Cost constraint on financial reporting
Standard-setters consider the costs imposed on preparers, users, auditors and others alongside the benefits of more useful information. The assessment involves judgement and may vary by type of entity or disclosure; it does not give a preparer a general licence to omit a disclosure required by an applicable standard because it is costly. The constraint operates alongside, not instead of, relevance and faithful representation.
Worked example
A proposed disclosure would require extensive new data collection but might help users assess a material risk. The standard-setter weighs those costs and benefits when developing requirements; a preparer must still follow requirements that apply.
Common mistake
Dropping a mandatory disclosure solely because management believes it costs more than it is worth, or treating all costs and benefits as precisely measurable.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |