Australian FRC Chairman comments on global standards, floats idea of regional regulatory database
The Australian Financial Reporting Council (FRC) has published the text of a speech given by Ms Lynn Wood (FRC Chairman) to the 6th IFRS Regional Policy Forum held in Kuala Lumpur, Malaysia, on 26-27 March 2012. In the speech, Ms Wood comments on topics such as the possible adoption of IFRS in the United States and the steps needed by regulators to ensure global consistency in accounting standard interpretation, including the possible need for an enforcement database for the Asia-Pacific region.
Ms Wood began her speech with an endorsement of IFRS as the global standard, noting "with the current pace of globalisation, the movement to a global set of accounting standards is a logical transition". She did however note two key challenges: the uncertainty as to whether the United States will adopt IFRS and the consistent application and enforcement of IFRS across jurisdictions.
In relation the adoption of IFRS in the United States, Ms Wood noted:
To not have the US adopt IFRS would significantly impact global comparability of financial performance. Moreover, it would limit to some degree the expertise available to develop IFRS in the future.
Ms Wood then moved onto the role of international regulators in "working towards a global set of accounting standards". Ms Wood sees that regulators should participate in the standard-setting process both through the IFRS Monitoring Board and comment on specific proposals. She however focused on the need for regulators to work towards global consistency in interpretation. She sees a strong role for regional regulators such as ESMA (for the EU region) and IOSCO (on a global scale) to coordinate enforcement action between the national regulators.
Ms Wood discussed the ISOCO database of enforcement decisions, and a similar database coordinated by ESMA for the European region - which she sees as a "useful source of information for standard-setters". She further commented about the possibility of a similar database for the Asia-Pacific region:
Europe as a region has in place some good initiatives that we in the Asia-Pacific region should consider. AOSSG was created as a platform for jurisdictions within our region to discuss issues such as IFRS... It would arguably also be beneficial for our region to have our regulators establish a database, or contribute to that of IOSCO, in a way that member countries can share the experiences of IFRS…in particular to share cases where judgment calls have to be made for interpretation of IFRS. That way, we can ensure that we, as a region, are consistently applying IFRS, and that any inconsistencies are immediately detectable and can be raised as an issue to the IASB.
The speech also included discussion of the G20 and Australia's approach to setting the accounting standard framework.
The full text of the speech is available on the FRC's website. See also our summary of the outcomes of the 6th IFRS Regional Policy Forum.