BAA| July 2021 | Interview Prof Dr Andreas Barckow
As he takes up his appointment as Chair of the International Accounting Standards Boards, Prof Dr Andreas Barckow talks to Nigel Sleigh-Johnson and Sally Baker about his vision for the standard-setter
This is surely an interesting time for the incoming Chair of the International Accounting Standards Board (IASB) to be taking the helm. International Financial Reporting Standards (IFRS) are being affected by the global pandemic, carve-ins and carve-outs, reporting on environmental, social and governance (ESG) matters, technology that will influence the communication and proliferation of financial information going forward, and many more thought-provoking developments and trends.
But Professor Dr Andreas Barckow is enthusiastic about his new role: “I like to see the positive side of things without neglecting or turning down the challenging ones.”
Becoming Chair of the IASB is the pinnacle of his career. “It is like reaching the top of Mount Olympus,” says Barckow. It’s an achievement that has taken positivity and resilience. “Nine years ago, when I first applied to become an IASB member, I was rejected,” says Barckow, but he explains that he came to see this as a lucky moment. “I always look on the bright side,” he says, with a nod to Monty Python, “and if you want to live by that mantra, you have to see the good in being rejected.” So Barckow parked his disappointment, worked on developing some of his softer skills and prepared to try again.
Within a few years, he had become Vice President of the European Financial Reporting Advisory Group (EFRAG) Board. He says: “It really helped me to improve my skillset in conducting productive, efficient meetings and learning about the political side of the job.” Alongside six years in his most recent role, as President of the German accounting standards-setter, Barckow gained deep insights into what national standard-setters want from the IASB, and all of this complemented the strong technical skills he had already developed during his years as an IFRS expert in academia and practice.
All of the associated committees and meetings taught him some valuable lessons. Never enter into a debate or discussion without a clear objective: “A Board session is precious time. Don’t waste it.” Don’t take criticism and counter-arguments personally: “I’ve not seen a single project that hasn’t benefited from addressing them.” Always inform external stakeholders about what you are doing internally: “If you don’t constantly communicate that to your stakeholders, you may just lose them and that will backfire on you.” So Barckow brings a plethora of skills to his new role at IASB.
The Chair of the Board has a clear vision for its future. “I’d like to shape our organisation into becoming more agile and proactive.” He knows this will be easier said than done. But it is necessary: “If we look to the past, standard-setters have, by and large, been too slow in responding to coming trends, megatrends and developments – and that goes for any standard-setter, not just the IASB.” Barckow wants to explore whether and how the IASB can improve its communication, and his mission also includes carrying on the good work of his predecessors.
A matter of trust
“I want to continue building trust in global financial reporting standards and fostering consistent application,” he says. “It’s a big part of our ongoing work and I’m very much looking forward to continuing that.”
This may also be easier said than done. Some jurisdictions already tinker with IFRS and more regional variations may occur in the future, for example on the long and winding road to global adoption of IFRS 17 Insurance Contracts, with its annual cohort requirements for grouping insurance contracts to measure and recognise profit.
Does the prospect of IFRS carve-ins and carve-outs keep Barckow awake at night? “Yes. I have to be concerned,” he says. “The entire purpose of global standards is to have a single reporting language.” Being part of this grand project has always required a willingness to balance self-interest and the greater good. Countries that wish, albeit rarely, to deviate for “individually understandable circumstances” are, he says, putting a question mark over the entire objective of one global set of standards. “Each and every case is one too much. We shouldn’t be heading that way.
“These standards have gone through extensive due process and everybody who had an opinion had the opportunity to share it, over the years, as the standards were being developed.”
With multiple touch points for this global process, it would be a wonder if outright consensus were possible on everything, and some compromises are inevitable. “The compromise is not there to get to the lowest common denominator,” says Barckow, “but to get to something that really works in the majority of cases for the majority of entities for the benefit of the user.”
On extreme cases where a jurisdiction has, for example, legislation in place that is contradictory to IFRS, he says: “Ideally, we should be aware of that while we are developing the standard and not get told that after the fact.” If the IASB is not able to mitigate concerns around this through the standard-setting process, then some deviation from IFRS may be necessary. To those that want to deviate on the basis of self-interest, he poses a question: “Can’t you give way, rather than having your personal opinion adhered to and letting the general objective be thrown out of the window?”
