IFRS "Maturing" as 10th Birthday Approaches

by FEI Daily Staff

Nearly a decade after the adoption of International Financial Reporting Standards (IFRS) in the European Union, the vice-chairman of the International Accounting Standards Board (IASB) said despite some unfinished work, the framework is providing accounting benefits worldwide.

Ian Mackintosh, speaking Monday in London, said IFRS provides a consistent accounting framework that has been implemented nearly globally, and has played an important role in fostering international business growth.

"Today, IFRS means that the outlook for financial reporting is the same for most countries in the world, Mackintosh said. "Accounting is on the cusp of becoming the world’s first global profession, largely thanks to IFRS. This is remarkable progress in little more than a decade."

Global Acceptance

Mackintosh said IFRS has been adopted nearly globally, and used by all or most publicly listed companies in 114 countries. IFRS is the predominant reporting language for most global industry sectors, and has been adopted by 52 percent of the Global Fortune 500 companies.

Which is not to say the foundation's work is complete, according to Mackintosh.

"We cannot ignore the fact that the remaining one-fifth of countries includes some very large economies, such as China, India, Japan and the United States. However, even here we continue to see good progress towards IFRS and global standards."

Even in nations without full-scale adoption, Mackintosh said IFRS is influencing financial reporting. Chinese Accounting Standards, for instance, are similar to IFRS, and many Chinese companies use IFRS for dual listings in Hong Kong.

India is transitioning to new accounting standards based on IFRS, and Indian companies have the option of applying full IFRS. IFRS is also optional in Japan, and many large companies have adopted the framework to promote comparability with global competitors.

In the United States, Mackintosh said, the IFRS filings of nearly 500 international companies with U.S. listings are overseen by the U.S. Securities and Exchange Commission.

Standard-Setting Collaboration

In his remarks, Mackintosh also praised the collaboration among international accounting standard-setters that resulted in IFRS, as well as ongoing convergence efforts.

He cited IASB's work with the U.S. Financial Accounting Standards Board (FASB), which began 12 years ago and resulted in converged standards for segment reporting, business combinations, fair value measurement and, earlier this year, revenue recognition.

"It is clear that the convergence program has significantly contributed to the quality of financial reporting globally, even if the model does not always deliver the perfect outcome," Mackintosh said. "The last of the convergence projects is lease accounting. We are working hard to achieve convergence in this project. We should issue a standard in the first half of next year and time will show what degree of convergence we will have achieved."

Looking Ahead

As the convergence effort winds down, Mackintosh said IASB will hold an agenda consultation with stakeholders next year to determine plans for the immediate future.

While some stakeholders are asking for a calm period after a decade of intensive change, Mackintosh said IASB plans to focus on targeted improvements to IFRS implementation. Work remains on lease accounting and insurance contracts efforts, and IASB is conducting research projects on business combinations under common control, foreign exchange, income taxes, share-based payments, and other topics.

IASB also plans to prioritize consistent implementation among IFRS users.

"It is incumbent on standard-setters, regulators and the accounting firms to work together to improve consistency in the implementation of our standards."