10 December 2024

Adapting to a changing world—Keynote address by the IASB Chair at the EFRAG Conference

Twenty years ago, the widespread adoption of IFRS Accounting Standards ushered in a new era of transparency in corporate reporting. This pivotal moment was driven by Europe, which took the step of mandating the adoption of IFRS Accounting Standards by listed companies across its member states.

Connecting global markets with a common language

Australia, Hong Kong, New Zealand and South Africa also became early adopters around the same time, reinforcing the momentum. Today, close to 150 jurisdictions require the use of IFRS Accounting Standards for all or most publicly listed companies. Such widespread adoption underscores the global recognition and demand for consistent, high-quality financial reporting standards.

While IFRS Accounting Standards alone do not create competitiveness, they lay the foundation for businesses to compete effectively in the global economy. Transparency has been central to this and, today, it is worth reflecting on our progress and the shared challenges that we must navigate together with our stakeholders. 

Strengthening trust through transparency

Transparency creates trust in financial markets. Let me show you how we are advancing this trust through our mission and our work.

Our mission is to bring transparency, accountability and efficiency to financial markets around the world. We serve the public interest by fostering trust and financial stability within the global economy. The global acceptance of IFRS Accounting Standards as the common language of financial reporting across borders demonstrates this trust in action.

Let me highlight concrete examples from this past year that demonstrate how this common language translates into real-world benefits.

We reached a significant milestone this year with the publication of IFRS 18 which sets out requirements for presentation and disclosures in financial statements. This Standard represents the most significant change to the way financial performance is reported since IFRS Accounting Standards were introduced. IFRS 18 introduces three sets of requirements to improve companies’ reporting of financial performance:

• First, companies will use a consistent and improved structure in their income statements with defined categories and subtotals, making comparisons easier for investors.
• Second, IFRS 18 will also enhance the transparency of management-defined performance measures.
• Third, it requires a more useful grouping of information in the financial statements.

These improvements will provide investors better information about companies’ financial performance and consistent anchor points for their analyses.

Our commitment to transparency also extends to ensuring that our existing Standards meet their objectives. This year, we concluded post-implementation reviews of two major Standards: one on the impairment requirements in IFRS 9 relating to financial instruments and the other on the revenue Standard, IFRS 15. These reviews confirmed that both Standards are providing investors with useful information. This real-world validation helps us ensure that our Standards are facilitating the reporting of transparent and trustworthy information in today’s unpredictable economic environment.

Acknowledging diversity in a connected world

Transparency and trust must be coupled with a deep understanding of diverse economic realities and priorities.

Our global reach means we need to be cognisant of the diverse stakeholder needs in economies with vastly different conditions. Different jurisdictions and regions are at various stages of economic development and will naturally have differing priorities. While our mission to help investors to make good capital allocation decisions receives universal endorsement, the practical reality can look very different depending on where you are from.

For example, some jurisdictions may be grappling with geopolitical and economic insecurity while others want to prioritise technological innovation to drive growth. These diverse economic realities influence how our Accounting Standards are implemented and understood. In this context, European perspectives on financial reporting are undoubtedly important but they represent just one part of the global landscape. We have to recognise and respect diversity and ensure that all voices are heard.

This brings me to a fundamental principle of our work. To be truly effective as a global standard-setter, we must consider the full spectrum of views that we receive, while remaining sensitive to local and regional issues. Considering diverse views does not mean that we can or that we should address every priority, but it does mean we need a transparent and structured approach to problem-solving.

We put this principle into practice through our open and inclusive process by actively engaging with stakeholders around the globe. Our project on intangibles illustrates this approach: our stakeholders agree that the current accounting for intangibles needs improvement, yet their views differ on both the problems and their solutions. This diversity of opinion is amplified by the rapid pace of change of today’s business world, where more and more companies find that traditional reporting paradigms do not faithfully reflect their business models, particularly when it comes to intangible value drivers. This makes our task both complex and urgent. Any solution we propose must be robust and practical for diverse business models and jurisdictions. In this environment of diversity and change, we are approaching the intangibles project through stakeholder consultation: first, by clearly identifying the problems that need solving, and then by understanding how we should stage our work to deliver timely improvements to the market....

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