A set of common rules that make financial statements consistent, transparent and comparable around the globe is a big improvement on trying to reconcile the 200 national generally accepted accounting principles (GAAPs) that preceded them. Although some big economies, such as the US, have not adopted IFRS, 144 countries have, with more knocking on the door, but this does not make jurisdictional tinkering less of a worry. “Although instances might be few and far between, there is a risk of there no longer being a global set of standards and that is what we have to remind ourselves,” says Barckow. “That will keep me awake.”
Assets and liabilities
Taking divergent constituencies of stakeholders along with you is one of the great challenges of standard-setting. “The biggest asset the Board has, in how it sets standards, is its transparent due process,” says Barckow. But, as he adds: “That is as much an asset as a liability because it is time consuming.” There is a limit to how much this global process can be accelerated – for example, by shortening comment periods. “Many jurisdictions are translating due process documents, soliciting comments and feedback and being lighthouses for our work,” he says, noting that all of this takes time.
“I don’t know if there is much you can do apart from communication,” says Barckow. One way the Board addresses this is by tailoring how it communicates with some financial statement users, such as investors. “Accounting, as interesting as it is, is only one dimension of the many that investors have to follow, so if you throw a 200-page document over the fence saying, ‘This is for you. Could you please respond within 120 days. Thank you very much,’ it should not come as a surprise that this doesn’t bode well.”
Changing how the IASB communicates with investors seems to be improving engagement. “It is too easy, in communications, to take the position of the sender and forget about the recipients,” says Barckow. The Board has been working with the investment community through the standard-setter’s Investors in Financial Reporting programme and using ‘investment-speak’ in output such as newsletters. It is also engaging heavily in one-to-ones and small group meetings, bearing in mind those in the investment community who do not want to be heard in the open pit. “I think this proactive approach has created greater appetite in the investment community to engage with the IASB.”
On the horizon
Being proactive could also support Barckow’s vision for a Board that is more agile, timely and better able to respond to megatrends and coming trends and developments. “You could put some of them on a watch list and monitor them more closely as they come closer to you,” he says, “then start working in the background, without formally launching a consultation and seeking counsel from others, just to be prepared.” In case it is needed, Barckow will be carefully assessing options for “a quick reaction device”, that does not take unnecessary shortcuts because, as he observes: “We have due process for a reason.”
That due process includes the Third Agenda Consultation, published in March 2021, which will help to shape the Board’s thinking when determining how to prioritise its activities and what new projects to add to its work plan for 2022 to 2026. What is Barckow expecting? “I’d be surprised if feedback on this consultation is dramatically different to previous ones because everybody tends to follow their particular hobby horse.” If you are in the extractive industry or the pensions industry, then that is probably what you want the IASB to focus on, which results in wide-ranging feedback.
For many IFRS reporters, the big question about what’s coming up may be whether they can expect substantial changes over the next year or so. “There is no imminent new standard coming their way, like IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers, IFRS 16 Leases or IFRS 17 Insurance Contracts,” says Barckow. But there is plenty of maintenance work for the Board to do – such as the post-implementation review of IFRS 9 and monitoring the IFRS for SMEs standard – and plenty of emerging issues for it to consider, such as changing expectations of ESG reporting, the ongoing debate about amortisation of goodwill and a host of technology-related developments.
Many of these issues are surrounded by unanswered questions. What would an international sustainability standards board within the IFRS Foundation mean for the IASB? What if the world prefers to reintroduce amortisation of goodwill? Is a crypto currency akin to a currency, financial instrument, intangible, or what? There are many questions and fast-paced developments for the Board to consider in the coming years and Barckow is focused firmly on the future.
“Standard-setters have been too much concerned about today’s and yesterday’s problems and not concerned enough about tomorrow’s problems.”
About the authors
Nigel Sleigh-Johnson, Director, Technical Strategy Accountability Group
Sally Baker, Technical Manager, Financial Reporting Faculty