Following the theme of his recent speeches made in Japan and China earlier this month, Mr Prada provided a case for global accounting standards and uses the actions taken in Korea to serve as “an exemplary role model in the region.” 

Mr Prada states that businesses in Korea benefit from full adoption of IFRS because they can report a set of financial statements that are familiar with investors around the world. According to a recent KASB review of the consequences of the move to IFRS, the introduction of IFRS has “led to an improvement in the quality of earnings, as well as improving comparability between different Korean companies as well as their international peers.” Mr Prada noted that other jurisdictions have experienced similar conclusions. He also states that the continued economic and financial globalisation has caused the G20, International Monetary Fund, World Bank and IOSCO to support the work of the IFRS Foundation (IFRSF) and the IASB.

In addition, Mr Prada commented on progress made in the development of high quality, global accounting standards, which included IFRSF study on the use of IFRS around the world and the requirement of 114 out of 138 countries to require the use of IFRS for all or most public companies. Significant progress has been made in jurisdictions that have not yet required the use of IFRS, such as China, India, Japan and United States.

Lastly, he reflected on the “evolution” of the IFRSF and IASB and how the upcoming public consultation on the structure and effectiveness of the organisation will provide stakeholders with an opportunity to voice their comments.

The full text of Mr Prada's speech is avail­able on the IASB's website. The KASB has published a press release on the seminar on its website.

According to the new Directive, large public-interest companies with more than 500 employees are required to disclose relevant and material environmental and social information in their annual reports. Disclosures shall be provided at group level, rather than by each individual company within a group.

Large listed companies will also be required to provide information on their diversity policy, covering age, gender, geographical diversity, and educational and professional background. Disclosures shall set out the objectives of the policy, how it has been implemented, and results.

The Directive enters into force on the twentieth day after its publication. Member States have to transpose the Directive into national law by 6 December 2016. The new provisions have to be applied to all undertakings within the scope of the Directive for the financial year starting on 1 January 2017 or during the calendar year 2017.

Please click for access to the full text of the Directive in the Official Journal (available in all languages of the EU).

Without being a direct response to the European Commission's questionnaire seeking respondents' views on the impact of International Financial Reporting Standards (IFRS) in the European Union, the timing and content of a booklet The future of IFRSs in Europe published today shows that not all European voices criticise and question the application of full and unaltered IFRSs in Europe.

The booklet claims that the debate on appropriate accounting reveals fears and worries that prove to be unwarranted on closer scrutiny. It therefore provides a detailed overview of how an IFRS is developed and becomes applicable law in Europe. The booklet concedes that the process for developing IFRSs is "unlike the conventional legislative process we are familiar with in Europe", but it also notes that the IASB's standard-setting process has been continuously improved over the past ten years to strengthen transparency and participation and the setting-up of a Monitoring Board in 2009 has established a direct link to the major regulators around the world.

Therefore, the German private banks view recent international developments (first in the US, where the FASB turned away from some convergence projects, and now in Europe, where politicians call for more of a European influence and maybe a European version of IFRSs) critical:

We take a critical view of these developments. So that it can continue to perform its job as an independent global standard-setter, the IASB should not be allowed to become a plaything of diverging national interests. Purely national interests inevitably have to take a back seat in efforts to develop an internationally accepted financial reporting convention. The IASB’s work as a standard-setter should therefore be kept largely free of political influence in the future as well. This is the only way to ensure high-quality standards and uphold the IASB's good reputation in the long term.

The banks also believe that any tinkering with the European endorsement process would be harmful:

Any European go-it-alone approach must be avoided, however. The non-recognition of individual IFRSs in Europe (carve-out) or the establishment of European accounting rules would be at odds with the target of uniform international accounting standards. The comparability of financial information would be impaired; the result would be a competitive handicap for internationally operating companies based in Europe.

In the press release accompanying the publication of the booklet, the German banks even express the hope that the endorsement process of IFRS 9 Financial Instruments, which is currently postponed in the EU, would be taken up soon and concluded speedily.

The booklet also states that a strict and efficient enforcement is needed to reap the benefits of using international standards. However, similar to the points made above, the banks maintain that European Securities and Markets Authority (ESMA) must avoid interfering with international processes:

We support ESMA's activities as long as there is a strict separation between standard-setting and enforcement. On the other hand, setting actual accounting and valuation rules is not ESMA's job in our view, but should be left to the IASB and the IFRS Interpretations Committee.

Please click for the following information on the website of the Association of German Banks:

• Access to the booklet The future of IFRSs in Europe(it can either be downloaded or ordered as printed copy free of charge):
  • English version
  • German version (includes additional information on the situation in Germany)
• Press release (German language only)

Mr Prada's overview of the success of IFRSs around the world was similar to his explanations in Tokyo earlier this week. He praised IFRSs as global standards for financial information that can help to power the global economy, which would be especially important today, "because every major jurisdiction seeks to maintain a level of economic growth, to provide further time to heal the wounds from the global financial crisis and to facilitate a continued economic recovery".

From the world economy Mr Prada turned to the role of efficient markets in China in connection with the 2020 reform programme that identifies the decisive role of markets and the need to facilitate overseas companies' entry to China and Chinese companies' expansion abroad. He stressed that the IFRS Foundation is very willing to work with the Chinese authorities to achieve this goal and he also included the hope, that a funding mechanism might be found that allows China to fully contribute to the costs of the IFRS Foundation and would see increased Chinese support for the Asia-Oceania office of the IFRS Foundation in Tokyo.

