6th ANC Symposium on Accounting Research

  • Book badge (green) Image

12 Dec, 2016

On 12 December 2016, the Autorité des Normes Comptables (ANC), the French standard-setter, hosted its 6th Symposium on Accounting Research in Paris. We have prepared a report from the symposium that explored the general theme of "Accounting and performance".

The mainstay of the symposium were presentations of six research papers each followed by roundtables on the topic presented and key speeches summing up the discussions. In addition there were introductory views presented by IASB and FASB as well as a final roundtable on performance and the public European good. In addition to a high level French audience the event drew also eminent attendance from China, Germany, Italy, Japan, Korea, the United Kingdom, and the United States as well as many other countries and supra national organisations.

IASB and FASB views

Following introductory remarks by ANC Chairman Patrick de Cambourg, former IASB member Philippe Danjou and FASB member Larry Smith introduced the IASB and FASB views respectively. Mr Danjou expanded on the IASB's "better communication" initiative, which includes the primary financial statements project, the disclosure initiative, the IFRS Taxonomy/XBRL considerations, and also work on materiality. While touching on all of these, he concentrated on the question of performance reporting and the IASB's efforts around this matter, which according to him will hopefully lead to tangible improvements but will not lead to the definition of a single measure of performance. Mr Smith noted that the FASB has been struggling with financial performance reporting as well for a long time - first jointly with the IASB, later by himself and most recently in a new research project. He explained that different background of the Board members as well as Board member rollover had not made things easier but the FASB's agenda consultation had clearly revealed that in addition to the problem of differentiating equity and liabilities the comment letters had clearly stated that financial performance reporting is a problem users and preparers want to be solved.

Research papers

  • The first research paper was dedicated to non-GAAP financial indicators and the question of whether they are representative strategic governance. The paper is available in French original and English translation on the ANC website. After the roundtable discussing internal organisation and financial communication strategies of companies, key speaker Roger Marshall (UK FRC) came to a qualified defense of non-GAAP measures. He explained that he could see their value in removing misleading volatility, in explaining where management and board of a company disagree with where IFRS requirements take them, and in reflecting the business model. However, Mr Marshall maintained that to be effective non-GAAP measures need to have a clear rationale, must be properly reconciled to IFRS numbers, and there must be valid reasons if non-GAAP measures are changed from year to year.
  • The second research paper discussed the theoretical foundations of the accounting representation of performance in a stakeholder and territorial approach. A French version and an English translation can be accessed on the ANC website. After the roundtable discussing of who the users of financial statements are, investors or (also) other stakeholders, key speaker Andreas Barckow (DRSC, Germany) explained that there is no right and no wrong answer to the question which was at the same time a beauty and a challenge. According to him, territoriality also in the metaphorical sense of non-core financial information as for example sustainability information and non-GAAP measures certainly had its place, the question was simply whether that place was in international financial reporting as the question looms whether one can really serve different constituents at the same time. Questions from the audience concluded the lively debate.
  • The third research paper on the impact of accounting and prudential standards for financial intermediaries on long-term capital investment is again available in French and English on the ANC website. The roundtable discussed the question of whether the long-term perspective can or must be integrated. Key speaker Linda Mezon (AcSB, Canada) concluded the session by providing insights from the Canadian perspective. She explained that in Canada it is believed that one can only get so many uses out of financial statements, therefore financial statements in Canada are understood not to be "be all and say all". Rather, financial statements are seen as a starting point on which others can build. Ms Mezon added that even the new expected losses approach in IFRS 9 is seen by some as pushing too much into financial statements. She concluded that building too many expectations into financial statements bears the danger of making them not useful for anybody.
  • The presentation of the fourth research paper “Marking to Market versus Taking to Market” (French version and English translation) was followed by a roundtable that discussed alternatives to mark to market and relevance and fairness. Key speaker Wei Ying (MoF, China) contributed insights into the challenges regarding fair value measurement faced by emerging economies. She explained that strict market controls in China lead to a relatively small number of listed companies. Undeveloped market infrastructure with little depth and an imbalanced structure of less mature market participants lead to irrational investing behaviour of individual and institutional investors.
  • The fifth research paper used a study a sample of European companies over ten years to discuss performance measures and components of OCI and their volatility and impact (French version and English translation). The subsequent roundtable carried the discussion further and also included the aspects of usefulness and recycling. Key speaker Yasunobu Kawanishi (ASBJ, Japan) followed with a slide presentation on the Japanese view of OCI. He explained that the ASBJ views OCI as a linkage factor between net income and comprehensive income as the objective of the balance sheet differs from the objective of the income statement. He also noted that under this approach recycling of all OCI items is needed. Questions from the audience were asked of both, the key note speaker and the panel.
  • The sixth and final research paper was dedicated to recognising environmental issues in performance measurement. This paper is also available in French and English. The following roundtable took the issue further and discussed non-financial components in the measurement of performance in general. Key speaker Angelo Casò (OIC, Italy) rounded off the discussion by explaining the change of mind that has occurred and has led from a situation where companies were not held responsible for anything but their assets to a situation where people realise that risks outside of a company may well impact a company's assets and should be reflected. However, Mr Casò maintained that financial statements are addressed at investors. When investors request sustainability information or other non-fiancial information this becomes relevant for the markets and economic decision making and should be reported. It is then that non-financial information becomes financially relevant, but only then.

Final roundtable

A final roundtable, that also saw participation of IASB Chairman Hans Hoogervorst and EFRAG President Jean-Paul Gauzès, discussed performance and the public European good. The panelists provided a wide range of comments. ANC Chairman Patrick de Cambourg opened the floor for the discussion with the comment that accounting itself is not neutral and should therefore refer, as overarching guidance, to the public interest. EFRAG President Jean-Paul Gauzès maintained that the European voice, being the voice of a whole continent should be heard, but it should be heard in the context of the overall context of standard-setting and of its individual aspects such as for example impact assessments.

Erik Nooteboom from the European Commission noted that the EU does not and will not development its own standards, however, it would carefully weigh adopting each standard against its own "framework" that included the endorsement criteria and among them the European public good. However, he noted that it was difficult if not impossible to define "European public good", rather it would be made up of the whole range of careful considerations. IASB Chairman Hans Hoogervorst commented that he could not see that defining the European - and global - public good would be so difficult. The only ambition of the IASB would be would be to develop accounting standards that reflected as closely as possible economic reality so that investors around the world could make informed decisions. If this was not an immense public good, he wondered, what would be?

Mr Hoogervorst also added that the IASB had no power to force jurisdictions into adopting IFRSs - all jurisdictions including the EU had the free choice to withdraw from IFRS application which to his mind was an expression of full sovereignty - something which Erik Nooteboom wholeheartedly supported and which reflected an earlier comment Jean-Paul Gauzès had made that raising the European voice meant raising the voice of sovereignty.

Reacting to a question from the audience on whether sustainability reporting would be an expression of public good and whether the IASB had plans to embark on that, Mr Hoogervorst responded that taking that on at the current time was beyond the IASB's resources and expertise. However, he pointed out that the IASB was a member of the IIRC, observed developments close and could - in the long run - see updating the management commentary practice statement for guidance on how to integrate sustainability reporting and financial reporting into an integrated report as a possible solution.

Related Topics

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.