In 2015, the International Accounting Standards Board (IASB) conducted a consultation on its five-year workplan (2017-2021). Based on feedback received, IASB has set the central theme for its activities as better communication in financial statements and aims to improve the communication effectiveness of financial statements by taking a fresh look at how financial information is presented and grouped together. Several projects were then identified by IASB which support better communication in financial reporting. One of these projects is the Principles of Disclosure that focuses on developing disclosure principles to help companies communicate information more effectively to users of financial statements. As part of this project, IASB published the Discussion Paper, “Disclosure Initiative – Principles of Disclosure” (the Discussion Paper), in March 2017.


In October 2017, IASB published a case study report titled “Better Communication in Financial Reporting”, showing how companies from different parts of the world have improved communication in their IFRS financial statements. IASB Chair Hans Hoogervorst had said in the foreword that “Financial statements are intended to provide investors with information that is useful for making investment decisions. IASB recognises, however, that companies can find it challenging to provide that information”.


In this report, six companies from varied industries shared the process they have gone through to improve disclosures in the notes to their IFRS financial statements. Excerpts from the companies’ financial statements were used to illustrate the changes and also the application of the principles of effective communication suggested in the IASB’s Discussion Paper.1 The following is one case study on Wesfarmers extracted from this report.


For more case studies on how companies improve the communication of information in their financial statements, please refer to the report “Better Communication in Financial Reporting”.



Wesfarmers Limited is an Australian conglomerate whose operations span a retail division with businesses in supermarkets, home improvement, office supplies and department stores, and an industrial division with businesses in chemicals, energy and fertilisers, industrial and safety products, and coal. The company is listed on the Australian Securities Exchange.



Historically, Wesfarmers’ financial statements took a long time to prepare, due in part to the company’s diverse portfolio of businesses. The resulting financial statements were long and filled with technical jargon that attracted a lot of questions from investors who struggled to find or understand the information they needed. In 2014, the company celebrated its centenary year and the 30th anniversary of its public listing. This prompted senior managers to examine how they could improve the communication in the company’s financial statements. Wesfarmers published its first streamlined financial statements for the year ended 30 June 2014.



Wesfarmers started the process of streamlining its financial statements in October 2013. A team comprising senior managers and staff developed draft versions of the streamlined set of financial statements. This involved rephrasing, removing and relocating information. Different versions were presented to various departments within the company, as well as its audit and risk committee. Throughout the process, the team maintained an open dialogue with committee members and departments, addressing questions about proposed changes. To reduce risks, senior managers decided the development of the streamlined set of financial statements would run parallel with the preparation of the customary financial statements.


To ensure that the streamlined financial statements addressed the information needs of Wesfarmers’ investors, the team reviewed queries sent to the Investor Relations team, considered questions raised at annual general meetings and looked at feedback received during discussions with institutional investors, retail investors’ representative bodies, regulators and auditors.



The team grouped the notes into six key sections – Key numbers, Capital, Risk, Group structure, Unrecognised items, and Other. This aimed to help stakeholders better understand the structure and location of information in the company’s financial statements. The excerpts from the 2013 and 2016 financial statements in Figure 1 illustrate this change.


The team also added a section called “About this report” immediately after the primary financial statements2. In this section, Wesfarmers explained the basis of preparation of its consolidated financial statements, identified where information about key judgements and estimates could be found and described how information in the notes was organised (Figure 2).


The section “About this report” also included information about the most important transactions during the reporting period in order to give them greater prominence in the financial statements (Figure 3).




The team believes that a series of small changes made throughout the financial statements, highlighting relevant matters and communicating them clearly and concisely, has made a huge impact overall. The following paragraphs describe some of these changes.


The team relocated information about the significant accounting policies, judgements and estimates into the relevant notes. The excerpts from the Inventories note in Figure 4 illustrate these changes.


The team gathered feedback from analysts and investors to understand what information they found relevant when analysing Wesfarmers and similar companies. As a result, the team learnt that investors had not raised questions about the company’s pension plan in recent times. In addition, Wesfarmers assessed the information arising from the pension plan, and concluded that it was immaterial and that there was no need for a separate Pension note.


The team also merged disclosures that were previously presented in separate notes to help investors understand the relationship between different pieces of information. For example, the 2013 financial statements presented disclosures about contributed equity, retained earnings and reserves in separate notes. The 2016 financial statements combined information on these three notes into one note called “Equity and reserves” (Figure 5).


Wesfarmers redrafted the description of new and amended accounting standards using simpler language and formatting that helped investors understand their relevance to the company. The excerpts from the 2013 and 2016 financial statements in Figure 6 illustrate this change.


In addition to the changes above, the team also introduced the use of:

  • Symbols to refer to information placed in other parts of the financial statements, thus avoiding repetition (Figure 7), and
  • Charts and other graphics to present data-intensive information more clearly (Figure 8).



The process produced clearer and more concise financial statements, which resulted in a reduction in the number of questions addressed to the Investor Relations team. Questions that were asked were more focused than those raised before the streamlining process was undertaken. Wesfarmers received positive feedback from retail investors immediately after the first set of its streamlined financial statements was released. Wesfarmers also noted that the process has attracted good reviews from the company’s auditors, who say they find the streamlined financial statements easier to read and review.


The process has also led to a significant reduction in the amount of time spent preparing financial statements. As a direct consequence, Wesfarmers’ accounting staff are available to work on other internal projects, and better support the company’s financial management function.


The major challenge for Wesfarmers is maintaining a degree of comparability to financial information provided by other companies, in order to enable investors to benchmark the company against its competitors.



Wesfarmers believes that its process was most successful in reducing duplication and redrafting particular disclosures to make them clearer and more concise.


To assess what information would be useful to investors, the team asked other departments within the company about the information they typically provided for the preparation of the company’s financial statements. However, the team also said they could have involved these departments more actively at the start of the process, by asking them more directly about the ways in which they would streamline the information in the financial statements for which they had direct responsibility.



Wesfarmers says it will continue to seek improvements in the quality of the company’s financial statements by incorporating feedback from investors and senior managers. The company aims to extend the streamlining efforts to other parts of its annual report, such as the remuneration report.


Wesfarmers also intends to explore how to make its financial statements more comparable with its peers’, thereby making it easier for investors to analyse the company relative to other companies. It may also consider working towards a fully digitised, interactive annual report.



This is an edited version of a case study from the IFRS Foundation Disclosure Initiative – Case Studies, “Better Communication in Financial Reporting: Making disclosures more meaningful”, October 2017. Reproduced with permission. Additional reporting for this article was provided by Corporate Reporting & Ethics, ISCA.


1 The Discussion Paper suggests seven principles of effective communication. According to these principles, information provided should be entity-specific, simple and direct, better organised, better linked, better formatted, free of duplication and should result in enhanced comparability.

2 The Discussion Paper “Disclosure Initiative – Principles of Disclosure” suggests using the term “primary financial statements” for the following statements: financial position, financial performance, changes in equity and cash flows.