The directors of Lizzer, a public limited company, have read various reports on excessive disclosure in the annual report. They have decided to take action and do not wish to disclose any further detail concerning the two instances below.

(i) Lizzer is a debt issuer whose business is the securitization of a portfolio of underlying investments and financing their purchase through the issuing of listed, limited recourse debt. The repayment of the debt is dependent upon the performance of the underlying investments. Debt holders bear the ultimate risks and rewards of ownership of the underlying investments. Given the debt specific nature of the underlying investments, the risk profile of individual debt may differ. Lizzer does not consider its debt holders as being among the primary users of the financial statements and, accordingly, does not wish to provide disclosure of the debt holders’ exposure to risks in the financial statements, as distinct from the risks faced by the company’s shareholders, in accordance with IFRS 7 Financial Instruments: Disclosures.

(ii) At the date of the financial statements, 31 January 20X3, Lizzer’s liquidity position was quite poor, such that the directors described it as ‘unsatisfactory’ in the management report. During the first quarter of 20X3, the situation worsened with the result that Lizzer was in breach of certain loan covenants at 31 March 20X3. The financial statements were authorized for issue at the end of April 20X3. The directors’ and auditor’s reports both emphasized the considerable risk of not being able to continue as a going concern. The notes to the financial statements indicated that there was ‘ample’ compliance with all loan covenants as at the date of the financial statements. No additional information about the loan covenants was included in the financial statements. Lizzer had been close to breaching the loan covenants in respect of free cash flows and equity ratio requirements at 31 January 20X3. The directors of Lizzer felt that, given the existing information in the financial statements, any further disclosure would be excessive and confusing to users.

Required:

Discuss the directors’ view that no further information regarding the two instances above should be disclosed in the financial statements because it would be ‘excessive’.