07 December 2021

IASB: Connectivity, core work and convergence—what next for IFRS Accounting Standards?

IASB Chair Barckow outlined the IASB’s immediate and future priorities, talked about the growing importance of sustainability issues in financial reporting and shared his views on convergence with the FASB.

Andreas Barckow, Chair of the International Accounting Standards Board (IASB), addressed delegates at the AICPA and CIMA Conference on Current SEC and PCAOB Developments on 7 December in Washington.

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Good afternoon, it is a pleasure to be with you today. My name is Andreas Barckow, and since July this year I have served as Chair of the International Accounting Standards Board, or IASB. The IASB is the independent standard-setting board of the IFRS Foundation, which is responsible for IFRS Accounting Standards required for use by more than 140 countries.

Although US companies are required to use US GAAP, many have international subsidiaries that report using IFRS Accounting Standards. Moreover, US investors investing internationally are prolific users of financial statements that comply with IFRS Accounting Standards. Your views matter to us, so please continue getting involved in our work.

Given the role IFRS Accounting Standards play in United States, I’ll focus my comments on three strategic topics: sustainability, our current and future work programme and convergence.

Sustainability-related financial disclosures

First off is sustainability. It might seem odd for the Chair of the IASB to begin by talking about sustainability. However, the principle-based nature of IFRS Accounting Standards means that sustainability issues such as climate change and other emerging risks are already covered by our existing requirements, even though such risks are not explicitly referenced—companies are required to consider sustainability-related matters in their financial statements when their effect is material to users of the financial statements.

About a year ago we published educational material that highlighted the potential relationship between current requirements in IFRS Accounting Standards and climate-related matters. The bottom line is that even if a Standard does not say ‘this applies to risks and obligations arising from climate-related matters, too’, those requirements need to be considered. Topics covered in the November 2020 educational material include impairment, provisions, and insurance contract liabilities—and some less obvious points like risks arising from financial instruments. I highlight this material as a reminder that climate change risk is an issue for today, not just for tomorrow.

Sustainability has become a mainstream topic for every company board of directors. The topic is making its way from the investor relations and communications functions straight to the finance department, and for good reason—it is here where robust processes and controls resides. So, for those involved in financial reporting, let me assure you—sustainability is going to become part of your day job—if it isn’t already!

Earlier today, you may have heard my colleague Lee White talk about a new sister-board to the IASB, known as the International Sustainability Standards Board, or ISSB. The creation of the new board was announced last month at the COP26 climate conference and welcomed by more than 40 jurisdictions around the world, including the United States. Its purpose is to develop a comprehensive global baseline of investor-focused, sustainability-related disclosure standards for the global capital markets. It will be up to each jurisdiction to decide whether and how to incorporate the global baseline into their own requirements, and there will be no requirement for the jurisdiction to be using IFRS Accounting Standards.

To facilitate a running start of the new Board, the ISSB will benefit from recommendations to create two standards—one on climate-related disclosures and one on general disclosure. These recommendations—or prototypes—have been developed in a joint effort by the IASB and leading investor-focused sustainability organisations. And we are truly delighted that two of these organisations, the Value Reporting Foundation—home of integrated reporting and SASB Standards—and the Climate Disclosure Standards Board will become part of the ISSB.

While both the ISSB and the IASB will be independent, our Trustees have made clear that the two Boards are expected to work in very close cooperation to drive compatible reporting from the outset. This is a message that we have also heard loud and clear from our stakeholders and advisory bodies—connectivity between accounting requirements and sustainability disclosure requirements is essential. The left hand must work in sync with the right. Hence, we will strive to make our Standards compatible and complementary—to facilitate seamless reporting by companies to provide investors with a comprehensive, decision-useful set of information....

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