Advanced financial reporting—The French approach to the disclosure problem

Date01 January 2021
Published date01 January 2021
AuthorAndreas Hecht,Dirk Hachmeister
J Corp Acct Fin. 2021;32:139–144. 139
Advanced financial reportingThe French approach
to the disclosure problem
Andreas Hecht | Dirk Hachmeister
University of Hohenheim, Institute of
Financial Management, Stuttgart,
Andreas Hecht, Schwerzstrasse 42, 70599
Stuttgart, Germany.
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.
advanced financial reporting | disclosure problem | voluntary reporting
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.
J Corp Acct Fin. 2020;16. 1

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