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IFRS covers more than half of the world’s GDP: Hans Hoogervorst

Following the release of the converged standard on revenue recognition, International Accounting Standard Board (IASB) chairman Hans Hoogervorst gave a speech at a conference in Singapore, in which he highlighted the current use of the International Financial Reporting Standards (IFRS) around the world.

In his speech, Hoogervorst said it was fair to say that the spread of IFRS around the world was an astonishing success as in 10 years it expanded to all corners of the world.

"Although some big economies are still missing, the countries where IFRS is used already cover more than half of the world's GDP," he said.

In the past 18 months the IASB has been collecting evidence of IFRS use from around the world to get a fuller picture of how wide spread the international standards are and how they are used. This resulted in the publication of 130 jurisdictional profiles.

"The first conclusion we can draw is that of these 130 jurisdictions, 105 require the use of IFRS for all or most companies, 14 more permit the use of IFRS in their jurisdiction," Hoogervorst said. "What is more important is that of these adopters, only a few have made modifications to IFRS."

Mostly, such modifications are very small and are meant to be temporary arrangements in the migration from national generally accepted accounting principles (GAAP) to IFRS, he continued.

Hoogervorst attributed this 'success story' to the fact that each stakeholder could find his own benefit in adopting IFRS. "For Europe, it was simple: they could not have a single financial market with 20 different accounting languages," he explained.

While many emerging countries saw IFRS as an easy way of enhancing the international credibility of their financial markets, he continued. "World leaders saw it as a logical underpinning of the global economy. For multinational companies the use of one single financial reporting language for both internal and external reporting is simply cost efficient."

Complex economy calls for complex reporting

In the second part of his speech, Hoogervorst discussed the IASB's work programme and revealed that in his numerous travels around the world he often hear people complain about the increasing complexity of financial reporting.

With financial reports becoming lengthier people complain that the real message is getting drowned in excessive disclosures, according to Hoogervorst.

"I fear that most of this complexity is a reflection of an increasingly complex economy," he replied. "If we really want simple reporting, we should do away with derivatives, defined benefit pension schemes should go out of the window, companies should stop dressing up liabilities as equity instruments, insurers should stop mixing insurance with investment products and the list goes on..."

This won't happen and therefore things have to be done to make complexity more manageable, Hoogervorst continued.

In that sense, he concluded his speech saying that the IASB will continue its work to do its part in making "disclosures less indiscriminate and more meaningful".

Related article:

IASB and FASB issue converged standard on revenue recognition

Related links:

Hans Hoogervorst's full speech

IFRS Foundation and the IASB

 

 

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