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IASB must change to safeguard the future of IFRS

Over the past year, despite the efforts of the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) to converge their respective financial reporting rulebooks, it became increasingly evident that making a decision about the potential future adoption of IFRS in the US was not top of the US Securities and Exchange Commission's agenda. Not so strange, of course, given the Presidential election and the challenge of implementing Dodd-Frank.

However, as there currently is no clarity over how or when the US may make a move, some ask 'what next for IFRS?' And that is exactly the question ICAEW has sought to answer in a major report published this week, entitled The Future of IFRS. We've looked from an international perspective at what has been achieved so far and what the current barriers and challenges are.

And one thing that is clear is that the importance of a global financial reporting language has in no way diminished. The move to IFRS has been transformational for international investors. More than two thirds of the G20 countries have now adopted or allow IFRS reporting.

One of the biggest challenges still to be overcome is turning the IFRS Foundation into a truly global organisation, able to respond in an effective way to the demands of its many stakeholders. As membership of the 'IFRS family' increases, it is quite possible that those demands may start to compete in some areas, and it is here the IASB will have to demonstrate clear leadership and vision.

This challenging next phase will simply not be possible unless the funding system for the IFRS Foundation is established on a secure and sustainable basis, and this will require commitment from the G20 countries, who should take on their shares of the funding required.

There is no easy path to follow in creating an effective international standard setter. This hasn't been done before. It will require a certain amount of experimentation. The IASB must look to continue to engage, evaluate and evolve.

More specifically, now is the time for the IASB to end the era of convergence, and to go it alone on significant outstanding projects like financial instruments. This is not to say that there should never again be efforts to align IFRS and US GAAP, merely that such harmonisation should only be undertaken if it will significantly improve IFRS; otherwise separate standards should be published.

The time has come for the IASB to be seen to concentrate very clearly on those countries that have chosen to use IFRS and to ensure that future efforts demonstrably improve matters for its constituents. This will mean focussing on some areas of IFRS in need of urgent improvement , such as how company performance is reported.

At the same time, we should not lose sight of the fact that the quality of the current suite of standards, while far from perfect, is generally good.

In a similar vein, we may well need to accept that 100% uniformity of implementation across the globe is not possible. The point of a global financial reporting language is surely not uniformity at all costs, but to ensure that financial reporting facilitates, rather than hinders, global investment and trade. To this end, the IASB should aim to minimise complexity wherever possible. Not only does this help those applying the standards and using IFRS reports, it is also possible that the complex nature of some standards serves to discourage some countries still hesitating about IFRS adoption.

The IASB has a hard job to do, but not an impossible one if governments, regulators and others play their part. In today's economic climate, enabling global investment and trade is absolutely vital, and the central role of the IASB in this endeavour needs to be recognised and supported. But it will require change, and that process needs to begin now.

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