On 28 and 29 November 2017 the IASB held its annual Research Forum in association with the European Accounting Review and Accounting in Europe, both journals of the European Accounting Association. This year’s Research Forum took place in Brussels with the participations of 50 academics and 50 practitioners from various countries. On the first day, five academic papers were presented by the authors and after each presentation the papers were commented by two discussants, one from the academic world and one from the IASB. Following these discussions, all participants had the opportunity to ask questions and challenge the approach and the findings presented. The participants have actively done so and lively discussions took place on the different topics.
After some introductory remarks by an IASB member, the authors of the first paper presented an empirical study on the impact of the change of pension accounting on the investment decisions of affected companies in Germany. Specifically, they examined IAS 19R, which increased expected pension-induced equity volatility by eliminating the so-called “corridor method”, a smoothing device for actuarial gains and losses. Supported by interview evidence, the findings suggest that IAS 19R led companies to reconsider their pension investment decisions, shifting their pension assets from equity instruments into bonds, relative to control companies. Thus, the study analyzed some important “real” effects of accounting standards within the context of defined benefit pension plans.
The next agenda item was the IFRS Conceptual Framework and two presenters dealt with this topic. In the first paper, the authors identified gaps in the Conceptual Framework that according to their understanding are still present in the Exposure Draft currently discussed by the IASB. The authors argued that the Conceptual Framework does surprisingly little to help the IASB (or preparers) determine which assets, liabilities, income and expenses should be recognized, and how they should be measured. The Framework’s focus on assets and liabilities, the presenters continued, implies that the accounting can, and should, be determined from the balance sheet although many current financial reporting requirements focus initially on the income statement. In the second paper presented, the authors look at the mixed valuation and transactions approach to income determination that can be found in the current Framework Exposure Draft and critically point out that the Framework does not clearly choose between single or dual concepts of profit, which renders the Framework Exposure Draft’s financial accounting model somewhat incoherent.
In the fourth paper of the day, the authors analyzed conceptual problems in current accounting for deferred taxes. In order to make IFRS deferred tax numbers more relevant, they suggest, that deferred taxes should only be recognized for temporary differences that will result in actual future tax payments and/or tax receipts. The presenters critically dealt with the various exceptions in IAS 12 and further argued that a probability threshold should apply for both deferred tax assets and liabilities and that discounting should be introduced into deferred tax accounting. The first day of the Research Forum was concluded by a paper discussing the question, if more IFRS principles of disclosures would improve the currently sometimes poor disclosure practice. Based on a comprehensive review of the literature, the authors argued that introducing more principles of disclosure must be accompanied by a clarification of the role of the specific disclosure requirements in IFRS.
On the second day of the IASB Research Forum, no papers were presented but instead the participants were introduced to two topics that are currently on the IASB’s agenda and approached related questions by working on case studies. The morning was dedicated to financial instruments with the characteristics of equity and the participants were asked to discuss five examples. Among others, the questions to be answered were, what were the features of the respective financial instrument and if it should be classified as liability or equity. In the afternoon the participants tried to identify what is “interest” in EBIT and approached this question by dealing with seven scenarios.
This Research Forum was the fourth organized by the IASB. The fifth IASB Research Forum will take place in 2018 and be held in Sydney in association with the accounting journal Abacus.