Advanced financial reporting—The French approach to the disclosure problem

• Date: 01 January 2021
• Published date: 01 January 2021
• DOI: http://doi.org/10.1002/jcaf.22455
• Author: Andreas Hecht,Dirk Hachmeister

J Corp Acct Fin. 2021;32:139–144. wileyonlinelibrary.com/journal/jcaf 139

EDITORIAL REVIEW

Advanced financial reporting—The French approach

to the disclosure problem

Andreas Hecht | Dirk Hachmeister

University of Hohenheim, Institute of

Financial Management, Stuttgart,

Germany

Correspondence

Andreas Hecht, Schwerzstrasse 42, 70599

Stuttgart, Germany.

Email: hecht.andreas@uni-hohenheim.de

Abstract

Sound decision-making depends on an appropriate level of relevant information.

This topic is on the agenda of international standard setters in order to increase

the decision usefulness of financial disclosures for the addressees of corporate

reporting. A look at France demonstrates how a uni que recommendation on

financial market communication initiated by the Financial Supervisory Authority,

which goes beyond legal requirements, can help solve the problem. The resulting

advanced disclosures not only provide a clear picture of the origin and magnitude

of, for example, financial risks but also of the extent to which the company has

reduced or increased the risk with derivative instruments. Such unprecedented

transparency could raise the inhibition threshold for speculation. In addition, we

illustrate that the enhanced data granularity could benefit various stakeholders

through more meaningful competitive or benchmarking analyses.

KEYWORDS

advanced financial reporting | disclosure problem | voluntary reporting

1|THE PROBLEM

Decision-making requires an adequate amount of

information as input variable. In this respect, extant

literature indicates that the performance relative to

decision-making is positively correlated with the

amount of information an individual receives. How-

ever, excess information is counterproductive, and the

result is a so-called information overload with lower

performance of decision makers, that is, lower quality

of decisions (e.g., Chewning & Harrell, 1990, O'Reilly,

1980, Schick et al., 1990). In the realm of accounting,

information overload in connection with public corpo-

rate disclosures, such as annual financial statements,

is often termed disclosure problem, where it is impor-

tant to note that the latter term takes a broader per-

spective. It does not only cover the overload of data in

financial disclosures but rather targets the relevance of

the published information (Zülch & Weuster, 2017).

As early as 2003, Paredes expressed his concern that

the financial reports were no longer understandable

because they had become so full of information

(Paredes, 2003). This ongoing discussion gathered

momentum during the 2010s when several standard set-

ters, such as the International Accounting Standards

Board (IASB), U.S. Securities and Exchange Commission

(SEC), and the European Securities and Markets Author-

ity (ESMA), were internationally addressing this problem

with the objective of solving the issues of information

overload and disclosure problem. In 2013, the IASB pro-

vided survey evidence that more than 80% of the survey

participants agree that the way financial information is

disclosed could be improved. Furthermore, the results

indicate that, instead of letting users search large

Received: 5 May 2020 Revised: 19 May 2020 Accepted: 22 May 2020

DOI: 10.1002/jcaf.22455

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided

the original work is properly cited.

© 2020 The Authors. Journal of Corporate Accounting & Finance published by Wiley Periodicals, Inc.

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