If the IASB decides to maintain the current level of focus to its six activities, almost half of the IASB’s focus for 2022-26 will be on new IFRS Standards and major amendments to IFRS Standards – albeit that significant resources are still earmarked for the maintenance and consistent application of existing IFRS Standards.
The list of financial reporting issues (potential projects) that could be added to the IASB’s workplan include financial reporting projects such as climate-related risks, cryptocurrencies and related transactions, going concern, inflation, and negative interest rates; but these are just a handful of ideas amongst many. The IASB would like to hear from constituents about what they would like to see in their work plan, and to do so by 27 September 2021.
Rika Suzuki, IASB Board Member, says: “This is the third time that the IASB has invited comments to help shape its five-year plan. We are asking for views in three areas.
“First, in relation to the strategic direction and balance of our activities. For example, how much time we should spend on developing new IFRS standards and major amendments to IFRS Standards compared with that spent on our other five activities, including maintenance and consistent application of IFRS standards and digital financial reporting.
“Second, the criteria for assessing the priority of new potential projects that could be added to our work plan. We have laid out seven criteria in the consultation document for stakeholders’ views. Lastly, and everyone's favourite question, which new potential projects should the Board prioritise. This is an opportunity for all of our stakeholders to share their views with us about their priorities.”
Once the projects are identified, how will that work fit into existing priorities without creating a very challenging work environment for all concerned?
“Some of our capacity until 2026 will be devoted to completing projects already underway. We will be conducting the required post implementation reviews that assess whether recently issued standards IFRS 9 Financial Instruments, IFRS 15 Revenue from Contract with Customers, and IFRS 16 Leases, are working as intended,” she says. “So, assuming we maintain our current level of focus on developing new Standards and major amendments to IFRS Standards, we can only add two to three large projects, or four to five medium-sized projects, or seven to eight small projects. This means it is important that we hear from stakeholders on the issues that are important to them – the feedback we receive, as well as our experience and expertise, will help shape the next work plan.”
Suzuki continues: “Also, the time involved in taking on a new project will be considered in terms of its interaction with other projects. For example, if we decide to enhance the disclosure of intangible assets, because stakeholders would like information that is more comparable between internally generated intangibles and intangibles acquired through a business combination, we might want to first consider the effects of any new requirements that could be introduced as part of the existing IASB’s project on goodwill and impairment.”
Rafal Markowski, IASB Project Lead, adds that standard-setting generally is a huge investment over a long timeframe: “Normally, a major standard-setting project takes roughly five to seven years to complete. This means any new major project that might be added to the work plan is unlikely to be completed within the five-year cycle until 2026.”
However, we have seen during the pandemic that timeliness is sometimes of the essence, and we may well continue to see that in relation to reporting on risks associated with climate change, for example. Is there flexibility within the agenda to fast-track particular projects?
“Our day-to-day ability to address emerging issues that need urgent solutions is essential to our mission as the international standard setter. We have indeed responded swiftly to time-sensitive and urgent issues in the recent past including developing amendments resulting from interest rate benchmark reforms and COVID-19-related rent concessions,” Suzuki responds. “So, we have intentionally set aside some resources for time-sensitive projects that may arise after this consultation.”
This is important as, compared with the previous consultation, the issues that are being considered as potential priorities look very different from those that were considered previously. Reporting on crypto currencies is a case in point. But she points out that the timing associated with addressing new issues is critical and requires careful consideration. She also points out that IASB Standards are principles-based, with all the advantages that affords, and that the development of new standards should not always be the starting point.
And let’s remember that this endeavour around promulgating financial reporting standards is likely to take place – in the coming years – in a new environment alongside the introduction of sustainability standards. How will that work?
Suzuki responds: “The IFRS Foundation Trustees are working on proposals for creating a new International Sustainability Standards Board (ISSB) to develop global standards for sustainability reporting. In contrast, the IASB’s consultation is about how to prioritise the various activities within the current scope of the IASB’s work, which is related to financial statements and management commentary for profit-oriented companies. We are not seeking to consider, as part of this IASB agenda, sustainability reporting issues except to the extent they affect financial statements.
She adds, however, that the inter-connection between the work of the IASB and the new ISSB will definitely be considered in finalising and delivering the IASB’s priorities for 2022 to 2026. “Our discussion will rely on feedback from the trustees and the views of our stakeholders in that context,” she says. “We will support each other to improve reporting collectively.”
There are 22 potential ideas on the slate that the IASB could pursue over the next five years, but the IASB says this list is neither fixed nor to be pursued in its entirety. It is open to influence. “ICAEW members have been practising the IFRS standards in different industries, and probably different jurisdictions, for a long time. So, we truly appreciate such practitioners’ feedback, and we are always excited to hear from you,” she says.
The IASB consultation paper can be found here. To provide your views to the Financial Reporting Faculty, please email firstname.lastname@example.org
Readers can also find out more about IFRS requirements on the Financial Reporting Faculty’s hub page icaew.com/financialreporting
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