The International Accounting Standards Board (IASB) has asked the industry to provide feedback about its future priorities, as Europe pauses before implementing fair value standards and the standard body awaits a decision from the US about adoption of International Financial Reporting Standards (IFRS). IASB chairman Hans Hoogervorst stated this week that the consultation comes “at an important point in time,” when the markets are evolving and big decisions are being made.
Hoogervorst explained: “I see this agenda consultation as a great opportunity to discuss ‘what next?’ openly with all those interested in and affected by financial reporting. What do you think should be our broad strategic direction in setting our work plan and to which projects and areas of financial reporting should we give priority when allocating the limited time and resources available?”
He noted that the aim is to understand the industry’s priorities and needs across the globe, thus enabling a work plan to be set in place. However, given the potentially competing requirements from different countries, it will be a tough balancing act for the IASB to reflect all these views in such a wide ranging plan.
But, the idea is indeed to garner as much input from as broad a spectrum as possible, as noted by Hoogervorst: “This agenda consultation asks deliberately open ended questions in order to seek broad input. I urge all those that are directly and indirectly affected by financial reporting to get involved.”
Hoogervorst also conceded that the European decision to pause before implementation of IFRS 9 and the US delays are likely down to a desire for a “stable platform. Despite pressure from the IASB to move forwards, the European Commission has indicated that it wishes to hold off on implementing mark to market rules until the rest of the IFRS 9 standards are finalised. EU Internal Market Commissioner Michel Barnier stated this month that the pause will allow firms in the region some respite from the potential cost of convergence with the US accounting rules and for the final aspects of IFRS to be determined.
The US Securities and Exchange Commission (SEC) has also been delayed in indicating whether it will go for full adoption of IFRS over the next few years. In June last year, SEC chairman Mary Schapiro indicated that the regulator would be kicking off research efforts into how best to move the US from Generally Accepted Accounting Principles (GAAP) to IFRS over the next few years, but she has yet to indicate final approval and any kind of timeline for adoption.
In the meantime, the aim of the IASB consultation is to make the standards setting body more accountable and to keep it in tune with the industry’s requirements. To this end, the accounting standards setter is looking to see whether the industry has been experiencing any difficulties in IFRS implementation and financial reporting structure changes.
The two main open ended questions from the IASB are: “What do you think should be the IASB’s strategic priorities, and how should it balance them over the next three years? What do you see as the most pressing financial reporting needs for standard setting action from the IASB?”
These are tempered against more practical questions such as whether some projects that should be prioritised in light of the industry’s requirements and whether the five main strategic areas identified by the IASB are the right ones.