Financial reporting / International

April 1, 2013

  The IFRS Foundation’s departure from requirements initially proposed in November could clear the way for FASB membership in a new global forum of national and regional standard setters.

Promoting IFRS adoption will not be a prerequisite for standard setters to participate in a new forum the IFRS Foundation is forming to advise the IASB on technical standard-setting issues.

Documents showed that the IFRS Foundation is dropping the proposed requirement. This move and other changes in language from the original proposal could facilitate FASB’s participation in the forum.

The changes were formalized as the IFRS Foundation released documents that requested applications from potential participants in the Accounting Standards Advisory Forum (ASAF).

A feedback statement on the IFRS Foundation’s proposal to establish the ASAF described the changes. The foundation is requiring national and regional standard setters that wish to participate in the forum to sign a Memorandum of Understanding (MoU) with the foundation. The feedback statement is available at tinyurl.com/awufkma.

In an Invitation to Comment (ITC) released in November, the foundation proposed that forum participants agree to make their best efforts to promote the endorsement or adoption of IFRS in full and without modification over time. The new document says no such commitment will be required.


  Financial statement preparers’ concerns about disclosure overload came through loud and clear in a survey recently conducted by the IASB.

Most preparers participating in the survey said the primary problem with the way financial information is disclosed is that disclosure requirements are too extensive, and more needs to be done to exclude immaterial information.

Respondents from Africa, Asia, Europe, and North America participated in the survey. About half of the respondents were preparers, and about 1 in 5 was a financial statement user.

More than 80% said improvements could be made to the way financial information is disclosed. Half of those respondents said improvements are needed across all parts of the annual report, not just the financial statements.

Many financial statement users said preparers could do more to improve the communication of relevant information in financial statements instead of leaving users to sift through large amounts of data.

A variety of views on the causes of disclosure overload were identified. Some respondents said accounting standards could be improved. Others said preparers, auditors, and regulators are approaching financial reporting as a compliance exercise rather than as a means of communication.


  A report by U.K. researchers found inconsistencies in compliance with certain impairment disclosure requirements across jurisdictions in Europe, which suggested that IFRS are not being evenly applied across jurisdictions.

IASB Chairman Hans Hoogervorst said more-consistent application remains a worthwhile goal that requires the attention of regulators, auditors, and standard setters. But he said that even in the presence of inconsistencies, worldwide adoption of IFRS remains the best way to arrive at global comparability between companies.

“The truth is that even an unevenly applied global standard provides much more global comparability than an equally unevenly applied multitude of diverging national standards,” Hoogervorst said at the unveiling of a report by three researchers at the Cass Business School at the City University of London. “Without a global standard, there is absolutely no chance you will ever arrive at global comparability.”

Researchers Hami Amiraslani, George Iatridis, and Peter Pope studied impairments recognized at 4,474 listed companies from the European Union, Norway, and Switzerland. Their findings included:

  • Compliance with some impairment disclosure requirements varied across European countries, which suggests uneven application of IFRS.
  • Companies operating in countries with strong regulatory and institutional infrastructure, such as the U.K. and Ireland, are more likely to exhibit high-quality impairment reporting.
  • Companies in jurisdictions with strong regulatory and enforcement settings recognize economic losses in a more timely manner than companies located where enforcement is weaker.


“Ultimately, IFRS appear to have had a significant and positive impact on the financial reporting practices of many reporting companies across Europe,” the researchers wrote. “However … there is scope for further improvement in the application of IFRS requirements.”

The report is available at tinyurl.com/d7aaevm.


  The International Public Sector Accounting Standards Board (IPSASB) released the first four chapters of its conceptual framework for public-sector general-purpose financial reporting. The chapters describe the objective of financial reporting by public-sector entities as providing information to users for accountability and decision-making purposes.

The partial release identifies service recipients and resource providers as the primary users of general-purpose financial reports (GPFRs) of public-sector entities.

The remainder of the framework will be released upon completion.

The chapters identify the qualitative characteristics of information included in GPFRs, and the constraints on that information. The characteristics are:

  • Relevance.
  • Faithful representation.
  • Understandability.
  • Timeliness.
  • Comparability.
  • Verifiability.


Materiality, cost/benefit, and balance between the qualitative characteristics are identified as constraints.

In addition, the chapters identify key characteristics of a public-sector reporting entity, as well as the role of the conceptual framework in the development of International Public Sector Accounting Standards and Recommended Practice Guidelines. These chapters are available at tinyurl.com/bemyox3.

Additional chapters under development will address the definition, recognition, and measurement of the elements of financial statements, and presentation in GPFRs. The IPSASB develops standards, guidance, and resources for use by public-sector entities around the world.

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