Views on improving the integrity of global capital markets
22 November 2011

Investor Priorities and Shaping the IASB Agenda for the Next Decade

The last 10 years have seen wide-ranging and intense activity on the accounting standard-setting front, including the convergence project to reduce existing differences between international accounting standards and U.S. GAAP as well as financial crisis-related projects. The last decade has clearly shown that there is an interplay between accounting standards and the prevailing state of the economic environment. At the same time, there are innumerable parties with vested interests in the standard-setting process, which, in certain instances, has contributed to ad-hoc standard setting. Over the next decade, there is need to shift away from this pattern; a well-defined agenda can potentially be a useful first step towards achieving standards that primarily address established user needs.

Investor Update Webcast

As part of the process of seeking investor input for the IASB agenda for the next decade, the International Accounting Standards Board (IASB) and CFA Institute recently held a joint webcast. During the webcast, IASB board member Jan Engström exhorted investors to make a greater contribution than in the past towards defining the IASB’s standard-setting agenda.

The webcast covered a range of issues, including the history of International Financial Reporting Standards (IFRS) standard setting during the last 10 years. Hilary Eastman, CFA, who heads the IASB’s investor liaison activities, highlighted how investor input has tended to be lower than is desirable. She also gave an overview of 23 potential future projects and suggested how investors can get involved in prioritizing what needs to be included in the agenda. For example, investors and other users of financial reporting can respond to an online IASB survey designed to obtain input from the investor community on which areas of accounting are in the most urgent need of improvement. The survey closes on 19 December.

Further input can be provided to the IASB by writing comment letters in response to the Agenda 2011 consultation document. The closing period for receiving comment letters is 30 November. In broad terms, the IASB is seeking input from stakeholders on how to prioritize between developing new IFRS standards and maintaining existing IFRS standards, and how to allocate resources accordingly.

During the recent webcast, CFA Institute emphasized the importance of several key projects such as the conceptual framework, disclosure framework, and financial statement presentation. We also put forward a framework for categorizing and prioritizing the 23 potential future projects. There are four key proposed categories:

  • Key projects for investors with an established case for change for the benefit of investors (e.g. financial statement presentation) 
  • Deferred projects where significant standard-setter effort expended (e.g. financial instruments with characteristics of equity) 
  • Projects with broad applicability (e.g. post-employment benefits, including pensions and share-based payment)
  •  Projects with limited scope (e.g. emissions trading schemes)

Additionally, various stakeholders have expressed that updates to existing accounting standards should be premised on established evidence of adverse economic consequences, low usability, or shortfalls in the operational nature during the implementation of existing standards. As a result the IFRS Foundation, through its IFRS Strategy consultation, and the IASB, through the Agenda consultation, have sought stakeholder feedback on whether they should have research capacity. CFA Institute has been supportive of the establishment of such research capabilities and evidence-based standard setting.

The stakes are high given the volume and complexity of the work ahead for IASB, and other stakeholders are sure to weigh in with their priorities. Investors should take heed of the opportunity to make their voices heard as well, and we encourage practitioners to use our webcast as a resource for background information and then take the IASB survey.

About the Author(s)
Vincent Papa, PhD, CPA, FSA, CFA

Vincent Papa, PhD, CPA, FSA Credential, CFA, was the director of financial reporting policy at CFA Institute. He was responsible for representing the interests of CFA Institute on financial reporting and on wider corporate reporting developments to major accounting standard setting bodies, enhanced reporting initiatives, and key stakeholders. He is a member of ESMA’s consultative working group for the Corporate Reporting Standing Committee, EFRAG user panel, and a former member of the IFRS Advisory Council, Capital Markets Advisory Committee, and Financial Stability Board Enhanced Disclosure Task Force. Prior to joining CFA Institute, he served in investment analysis, management consulting, and auditing roles.

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