IFRS in Europe – An Observer's Perspective of the Next 10 Years

Abstract

What follows is a personal reflection on the challenges that may face the International Financial Reporting Standards (IFRS) Foundation in the next 10 years, and is based on two conference presentations and the debate at those conferences. The suggestion is that the character of the members of the International Accounting Standards Board (IASB) in its second decade is different from that of the founding board, and is more pragmatic than crusading. It is mooted that the board will need to address second-order issues of the organisation and policy, and that Europe will try to take a more influential role. The article observes that existing issues of funding, complexity and differential reporting may become more urgent and will need to be addressed for the organisation to continue to evolve.

Keywords:

• IFRS
• EFRAG
• European Union

Acknowledgements

I am grateful to Carien van Mourik (Open University), and Paul André (editor, Accounting in Europe) for comments on an earlier draft.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 I underline that much of what I write is personal opinion unsupported by research evidence or third-party academic analysis. I do not apologise for that, because I believe there is a role for analysis and informed opinion in areas that are not susceptible to be researched and that can feed eventually into research, provided the subjective nature of the analysis is made clear. However, it would be a legitimate question to ask on what basis I have reached these opinions. I should disclose that in my professional writing career which has run parallel to my academic career I have since 1997 been editor of World Accounting Report, a technical bulletin published 10 times a year by Informa, and in that capacity have had the opportunity to talk with many policy-makers in international accounting. I was also chairman of the EAA's Financial Reporting Standards Committee from 2010 to 2015. I have sat in the observers’ gallery at the IASB for most of its meetings.

2 This draws on chapter 11 of Walton (2011)

3 The G4+1 was an informal grouping of Anglophone standard-setters (Canada, Australia/New Zealand, USA and UK with representatives from the International Accounting Standards Committee – IASC). It was founded in the early 1990s (Camfferman & Zeff, 2015, p. 13) and disbanded in 2001 (p. 33). At the time, it was viewed as a possible rival to the IASC, but also as a vehicle to pressurise the IASC towards Anglophone standards. Street and Shaughnessy (1998) provide an analysis of its evolution. They say that the IASC started meeting with standard-setters in 1991 and the FASB organised a meeting in 1992 from which the G4+1 crystallised.

4 The Accounting Regulatory Committee plays a key role in the endorsement of IFRS into EU law. It is a committee of permanent representatives of EU Member States, of which a two-thirds majority is needed to agree to endorse an IFRS. For a detailed account of the endorsement process and the potential flaws in it, see Walton (2009b). The accounting policy note where companies refer to ‘IFRS as approved for use in the EU’ refers to IFRS endorsed by the Accounting Regulatory Committee.

5 The Accounting Standards Advisory Forum (ASAF) is a new committee under the umbrella of the IFRS Foundation. Politically, its function is to provide a new focus for convergence following the end of the programme with the FASB. Founded in 2013, the ASAF has 12 members, of which three each are nominally from Europe, the Americas and Asia-Oceania, one from Africa and two from any part of the world. In practice, EFRAG, representing Europe, and the two regional groupings that the IASB has created for Latin America and Asia-Oceania, have been members from the start, and are likely to remain permanent members as representing a wider community of national standard-setters.

From 2015, the European membership is EFRAG plus the national standard-setters from Germany, Italy and France. The Americas are represented by the Group of Latin-American Standard-Setters (GLASS), Canada and the USA. Asia-Oceania is represented by the Asian-Oceanian Standard Setters Group (AOSSG), Japan, China and Australia.

In principle, national standard-setters can put forward ideas in this forum, and the IASB discusses its work in process. The aim is to enhance cooperation with national standard-setters and to identify difficulties in application ahead of standards being issued as well as keeping the IASB in touch with emerging issues at the national level.

6 For example, if you translated ‘liabilities’ into French, you might come up with ‘dettes’. However, if you translated ‘dettes’ into English, you might be tempted to translate it as ‘debts’. This is not a big difference, but potentially unsettling for the uncertain analyst and appears to introduce inconsistency. I have heard the explanation that Swiss French accounting technical terms are different from French terms because the rules are debated in German, and the terms are then translated in to French for francophone Switzerland.