Comments from ACCA to the International Accounting Standards Board, November 2011.
We very much support the IASB consulting on its agenda or work plan. This is in the public interest and that of constituents, allowing for greater input into the work and priorities of the IASB. In our view a consultation every three years is too long an interval. An annual review and consultation on the agenda should be an integral part of the due process to ensure that the projects undertaken by the IASB continue to be considered to be significant enough to warrant attention and are relevant to the widest range of stakeholders. The IASB should continue to consult with the Trustees and the IFRS Advisory Council, but we do not consider this an adequate substitute for public consultation. It is not possible for the Advisory Council with around 50 members to represent the full range of stakeholders on a global basis.
In determining the priorities for its future work IASB needs to put in place a rigorous and evidence-based system for deciding
We are concerned that the current consultation will lead to a mass of competing priorities being suggested by constituents across the world and the final decisions overly swayed by the existing influence of the bodies submitting ideas and by the individual preferences of the board members. As a global standard setter IASB must have a rigorous and rational basis for choosing which issues it tackles from the range submitted by different countries or sectors.
IFRS are a reasonably complete set of standards which have already been implemented by a large number of companies and will over the next few years be taken up by a further large group. In particular the greatest significance must be given to demonstrating the need for a new standard dealing with a subject. The default position should now, therefore, be one of no change unless one of the following criteria are met to an unambiguous and decisive extent.
Having met at least one of these criteria, the costs and benefits of change must be considered and the net advantage needs to be substantial. This is likely to mean that the issue is both prevalent and significant, in the sense that it would produce the potential for material misunderstanding of many financial statements.
Each of these steps needs to be justified not only on the basis of representations made as part of this consultation but on the basis of research and objective evidence. To achieve this IASB needs to develop methodologies for better:
The current agenda selection criteria in the due process handbook need to be revised.
We agree with the importance of the activities proposed as maintenance of the existing IFRSs in the consultation document.
Post-implementation reviews of standards will be important to assess the effectiveness of the many changes to the standards that have been made and are in prospect. In our submission on the constitutional review we noted that it might be that these are best done by a function other than, and independent of, the IASB itself, given that such studies might amount to an assessment of the effectiveness of the standard setter's work. We also think that two years after the application of standards may be too soon to assess properly the effects.
We also agree that the IASB needs to devote sufficient resources to try to improve the consistent implementation of IFRS.
We accept that the existing programme of new standards should be completed, that is:
Beyond that the developing of new standards or making major amendments to existing ones, need to be based on the agenda criteria and process set out above. The IASB needs to conduct this evidence-based rational assessment and prioritisation of the different possible projects that it might undertake.
We will not pre-empt the conclusions of that assessment. However we would make the following observations.
The basis of choosing projects on the grounds of convergence would not meet the criteria we have set out. The further development of global standards needs to be via the adoption by countries of a single set of standards such as IFRS and not by trying to make different sets of standards more similar.
A major area of proposed activity is in revising the conceptual framework. We recognise the importance of the framework in developing the standards on a coherent and consistent basis. However the framework is not something which has to be directly applied by IFRS companies. We also agree that there are significant gaps in the current version for example on measurement (choosing between historical cost, fair value etc.). We note that the new framework is a joint project with FASB to aid convergence and the whole convergence agenda in our view should be given less priority. We are also concerned that a new framework might trigger a perceived need for a whole host of potential changes to the standards to align them with it and eliminate standards not in line. We would prefer to see a framework revision limited to any necessary updating and the remedying of gaps, rather than wholesale re-writing.
Applying the criteria we have proposed would probably qualify the following to be considered and prioritised: