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Notes from the XVII World Congress of Accountants

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15 Nov 2006

The World Congress of Accountants is being held in Istanbul, Turkey, from 13 to 16 November 2006. There are 5,000 delegates from over 120 countries.

There are nearly 50 plenary and technical sessions. Presented below are notes from a number of the sessions on the second day of the Congress.

Notes from the XVII World Congress of Accountants

Istanbul, Turkey, 14 November 2006

 Plenary Session 1

The theme of the first plenary session of the Congress was generating economic growth and stability through the accounting profession in developing nations. The session was chaired by the incoming chair of IFAC, Fermín del Valle (Deloitte, Argentina). In his opening remarks, he spoke of the role of accountants in promoting development, noting that accountants influence development at all levels: as controllers, management accountants, executives, Board members, internal auditors, members of audit committees and external auditors.

Continuing the high-profile political speakers at the Conference, the Deputy Prime Minister of Turkey, Abdullatif Sener, stated that the accounting profession was an integral part of being able to access secure and reliable financial data. He referred to the various measures that Turkey had put in place as it seeks to join the EU, including the commitment to adopt IFRS and Basel II by 2008. He said that global harmonisation of accounting standards is very important for developing countries. Global standards will encourage international trade, enhance the ability to obtain capital, ensure rational allocation of resources, and compel management to act rationally. Thus, IFRSs will enable developing countries to obtain the benefits of globalisation. He noted that Turkey has committed to the IMF that it will adopt IFRSs.

Mr Rahman Kahn (Deputy Chair of the Upper House of Parliament, India) stated that the lack of accountability (both in the public and private sectors) was a fundamental obstacle to economic development in several regions of the world. He said that the accounting profession had a very important role to play in countering this lack of accountability. Indeed, the role of the profession went beyond providing financial information, and should include constructive influence of public policy, especially in the areas of corporate governance, accountability, combating corruption, etc.

Mr Wang Jun (Vice Minister, Ministry of Finance, China) called the profession an 'economic bridge' in the journey from poverty to growth. He used the example of the tremendous growth of the accounting profession in China as providing a benchmark for other countries to follow. He said that China has adopted three strategies with regard to accounting:

  • talent development;
  • adoption of international accounting and auditing standards. In this regard he noted that in February 2006 China published 39 new accounting standards based on IFRSs and 48 new auditing standards based on ISAs, all of which are effective in 2007; and
  • development of larger and more competitive CPA firms. He noted that currently China has 140,000 CPAs ande 5,700 CPA firms.

 Mr Jabulani Moleketi (Deputy Minister of Finance, South Africa) reminded the Congress that development should not be economic growth for growth's sake, but rather an opportunity to offer a better life for a country's citizens. As others had done, he noted the role of accountants in fighting corruption and challenged the profession to fortitude: the resistance accountants encounter when faced with corrupt or doubtful practices should not deter us from doing our job. He concluded by saying that while a strong accounting profession was not the solution to the challenges of the developing world, a strong, vibrant and independent accounting profession was certainly part of it.

Each day at the Congress there are a number of concurrent workshops addressing a variety of issues. Deloitte participants were able to attend three of these workshops.

Workshop: Enhancing public confidence in financial reporting

Sir Bryan Nicholson, an IASC Foundation Trustee, led a panel discussion that examined the accounting profession's response to the financial reporting and auditing failures that had occurred since the last World Congress in November 2002. In his opening remarks, he noted in particular the introduction of the Sarbanes-Oxley Act in the US and the transition to IFRS in the European Union, Australia and elsewhere. Signs of regulatory fatigue were evident and had been acknowledged in the IASB's '2009 announcement'.

Robert Bunting, (Vice President, IFAC) reviewed the response of the global accounting profession. He noted that IFAC had reinforced the notion that the ethics and integrity of accountants were critical to building trust in the profession and he noted the several steps that IFAC and its member bodies had implemented to ensure that the trust was built on a solid foundation. In particular, he noted IFAC and its member bodies was committed to convergence of standards globally-not just financial reporting standards, but also standards on auditing, ethics, education and standards for accountants in business. He closed by stressing the four cornerstones of a financial reporting system:

  • a strong ethical foundation;
  • high quality international standards;
  • convergence of those standards worldwide;
  • enhancing and strengthening the role of professional accountants in business.

 Patrick de Cambourg (Mazards, France) focused on IFRS. He noted that IFRS was well known in theory but less well known in practice and (as the implementation of IFRS in the EU has demonstrated) there is room for 'local interpretation.' He noted five concerns related to IFRSs, some of which covered familiar ground:

  • the governance of the IASB, especially how agenda decisions are made
  • does convergence with FASB mean adoption of US GAAP as IFRSs
  • clarification of the status of IFRSs in the United States – will the SEC become an interpreter of IFRSs
  • stability ('people need a rest')
  • whether the revisions to the IASB framework, a statement of total recognised income and expense, and increased use of fair values are leading accounting into a 'brave new world'. He noted that although it is vital that the IASB and the FASB should be free and independent to develop their standards, a certain degree of accountability is necessary, especially as new standards shift the accounting model radically.
Finally, he noted that accounting standards were part of a larger coordinated reform of the European capital market, noting other developments such as the Transparency and Prospectus Directives as well as the reform of the Auditing Directive, which will permit the adoption of ISAs.

 Nick Fraser (Deloitte, France) addressed the role of the independent audit in the 'financial services supply chain.' He noted that public confidence in the accounting profession required all participants to perform: from management to auditor. The auditing profession has responded positively to the audit failures earlier this decade. The Forum of Firms brings together the major networks of auditing firms and is the means by which IFAC standards on auditing, ethics, internal quality control and education are implemented in the international auditing networks. He said that the Forum of Firms, whose members audit over 90% of listed companies around the world, has begun a study of consistent application of IFRSs from country to country. He noted that the profession needed to manage expectations with respect to the responsibilities and limitations of the audit better than it has done in the past. Auditors need to work with all financial reporting supply chain participants to ensure the credibility of the audit is maintained and enhanced.

Marc Pickeur (Banking, Finance and Insurance Commission, Belgium) stressed that market discipline can only be truly effective when market participants have access to high quality financial information. This required sound corporate governance and a commitment to enforce best practices within business entities and a strong external audit (which would include a report on internal controls to the audit committee). He said that regulators were reviewing and monitoring implementation of IFRS and ISA both in their own jurisdiction and globally.

Workshop: IFRS 2005: Can we see the benefits?

Gilbert Gelard (IASB Member) chaired a session that examined whether the benefits of adopting a common accounting language had begun to be seen.

Michael Birch (PricewaterhouseCoopers, Hungary) noted that the real benefits of IFRS would only be apparent when IFRS was embedded in the financial reporting systems of companies. The work to 2005 had been expensive and painful and the benefits would only be realised later. However, some benefits had already been seen: better, more transparent and more available information and an indication that the cost of capital for quality IFRS entities was improving. An underlying concern was that, because IFRS has a lower threshold for restatement of errors, the markets would react nervously to restatements under IFRS, eroding confidence rather than strengthening it.

Aziz Dieye (Cabinet Aziz Dieye, West Africa) spoke from a developing country perspective and stressed the need for the IASB to avoid any downgrading of their standards.

Bulent Ustunel (Chairman of the Turkish Accounting Standards Board) informed the session of the implementation of IFRS in Turkey. He noted that one consequence of implementing IAS 29 had been to demonstrate that the 'inflation adjustment' shares issued under Turkish tax accounting had, in fact, represented a distribution of capital and not a capitalisation of the inflation adjustment.

Lee White (Chief Accountant, Australian Securities and Investment Commission) spoke about the Australian experience of adopting Australian equivalents of IFRSs (A-IFRSs). In some areas, notably financial instruments and share-based payments, there was no equivalent Australian standard and the introduction of IFRS had real impacts on dividend policy, tax, loan covenant agreements and lending conditions. However, it seemed that already the benefits outweighed the costs: there is greater access to international capital markets and IAS 32/39 and IFRS 2 had improved financial reporting in the country. Implementation had been relatively smooth and there had been no stock exchange 'alarms'. He echoed Mike Birch in saying that implementation was not over. He also noted that the greatest challenge to ASIC as a regulator was to 'remain true to the principles-based approach' in their regulatory activity.

Workshop: Implementing international standards – the challenges and solutions

Peter Wong (Consultant, Deloitte, Hong Kong SAR) introduced this session by reviewing the findings of the Wong Report on the implementation of global standards (available on He noted that one of the principal challenges is that 'convergence' means different things, depending on who is speaking.

Gerard Tremoliere (Deloitte, France) reviewed the progress in the European Union towards adopting ISA, including the adoption of the 8th Directive on Company Accounts. He outlined the endorsement mechanism proposed to ensure that auditing standards in Europe will contribute to a high level of credibility and quality of company reports.

Sandy Chant (ALCOA, Australia and USA) reported on her experiences and the challenges of implementing IFRSs in the Australian subsidiary of a US listed, US GAAP parent. She gave a clear and concise report of the real-life challenge of implementing IFRSs; handling IFRS and A-IFRS differences (for Australian reporting purposes) and IFRS/US GAAP differences (for parent company reporting). As ALCOA is a SEC registrant, she had to engage IFRS transition accountants as her auditors were barred from providing advice under Sarbanes-Oxley. She noted that differences of opinion and interpretation of IFRS among the audit networks had cost the profession some credibility, but noted that everyone was learning 'on the job.' Her advice to those still facing transition: start early, invest the resources necessary and do not underestimate the time it will require. She also noted that in adopting IFRSs Australia had initially removed certain options from IFRSs and added new requirements. However, both her company and other Australian companies found that 'modifying IFRSs adds unnecessary complexity', and Australia has now decided to reinstate the options and remove the added requirements.

Manuel Sanchez-y-Madrid (Mexico) spoke of the challenges facing the adoption of global standards in Latin and South America. He noted that while there are active capital markets in the region, they listed companies are generally small and that IFRS presents a major challenge to both the preparers and professional accountants. In general, there is a lack of resources and capacity, both at the operational and financial level. He suggested that the most efficient way to implement global standards in the region would be through a joint effort involving all stakeholders: IFAC and the local accounting bodies, governments, donor agencies, universities, etc.

Dr Nordin Zain (Executive Director, Malaysian Accounting Standards Board) noted similar concerns in south-east Asia. He suggested that the challenge was strategic not technical. He said that the emerging economies in the region have little or no choice but to adopt global standards if they were to qualify for regional development funding, foreign direct investment programmes and membership of regional and global trade bodies.


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