Foreword to IFRSs in your Pocket 2007

It is a difficult time to be a member of the IASB. The Board must at times feel that they are attempting to construct a house on shifting sands. The solid ground on which they have previously anchored their efforts is gradually eroding – as the basic principles of the Framework are redebated. As keen observers, we do not underestimate their predicament.

But we do believe that predicament is aggravated by a degree of disarray in the management of the current agenda. We consider that the ultimate objective for the Board should be clear – the development of a cohesive body of principle-based Standards. We are concerned, however, that a number of the proposals emerging from the Board's recent deliberations do not seem to achieve real progress toward that objective. In fact, some of those proposals would undermine Standards (such as IAS 1 and IAS 37) that are operating satisfactorily within the current accounting model and environment and would, in our opinion, lead to inferior Standards. The underlying cause for this situation, we believe, is the pressure imposed by the Board's short-term commitments under the Roadmap for Convergence with US GAAP and the related IASB/FASB Memorandum of Understanding.

We at Deloitte are committed supporters of the convergence efforts of the world's national accounting standard setters, and the IASB and FASB in particular. While we support this process, we have significant reservations about the IASB's approach to its 'short-term convergence' agenda. Convergence should always be to the highest-quality solution – and the Board must, in all cases, demonstrate (not merely assert) that there is conclusive evidence that the approach chosen is the highest quality solution. A recent example of the Board's failure to meet this obligation is the elimination of the option to expense all borrowing costs. There had been practically no conceptual debate, and a solid rejection of the proposals by respondents to the Exposure Draft – and yet the Board has proceeded with its proposals in order to meet its Roadmap commitments. Clearly, the MoU is a highly influential planning document – one that received no public debate.

In moving forward, we believe that the Board's highest priority should be the progression of the new Conceptual Framework. We acknowledge that there will be projects that cannot wait until that Framework is finalised, and that there will be a need for interim 'fixes' in some areas. But the Board needs to approach these with care and avoid undermining Standards that, while they might not be perfect, work well enough until those building blocks are in place.

Ken Wild Global IFRS Leader Deloitte Touche Tohmatsu

We welcome the fact that the Board has taken this issue on to its agenda. The proposals in the Exposure Draft address a real concern that it may be impracticable to apply IAS 27 with full retrospective effect on transition. This is creating a significant barrier, in some jurisdictions, to the adoption of IFRSs for the separate financial statements of parent companies. Addressing the issue should therefore lead to wider use of IFRSs and reduced costs for companies because they will no longer have to prepare financial statements under local GAAP.