Partly this has been the IASB's fault. From a more or less standing start ten years ago it has had to invent its own way of dealing with its role and the way in which it attempts to fulfil it. There had never been an independent global standard-setter before and, from the outset, it simply did what seemed sensible at the time. There was no template, only trial and error.
But the real problem is that the IASB has also been, to an extent, the victim of history. Throughout its first decade it found itself often running to catch up with agendas dumped upon it by other organisations, some well-meaning, others less so.
When it was set up it inherited the efforts of its predecessor body, the IASC, which had been following a very different agenda while creating a mass of standards, including the infamous IAS 39 which dealt, somewhat haphazardly, with financial instruments. That standard, for example, came about just as the practices to which it was trying to bring effective disclosure were taking off at the speed of rockets and heading in an increasingly bewildering range of directions. Small wonder the standard struggled to keep tabs on the resulting developments.
So the first years of the IASB saw pressures from the stock exchange regulator, IOSCO, to bring the old IASC standards up to what IOSCO considered to be scratch.
Then, two years into its efforts, the IASB had the EU arrive on its doorstep to say that it wanted all listed companies in Europe to follow the IASB's standards by 2005. A rapid period of getting the standards into shape and ensuring that they were implemented properly took place.
Then, as part of the move towards acceptance of IASB standards for companies listed on US stock exchanges, a process of attempted convergence of IASB standards with US standards was started. As if that wasn't enough the roof then fell in with the global financial crisis and the IASB was charged with accelerating improvements in a raft of standards, including the old chestnut of IAS 39.
It is small wonder that whenever the dust did settle a bit, and the staff and Board members of the IASB peered out, they didn't necessarily have the time to sit down quietly and muse over the priorities and objectives of their future programme.
But now, ten years into their history, that time appears to have come. The new IASB Chairman, Hans Hoogervorst, is obviously one of those people blessed with being in the right place at the right time. Less than a month after taking over the job he is able to launch the first formal agenda consultation the IASB has ever offered and pen an official letter introducing the initiative and describing it as 'a great opportunity to discuss what next? openly with all those interested in and affected by financial reporting'.
And it also allows Hoogervorst to emphasise the need to internationalise the IASB's efforts. 'After a decade of work', he points out, 'IFRS have become the undisputed international financial reporting language. As the IFRS community continues to grow it is also becoming more diverse'. So mentions of the Malaysian Accounting Standards Board's proposals on financial reporting for bearer biological assets crop up, as do Islamic, Shariah compliant, transactions and instruments. The conceptual framework and the disclosure framework are important but so too is the recognition that there are many emerging issues from jurisdictions around the world now moving onto IFRS.
And it also suggests that the review would 'consider what will be meant by financial reporting ten years from now, and what form financial reporting might take. Given the increased interest in integrated reporting, the growing importance of electronic reporting and the extended use of XBRL, one question would be: in what way should we and IFRS interact with these and other areas of integrated reporting'.
And it is equally important, as the consultation document says, to create 'a channel for formal public input on the broad aspects of our agenda-setting process.' This in turn will further enhance public accountability and legitimacy and so 'deepen the respect for, and viability of IFRS globally'. As Jeroen Hooijer, Head of the Unit on International Accounting, at the European Commission (EC), DG Internal Market and Services, pointed out recently: 'Acceptability of standards is linked to governance. Only a good standard bites'.
This is the first of a rolling programme of consultations on the strategic direction and overall balance of the IASB's agenda which will take place every three years. The years following this first consultation will see a growing importance for the IASB of ensuring the consistency and quality of the application of IFRS as they spread around the world. The degree of perceived openness when it comes to what goes onto future agendas will be a very important part of that.
Robert Bruce
July 2011
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