Interview with Pauline Wallace

Pauline Wallace, inaugural Chair of the UK Accounting Standards Endorsement Board talks to Nigel Sleigh-Johnson and Sally Baker about its role in the post-Brexit world.

Pauline Wallace is not afraid to step into the unknown: “I think you should always grab opportunities, which is probably why I am here now.” By All Accounts caught up with Pauline via videoconference in October 2020, shortly after the announcement of her appointment as inaugural Chair of the newly minted UK Accounting Standards Endorsement Board, which will soon become widely known by the (UK government’s chosen) abbreviation of UKEB. 

The UKEB will endorse and adopt new or amended International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), after the transition period end date on 31 December 2020 and relevant statutory powers are delegated to it. The new Board will also become involved in the development of future standards through influence and research activities, and also undertake thought leadership work. “All three of those roles are equally important,” says Pauline.

Giving the UK a voice in the future direction of reporting could take a little time. Although recruitment for the UKEB is ongoing, the Secretary of State for the Department of Business, Energy and Industrial Strategy (BEIS) is not expected to delegate responsibility to the Board until early in 2021. Meanwhile, Pauline is contemplating the future of the Board and how it will operate in practice, with an enthusiasm that has characterised her long career in professional practice, standard-setting and public policy. “I’m a great optimist. I always think that things are going to work out well,” says Pauline – and they usually do. 

Leaps of faith

Early in her career, after a brief post-qualification flirtation with audit (“I really didn’t like it”), Pauline took a side-step into standard-setting: “It was luck that I found something that really suited me,” she says. A period at the now defunct UK Accounting Standards Committee was followed by time overseas. “I became the first Technical Director of the Hong Kong Society of Accountants,” says Pauline; a move she now sees as pivotal.

“Standard-setting got into my blood,” she says. It also did wonders for Pauline’s confidence – she was still in her twenties at the time – and raised her professional profile. “I realised that you could pretty much do what you want and get where you want with the qualification.” Her time in Hong Kong coincided with negotiations for the UK’s 1997 handover to China. “A fascinating time to be in that role,” recalls Pauline, whose professional life has more than once been shaped by major events on the world stage.  

The 2008 global financial crisis shifted her focus away from the technical, onto talking to Europe and negotiating on the implications of the financial crisis, which led into a role as Head of Public Policy at PwC. This broad range of experience has helped Pauline develop the skills that being Chair of the UKEB will demand. “The combination of technical and political is pretty crucial.”

Asked which of her many skills Pauline expects to find most useful at the UKEB, her response reveals much about the Board and the woman. “Listening skills will be key in dealing with different bodies and in trying to get different stakeholders to come together,” says Pauline, who is keen for the UKEB to engage broadly with stakeholders at every level. “I certainly do not know everything and I don’t think the Board will. I want people to tell us what they think because I want a strong evidence base for any decisions we make. I think that is hugely important.”

Difference and diversity

This will be reflected in the diversity of the eight to 12 members who will be appointed to the independent Board. “It’s important to get people from different backgrounds, because you need stakeholder representation from across the piece,” says Pauline, who expects the Board to be composed of preparers, investors, users and accounting firms, with perspectives further broadened by the inclusion of an academic and an economist.

Some understanding of IFRS and their implications will be key, but there will be a strong technical team to support the Board, which Pauline does not see as a technical body in the same sense that a standard-setter is. “I don’t think it’s crucial that every member of the Board is steeped in IFRS. The benefit of having people from different backgrounds is that they’ll give you that wider, broader experience,” she says. The Board’s members will need a range of different skills. 

“With thought leadership and influencing, you need technical understanding,” explains Pauline. “But when you are looking at endorsement, you are looking more strategically at the implications of a standard for the UK economy and for long-term public good. Then, I think you need a broader perspective than whether paragraph x is the best way to handle a particular issue.” Being able to stand back and see the bigger picture will, she says, be extremely important.

The first whole standard to be endorsed by the Board, IFRS 17 Insurance Contracts, is looming on the horizon – and it’s a challenging prospect. The UKEB already has a Technical Advisory Group (TAG) in place and the industry seems to be providing it with “really helpful input”, but based on her past experience, Pauline knows that “IFRS 17 is a very complex standard”; not least because the insurance sector is full of jargon and insurance products are inherently complicated.  

With help from the TAG, Pauline hopes to ensure that the Board fully understands the implications of IFRS 17 for preparers, users and auditors, so that the UKEB can apply, in detail, the endorsement criteria (see Endorsement criteria, below) as set out in legislation (by the International Accounting Standards and European Public Limited-Liability Company (Amendment etc), (EU Exit) Regulations 2019. “We are going to need a very detailed impact assessment on this one.”

It is too early for Pauline to comment on technical issues and other matters that will be focused on by the UKEB, and the timing of political events means there is limited scope for influencing and thought leadership on the subject. “The most important thing we can do, rather than re-open old battles and debates, is to get people thinking about the implications of what is now there in IFRS 17,” she says. 

“At the endorsement stage, you are looking more at impact than at whether the right conclusion was reached on an individual technical issue.” There will be greater scope in the future for the UKEB to influence thinking early, by engaging with the IASB (“whenever we can, as long as we’ve got the resources”) and by working closely with the European Financial Reporting Advisory Group (EFRAG) and other standard-setters, particularly in places such as Australia, Canada and South Africa, with similar endorsement processes. 

Leading not following

“They have massive amounts of experience of endorsement, so I am sure we can learn from them,” says Pauline, while emphasising how important it is for the UKEB to be seen leading from the UK perspective and not just following in the footsteps of others. “It’s not that I think we should be different just for the sake of it. We have a different raison d’être and I think we need to respect that in everything we do,” she explains.

Although criteria for the UKEB are based on regulations that EFRAG follows, there are critical differences. “The fact that we are looking at long-term public good in the UK is quite significant, rather than just public good,” says Pauline. She expects this to influence thought processes on the Board, which also needs to consider differences between the European context and the UK context. Just picking up and using what EFRAG has done seems inappropriate and unlikely.

Carve-ins and carve-outs also seem unlikely (and not just because Pauline is a passionate believer in global standards). “We have the power to carve out in exceptional circumstances; the only power to carve in relates to extending the scope of options already in the standards to additional undertakings,” says Pauline. She is reluctant to say these things will never happen and create a hostage to fortune or speak for a Board that has yet to convene. 

More thinking needed

Thinking is still required by the Board on strategies for some of its work areas, such as influencing and thought leadership. The Regulations offer less detail on these activities than on endorsement processes, and do not explicitly give the Board criteria it must use when influencing or leading on thinking. Nevertheless, “influencing is essential for an endorsement body, so I am glad the Regulations explicitly recognise this as one of our roles,” says Pauline. 

As long as the Board remembers its ultimate aim to have something that is conducive to long-term public good, it has some flexibility to think widely and be creative in its approach. “We need a proper debate and some proper thinking about how best to do influencing and thought leadership and I’m not going to try to pre-empt this. It’s a huge strategic decision that is way beyond my remit as an individual,” says Pauline, adding with a smile: “I am a team player.” 

Endorsement criteria

About the authors

Nigel Sleigh-Johnson, Director, Technical Strategy Accountability Group
Sally Baker, Technical Manager, Financial Reporting Faculty