Given the magnitude of the change-over to IFRS, overall the transition has
gone relatively well, with no real big surprises or shocks so far. But the
transition hasn’t been painless.
A huge amount of effort has been put in to make this happen. The learning
curve has been steep – perhaps not surprisingly, given the many new and revised
standards in a relatively short period of time and the coordination efforts
Consistency of application will remain the main challenge. It doesn’t mean
identical application in every case, but having an acceptable answer within the
boundaries of the standards for each particular case.
Consistency will improve as we move from the transition phase into a more
steady state – as the current set of standards become more familiar and the
emergence of new issues slows down.
Peer comparisons within industry will begin to take place now that many first
IFRS statements have been published. This benchmarking should help with best
practice. Analysts are expected to drive this process, but it will not all
Key to consistency will also be how the regulators approach enforcement. Some
regulators are involved in pre-clearance, which may assist consistent
application within a particular country, but runs the risk of creating local
interpretations and inconsistencies.
The efforts by CESR and IOSCO to coordinate their enforcement decisions,
through discussions and shared databases at EU and international level, are
therefore very much needed and welcome.
The principles-based nature of IFRS can be maintained only if a degree of
judgment in application continues to be allowed for.
This may be a challenge in environments where traditionally emphasis has been
placed on strict application of detailed guidance to achieve comparability in
one single jurisdiction.
Second-guessing judgments made in good faith, in areas where IFRS allows room
for judgment, would be detrimental to a principles-based system and lead
inevitably to a more rules-based approach.
The IASB also plays an important role. Its work plan, while recognising the
need for stability, envisages a number of changes, mainly emerging from
short-term convergence projects.
We would like to see the IASB take time to consult on some of the more
fundamental questions that will significantly impact on the direction of future
standard setting. Its planned consultations are the right steps.
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