WHAT NOW for international financial reporting standards? Addressing the ICAS conference, vice-chairman of the International Accounting Standards Board Ian Mackintosh seemed bowed by the weight of potential projects awaiting the IASB.
Several times, he questioned whether the IASB should wait for the US to come on board – effectively pursuing the convergence agenda – or focus on finishing the standards regardless.
On insurance, he said standard setters “are in a bit of a muddle” as the US disagrees with the IASB’s direction of travel and “are at a different stage” in their own standard.
US standard setters the FASB are “on a different page” when it comes to the financial instrument standard and “seem to be heading in a different direction” on hedging, a project the IASB has almost completed.
Is this an indication that the IASB is tired of waiting for the US to fall in line, and will instead prioritise completion of major outstanding projects?
“Even if we don’t achieve convergence, we have more than 120 countries already signed up to IFRS, and we must look to our future responsibilities,” he said.
These could include conceptual frameworks, research, post-implementation reviews and “big-picture thinking” on how IFRS fits with developments like integrated reporting.
With so much on his plate, perhaps it is small wonder Mackintosh seems tired of the convergence agenda.
But he shouldn’t feel too despondent. Barclays’ head of financial reporting Hugh Shields remains convinced by global vision, telling delegates: “Only principles-based standards can meet the needs of both business and public interest.”
Rules-heavy regimes such as US GAAP “add complexity and encourage financial engineering”, he suggested, saying it is harder to deviate from a strongly-based principle.
But there are some conditions for success. Continued training is needed “to avoid breeding young accountants who like ticking boxes”. Professionals should be encouraged exercise judgement and take responsibility for it, and above all, “to look at the big picture”.
Regulators also have a role to play, Shields warned, saying they must be willing to accept less-than-perfect comparability because “accounting is not a science”.
Mackintosh might take comfort from Shields’ unwavering support, but the IASB still has a long and potentially lonely road ahead.
Does Darwin's theory apply to taxation? Colin ponders...
Improvements to cashflow statements are being targeted in a consultation launched by the Financial Reporting Council (FRC)
Colin comments on the effect of Brexit on the influx of partners at KPMG
Dr Richard Willis provides a several thousand-year history lesson of the profession, from origin to modern-day