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IFAC video interview with Hans Hoogervorst on the IASB's priorities to 2021

14 Dec 2016

The International Federation of Accountants (IFAC) has released a short video of IASB Chairman Hans Hoogervorst discussing the 2015 Agenda consultation the the IASB's priorities for the next five years.

Questions discussed are:

  • Why does the IASB do an agenda consultation?
  • What are the IASB's main priorities for the next five years?
  • Why has the IASB chosen "Better communication" as a theme?
  • What will be the biggest challenges for the IASB?
  • What role does the research programme play in standard-setting?
  • How does the IASB support implementation of the standards?

Please click to watch the short video (6 minutes) on the IFAC website.

CAQ issues publication on revenue for audit committees

14 Dec 2016

The Center for Audit Quality (CAQ) of the American Institute of Certified Public Accountants (AICPA) has released a publication 'Preparing for the New Revenue Recognition Standard: A Tool for Audit Committees'.

The publication is a tool to help audit committees assess a company’s implementation of the new revenue recognition standard. It is organised into four sections:

  • Understanding the New Revenue Recognition Standard – What Is It?
  • Evaluating the Company’s Impact Assessment – How Will Revenue Recognition Change?
  • Evaluating the Implementation Project Plan – How Do We Need to Prepare?
  • Other Implementation Considerations – What Else Do We Need to Consider?

In addition to key questions for audit committees, the tool offers a list of resources on revenue recognition.

Please click for access to the publication on the CAQ's website.


IASB Chairman speaks on fair value accounting and long-term investments

13 Dec 2016

During yesterday's ANC Symposium on Accounting Research, IASB Chairman Hans Hoogervorst was invited to participate in a roundtable on performance and the public European good. However, he used his openening statement to address a different topic.

Given the symposium was being held in Paris, Mr Hoogervorst commented on what he called "French accounting tradition’s problematic relationship with fair value accounting". He explained that the assumption that the IASB was made up of "market fundamentalists" was wrong as the vast majority of the IASB's accounting standards were cost-based. However, Mr Hoogervorst argued, in some case fair value accounting would be the right choice:

At the same time, I firmly believe that cost-based accounting is inadequate for reflecting the performance of long-term equity investments. Quite the opposite — the longer term an investment, the less relevant its original price becomes. I fail to see how investors would benefit from a balance sheet that shows the original price of an equity investment acquired 20 years ago.

Mr Hoogervorst admitted that market-based valuations of equity could lead to more short-term volatility in the information reported in financial statements. However, he expressed the belief that this volatility reflected the risks associated with such investments and that presenting these equities at cost would not make the volatility go away. He concluded:

Long-term investment should not be encouraged by artificial accounting stability in the numbers. Long-term investment is best served by transparency that the public can trust.

Please click to access Mr Hoogervorst's prepared statement on the IASB website. On his comments that were to the point of the roundtable we already reported in our news item on all of the symposium posted yesterday.

6th ANC Symposium on Accounting Research

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

For a full list of list of speakers and panelists please see the events programme (available in English and French).

  • 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.

Recordings from the IASB research forum

09 Dec 2016

The third IASB Research Forum was held in conjunction with the 2016 Contemporary Accounting Research (CAR) conference that took place in Waterloo, Ontario, Canada on 15 and 16 October 2016. The Canadian Accounting Standards Board (AcSB) sponsored a webcast of the event and has now made available recordings on YouTube.

The papers that made up the IASB research forum were:

  • Moving the Conceptual Framework Forward: Accounting for Uncertainty
  • Assets and Liabilities: When do they Exist?
  • Relative Effects of IFRS Adoption and IFRS Convergence on Financial Statement Comparability

Please click here for the AcSB website that offers access to the recordings of the three sessions. The site also offers links to the author presentations and discussant presentations.

CAQ issues publication on non-GAAP measures

09 Dec 2016

The Center for Audit Quality (CAQ) of the American Institute of Certified Public Accountants (AICPA) has released a publication 'Non-GAAP Financial Measures: Continuing the Conversation'.

The purpose of the publication is to explore the issue of non-GAAP information, providing context on its definition and use, pertinent regulatory developments, and the current level of auditor involvement. The publication includes questions for stakeholder groups to consider as they prepare or use non-GAAP financial measures.

For more information, please see the press release and publication on the CAQ’s website.

Quick overview of key attributes and approaches to reporting business models

09 Dec 2016

In October 2016, the UK Financial Reporting Council's (FRC) Financial Reporting Lab published a report on business model reporting, which provides valuable insight for companies on the importance of business model information to investors and the type of information they are seeking. The findings have now been condensed into a single page graphic overview.

Please click for the following information on the FRC website:

Hans Hoogervorst discusses pension liability

08 Dec 2016

At the Institute of Pension Education in Rotterdam, IASB Chairman Hans Hoogervorst spoke about pension liabilities and the effect of a low interest rate environment.

In his speech, Mr Hoogervorst noted the need for the IASB to develop additional guidance on pension scheme designs to adapt to recent developments. In addition, he commented that the IASB’s liability measurement approach is well accept and that they “reject calls to fundamentally change pension accounting to eliminate or reduce pension deficits.” Further, he provided his views on macro-economic policies. He stated:

A return to more normal interest rates will reduce the pension liability and will be beneficial for the long-term health of the pension system. But even then, short-term pain seems inevitable, because a lot of damage has been done. While the pension liability will be reduced, there will probably be short-term harm to both your bond and stock portfolios. This is another reason why I do not believe that our accounting for the pension liability exaggerates the problem.

The full tran­script of the speech is available on the IASB’s website.

IFRS Foundation publishes its second update to IFRS Taxonomy 2016

08 Dec 2016

The IFRS Foundation has published 'Update 2 to the IFRS Taxonomy 2016'.

This update includes taxonomy elements for the September 2016 final amend­ments to IFRS 4 related to the different effective dates of IFRS 9 and the upcoming insurance contracts standard.

For more in­for­ma­tion and access to the update, see the press release on the IASB’s website.

New Interpretation on foreign currency transactions and advance consideration

08 Dec 2016

The International Accounting Standards Board (IASB) has published IFRIC 22 'Foreign Currency Transactions and Advance Consideration' developed by the IFRS Interpretations Committee to clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.


The IFRS Interpretations Committee observed some diversity in practice regarding the exchange rate used when reporting transactions that are denominated in a foreign currency in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates in circumstances in which consideration is received or paid in advance of the recognition of the related asset, expense or income. As a consequence, the Interpretations Committee decided to develop an interpretation.


Content of IFRIC 22

Issue and scope of the interpretation

The interpretation addresses foreign currency transactions or parts of transactions where

  • there is consideration that is denominated or priced in a foreign currency;
  • the entity recognises a prepayment asset or a deferred income liability in respect of that consideration, in advance of the recognition of the related asset, expense or income; and
  • the prepayment asset or deferred income liability is non-monetary.


The Interpretations Committee came to the following conclusion:

  • The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability.
  • If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt.

Effective date

IFRIC 22 is effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted.


On initial application, entities apply the interpretation either:

  • retrospectively in accordance with IAS 8; or
  • prospectively to all foreign currency assets, expenses and income in the scope of the interpretation initially recognised on or after the beginning of the reporting period an entity first applies the interpretation in or the beginning of a prior reporting period presented as comparative information.


Additional information

Please click for:

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.