RegulationAccounting StandardsLess is more on IFRS

Less is more on IFRS

Having worked with US and IFRS accountants for a number of years I believe that the best way to see the difference is to observe the results.

Those who live and breathe US GAAP spend more time debating the question
‘which piece of literature is required to be applied?’.

By comparison, aficionados of IFRS spend more time debating ‘how do we
communicate best with what the literature permits?’.

I know which of these groups I want to be associated with ­ debates about
which piece of literature may apply seem a pretty poor use of the time of very
bright professionals.

The increasing volume of IFRS literature is an important source of increased
complexity in corporate reporting. But if unchecked, it risks us all falling
into habits we will later regret. And this is one of the reasons that the
Financial Reporting Council has launched a project to reduce the complexity,
which is a brave aspiration.

But it is unfair just to blame accounting standard setters and their
regulators when the creation of much of this additional literature was strongly
supported by companies, auditors and others.

Comment letters from con-stituents almost always call for more detail. Also,
every time there is a crisis of confidence ­ just like we are experiencing over
the credit crisis, prospects for lower growth, and perhaps recession ­ lots of
groups are formed to find solutions.

Unfortunately, history tells us that too often an easy target for action is
to add to the content of annual reports, whether merited or not, and today’s
agenda looks little different.

So how do we develop a culture that enables us to keep a focus on outcomes
that support top quality company communications with investors and other
stakeholders?
There are lots of things that can be done.

One strand is that we all need to help the IASB improve rather than increase
IFRS.
When you next write a comment letter to the IASB about one of its exposure
drafts, remember to ask yourself: what could be deleted; is there a way to
express requirements more concisely, and can detailed guidance for narrow areas
of accounting be avoided?

Improved clarity is often best achieved by deleting or amending a word or
sentence.
And lessons for today’s stressed environment?

It is more important than ever to focus on improving quality rather than
adding volume ­ less is so often more.

Ian Wright is director of corporate reporting at the
Financial Reporting Council

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