Entitled Survival or Success: 10 Issues for 2010
, the report represents a collaboration among the governance teams from 11 Deloitte member firms. It describes 10 key issues for boardrooms to consider in the New Year. Click to download Directors' Alert: 10 Issues for 2010
(PDF 244k). One of those key issues is mastering the new financial lingua franca
– the linga franca being, of course, Internatonal Financial Reporting Standards.
The question for many boards is: how well do they 'speak' the new financial lingua franca? Mastering IFRS, just like learning a new language, poses a number of challenges:
- Does the board understand all of IFRS' subtleties? Board members may understand the individual 'words' and concepts but still not interpret them as intended.
- Is the board practicing the new language? Directors may study the new standards but if they continue applying the old financial reporting standards while believing that all accounting frameworks are similar, their transition to IFRS will not become a reality.
- Are we making IFRS easier to apply by making greater use of them? When everybody – the board, management and other stakeholders – all 'talk' in terms of the new standards, their application will be quicker and more effective.
- Do we think directly in terms of IFRS or just how they differ from the old standards? Shifting conversations to focus solely on IFRS forces people to leave their comfort zones, but it may also make for a much more efficient transition.
Directors who oversee financial reporting must familiarise themselves with the new accounting framework as soon as possible. Audit committee members have an additional concern: many jurisdictions require them to be 'financially literate', which will mean being literate in an IFRS world. It is likely that many directors will need to upgrade their skills under an IFRS regime. This Alert suggests some steps directors can take take to help master the language of IFRS.