The ICAEW Financial Reporting Faculty’s latest thought leadership report has attracted international attention, as stakeholders around the world ponder where the project to create a global set of accounting standards goes from here.
A universal ‘financial language’ offers many well-documented advantages. Cross-border businesses benefit from reduced preparation costs, and cross-border trading in securities increases as international investors can more readily compare the performance of companies based in different countries. In turn, it is argued that this results in increased market efficiency and a reduction in the cost of raising capital for companies, which ultimately helps to boost growth.
The rapid spread of IFRS around the globe in the past decade means that those benefits are no longer theoretical as a growing body of research shows they are increasingly evident in practice. Today well over 100 countries – including more than two-thirds of the G20 – require or allow their listed companies to prepare annual financial statements based on IFRS. But momentum has slowed as major projects have stalled and the US and other significant economies have become hesitant as they consider whether or not to commit to IFRS. Against this backdrop, a range of important questions are now being asked about where the IFRS project goes from here.
At this important juncture ICAEW’s Financial Reporting Faculty has published a seminal report entitled 'The Future of IFRS' that takes stock of the progress made towards developing a global financial language, identifies barriers and challenges that must be overcome if the use of the standards is to continue to spread, and provides recommendations for moving forward.
The report sets out a number of key recommendations, including:
We stand at an important crossroads. Success is not guaranteed. But if the IASB evolves into the type of organisation we envisage, listening and learning as much as leading, and backed by the G20 governments and the right sort of regulation, we may well in due course look back on the IASB’s second and third decades and conclude that they were was just as successful – if not more so – than its first.
Read the Financial Reporting Faculty report which highlights the lessons that can be learned from the European experience. The appendices to this report revisit the key perspectives of our Future of IFRS report and assess what has been achieved since its publication. They also provide an update on our comments on the role of IFRS in the global financial crisis and the adoption of IFRS by the United States.
Find out more about ICAEW’s Thought Leadership Programme in financial reporting "Information for Better Markets"