The clarity of fullness : an exploration of the disclosure of uncertainty in financial statements

This thesis examines the reporting of uncertainty in financial statements. This is an increasingly important issue for accounting policy-makers as they seek to create financial statements that reflect the substance and economic reality of events in an uncertain world. Several currently proposed disclosures of uncertainty are examined. They comprise the disclosure of the uncertain nature of financial statements and the disclosure of the uncertainty surrounding estimates of assets and liabilities. Drawing on theories of decision-making under uncertainty, the thesis adopts an experimental approach to the exploration of the effect of these disclosures on the perceptions confidence of users of financial statements.

As a result of its origins in the current context of the reporting of uncertainty, the research findings are pertinent to the development of disclosures of uncertainty. The research finds that the disclosure of uncertainty matters. Moreover, the framing of such disclosure has an effect on perception and confidence. The characteristics of the reporting entity and perceptions of the reliability of financial statement items are also important influences on the impact of such disclosures. The thesis concludes by suggesting that the clear disclosure of uncertainty leads to a fuller view of the reporting entity