporting times by 90%, request a demo today!