However, Mr Prada identified the modification of IFRSs as the major challenge China is facing. He noted the efforts China made in modernising its accounting systems and called them a "considerable undertaking for a country the size of China". He also mentioned that is was very impressive that the new Chinese standards are required for use by all large and medium-sized Chinese companies, not just listed ones. Yet similar to the point about familiarity he made in Japan, Mr Prada pointed out that international investors are wary when the IASB's standards are modified, even if only in small ways. He commented:

China has not fully received the international recognition it deserves by your efforts to move to global accounting standards. It is the same problem faced by any jurisdiction that chooses to adjust IFRS to meet local requirements. Other jurisdictions that have adopted IFRS in full and without modification often assume that the adjustments must be substantial to warrant such a change. So, the question for China is whether the relatively minor deviations from IFRS warrant the lack of international recognition that results from those changes? This is a question that China alone can answer.

The full text of Mr Prada's speech is available on the IASB's website.

The interim release provides additional taxonomy concepts that support the consistent adoption and implementation of IFRS.

More details (and a link to the interim release) are available in the press release on the IASB website. Our dedicated XBRL page is here.

Mr Prada commented on the ever growing number of jurisdictions adopting IFRS and explained that for most industry sectors in the world, IFRS is now the predominant basis on which companies' financial statements are prepared. As part of the reason for this success he made out that "investors have a clear bias for the familiar" and that IFRS have by now become the means to provide that familiarity to international investors. Jurisdictions or companies that decide not to apply IFRSs would need to be aware of becoming increasingly isolated and that the "costs of being outside the familiarity of the IFRS system" would rise.

Mr Prada then looked at the large economies that still have not adopted IFRS (China, India, the US, and Japan) and made out encouraging developments in all of them although he admitted that in the case of the US "progress has been slower than anticipated". Among these jurisdictions, he especially noted Japan and the careful and considered approach to the use of IFRS in Japan that has been chosen. He claimed that the option of voluntary adoption of IFRS was being watched carefully by other jurisdictions as it would allow larger, multinational companies to benefit from IFRS without immediately forcing smaller, more domestically focused companies to adopt a new system.

Among the Japanese encouraging developments, Mr Prada also looked at the introduction of Japanese Modified International Standards (JMIS) where an exposure draft has been published in July 2014. He commented:

I have no strong views on JMIS, and it is up to the Japanese authorities to determine what transitional steps to IFRS are required. However, if investor familiarity is the goal then this can only come from the full use of IFRS.

Mr Prada concluded his speech by underlining that the IFRS Foundation and the IASB have evolved into a global accounting standard-setter, willing and able to take on the resulting responsibilities but also willing to always keep and open mind and listen to and learn from the stakeholders.

The full text of Mr Prada's speech is available on the IASB's website.

Mr Mackintosh began by stating that most of Europe and many other parts of the world have already made the transition to IFRS and that “IFRS is a decade-old news story.” He noted the following:

• The European Union’s adoption of IFRS on 1 January 2005, with Australia, New Zealand, Hong Kong and South Africa adopting soon after.
• IFRS becoming the predominant reporting language for most global industry sectors.
• Survey of 138 countries showed that 114 countries require the use of IFRS; while the remaining countries surveyed have shown positive progress towards IFRS.

Next, he commented on the more than 12 year collaboration by the IASB with the FASB to develop converged high quality standards. He mentioned that the convergence project has had several achievements (segment reporting, business combinations, fair value measurement, and revenue recognition) as well as setbacks (financial instruments).

Further, he provided his expectation for the IASB for the next decade. He believes there would be a “period of calm” in the standard-setting process after the IASB completes its leases, insurance, and conceptual framework projects. However, he noted with next year’s agenda consultation, constituents will have a chance to comment on the future path the IASB will take.

Lastly, he goes on to emphasise the need to consistently implement IFRS across all jurisdictions. Several steps the IASB has done to achieve consistent implementation include:

• Public consultation during each phase of standard-setting.
• Co-operation with national and regional accounting standard-setters.
• Emerging Economies Group to gain perspective of countries without deep and liquid capital markets.
• Islamic Finance consultative group to consider the effect of IFRS for Shariah-compliant transactions.
• Expanding the role of the IFRS Interpretation Committee to address divergence in practice.
• A Statement of Protocols with the IOSCO and ESMA to share information on the implementation of IFRS worldwide.
• Education Initiative.

Text of the full speech is available on the IASB's website.

In particular, the outreach event will focus on the following questions:

• “Is there a need for a special standard for rate-regulated activities?
• Should balances arising out of rate-regulated activities be included in the balance sheet or is note disclosure a better way forward?
• How is the performance of rate-regulated activities best reflected?
• What corrections/adjustments are analysts making to the financial statements of companies with rate-regulated activities?”

Registration for this event is requested by 12 December 2014.

For more information, see the press release on the EFRAG website.

As stated in the Terms of Reference, “[a]ll aspects of ASAF and its operations shall be reviewed by the IFRS Foundation two years after the establishment of the group (as from the date of signing the Memorandum of Understanding (MOU)).” The questionnaire is the first step in assessing how the ASAF has performed in relation to its Terms of Reference and Memorandum of Understanding.

The IFRSF expects to publish a feedback statement detailing the findings and actions from the review after the Trustees and IASB have had time to consider the findings. It is expected to be issued mid-2015. Participants are requested to complete the questionnaire by 9 January 2015.

For more information, see the press release on the IASB’s website.