Mr Mackintosh discussed the importance of global standardisation in financial reporting, a goal shared by almost every country in the world, and by pretty much every international institution responsible for the global financial system, as well as by the participants who operate within those markets—namely those who are seeking capital and those who provide it. Mr Mackintosh mentioned the remarkable progress that has been made towards the goal of global standards since the formation of the IASB back in 2001.
"Transition from national to international capital formation presents huge challenges to policymakers. The recent global financial crisis provided a graphic illustration of how national or even regional approaches are no longer sufficient in managing globally interconnected capital markets.
This globalisation in capital formation has served as the genesis for the move towards globalisation in standards for financial reporting. If investor and investee are increasingly likely to be sitting on different sides of the world, it makes no sense for each and every country to maintain its own different set of accounting standards.
Dealing with multiple reporting requirements adds cost to multinational companies with international subsidiaries. It also impedes the work of the regulatory community, who require a globally consistent measurement of financial performance on which to base other regulatory initiatives. National differences in financial reporting impede the efficient allocation of capital by adding unnecessary risk and cost to investors.
Shortly after the formation of the IASB back in 2001, the EU, Australia, New Zealand, Hong Kong and South Africa led the way with landmark decisions to transition from national accounting standards to IFRSs, at the beginning of 2005. That first wave of IFRS adopters was followed by a second wave of countries transitioning to IFRS, including Brazil, Canada, Korea, Mexico, Russia and Taiwan.
As of today, more than 100 countries require the use of IFRS for all or most listed companies, while most of the remaining countries permit the use of IFRS in some shape or form. Almost every country in the world has made a public commitment to global accounting standards and almost all have stated a view that IFRS adoption is the best way to achieve that commitment. The IASB recently completed a major piece of research looking into the use of IFRS around the world. That data has been crosschecked and validated by the relevant authorities around the world and so has an extremely high degree of veracity.
The use of IFRS is extensive even among the few countries that have yet to endorse IFRSs. In the United States, for example, US investors are prolific users of IFRS compliant financial statements, while the SEC allows international companies listed in US markets to report using IFRS. So far, more than 450 such companies have already taken the opportunity to do so. Japan has chosen to allow a market-driven approach to the use of IFRS. The Japanese authorities recently allowed most publicly listed companies to voluntarily adopt IFRS if they chose to do so. So many companies have taken up that option that it is expected that companies representing around 20 per cent of the market capitalisation of the Tokyo Stock Exchange will be reporting using IFRS by the end of next year.
Although it would be tempting for the IASB to claim credit for the spread of IFRS, in reality this has occurred because policymakers in countries recognise the compelling need to move to standardise on a globally consistent language for financial reporting. One standard, applied on a globally consistent basis. Some have said that a competitive or decentralised method of global standard setting would be better. Nations or regions would set standards and various jurisdictions would adopt the best of them. The problem with this is that it would take away the consistency and comparability that one set of global standards offers.
IASB's role in this process is to ensure that IFRS as global standards meets the needs of stakeholders. IFRSs must be of the highest quality, developed through an inclusive and transparent due process. The IASB needs to work in close cooperation with others to encourage application of those Standards on a globally consistent basis."
Full speech
© IASB - International Accounting Standards Board
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