BCZ391 In July 2004 the IASB published the Exposure Draft Financial Instruments: Disclosures (2004 Exposure Draft). As part of that project, the IASB considered whether it should require disclosures about capital.

BCZ392 The level of an entity's capital and how it manages capital are important factors for users to consider in assessing the risk profile of an entity and its ability to withstand unexpected adverse events. The level of capital might also affect the entity's ability to pay dividends. Consequently, the 2004 Exposure Draft proposed disclosures about capital.

BCZ393 In the 2004 Exposure Draft, the IASB decided that it should not limit the requirements for disclosures about capital to entities that are subject to external capital requirements (for example, regulatory capital requirements established by legislation or other regulation). The IASB believes that information about capital is useful for all entities, as is evidenced by the fact that some entities set internal capital requirements and norms have been established for some industries. The IASB noted that the capital disclosures are not intended to replace disclosures required by regulators. The IASB also noted that the financial statements should not be regarded as a substitute for disclosures to regulators (which may not be available to all users) because the function of disclosures made to regulators may differ from the function of those to other users. Therefore, the IASB decided that information about capital should be required of all entities because it is useful to users of general purpose financial statements. Accordingly, the IASB did not distinguish between the requirements for regulated and non-regulated entities.