In my previous post on proposed auditor communication changes, Lynn Rees pointed out that there doesn’t seem to be a disclosure that investors don’t like. His post brought two things to my mind. The first was post from Rob Bloomfield a few months ago about how beliefs about hypothetical use and actual use of information can differ. It seemed particularly relevant here and I think bears repeating. CLICK HERE TO VIEW IT

Second, I also recalled a funny comment letter I read in the 2,800+ for the proposed Financial Instruments ASU in May 2010. The letter was from an unaffiliated party and contained a simple question “why do you even bother soliciting comments on this when you know exactly what each party will say?” Of course it was phrased in less elegant terms. I do think it works in both directions: investor groups proclaim that every incremental disclosure is hugely beneficial and preparers proclaim that every disclosure will cost millions of dollars and take three years to implement. It reminds me of the story of the boy who cried wolf. Every disclosure has a true cost and benefit but how can we tease those out of the conjectures? If the answer is we cannot, then how are we performing an analysis on cost-benefit constraints of new disclosures?

The good news is that taken together, investors and preparers may balance each other out to some degree in standard-setting. On the surface, the PCAOB has indicated a preference for serving investor needs and rightfully they should. But the danger is in assuming that what investors say will serve them accurately portrays what will actually be of use to their decisions. An auditor discussion and analysis section is proposed because the audit opinion has become boilerplate. But a disclosure framework is being proposed partially because management’s discussion has become boilerplate. There seems to be a pattern of recurring solutions to recurring problems. Not that some benefit can’t come from those solutions, but do those benefits justify the associated costs and efforts?