Agenda International Standard Setting for Financial Reporting - PDF document

Agenda International Standard Setting for Financial Reporting • Convergence and the Role of National Standard Setters – National and IFRS – IASB/FASB [and Japan] • Conceptual framework Ian Mackintosh • National standard setters in an IFRS world Chairman, ASB • IFRS and smaller companies www.frc.org.uk/asb 1 2 Why converge? How to converge (nationally) • Comparability • ‘Big bang’ • Reduced compliance costs, including abolition of – but standards constantly changing • Phased approach reconciliation (for larger companies) • Different standards do not make sense – but how long? – And how to phase? • Convergence means same words, same meaning – are any changes justifiable or necessary? 3 4 Convergence: IASB/FASB IASB/FASB convergence • Product to date: • Both bodies devoting significant resource – Share based payment • IASB standards notably influenced by US style and – Discontinued operations – Financial instruments (most of) level of detail – Business combinations (Phase I) • More evidence of US influence on IASB than vice • Coming soon – Business combinations (Phase II) versa – Fair value – Segments • Must we try and influence both bodies and not just – Tax the IASB? – Borrowing costs – Grants – Comprehensive income – Revenue recognition 5 6

Conceptual framework Conceptual framework: two camps Objective of financial Make buy/sell/hold Assist decisions by • Fundamental importance statements decisions portraying financial Future cash flows performance and • Fresh work is overdue position • Frameworks are incomplete: Perspective of financial Forward looking Historic statements – Measurement Primary qualitative Relevance Reliability characteristic – Presentation Markets Perfect Imperfect Convergence! Measurement basis’ ‘Fair value’ Cost (but not nec historical) Comprehensive income Meaningful Not meaningful Transactions Not very important Important 7 8 Conceptual framework Conceptual framework : Particular Matters • This is a summary and a caricature • Objectives • No-one knows all the right answers • Users • Debate tends to be polarised—thoughtful people will • Qualitative Characteristics do better! • Due Process • User Needs in Different Types of Entities • Standard Setters/Preparers 9 10 National standard setters National standard setters : in an IFRS world Working Together • Communication • NSS – With constituents • WSS – With IASB and FASB – With other standard setters (and EFRAG) • Europe • Interpretations • Thought leadership • ‘Domestic issues’ (including smaller companies and public benefit sector) 11 12

IFRS and smaller companies International Standard Setting for Financial Reporting • IFRS focus needs of investors in large, listed companies—especially international companies and the Role of National Standard Setters • Costs of preparation may be too great for smaller companies • User needs may be different Ian Mackintosh • IASB SME project still at an early stage—few specific Chairman, ASB proposals • Can smaller companies wait? • May have a major effect on national convergence www.frc.org.uk/asb 13 14