ACCOUNTANCY FUTURES: CORPORATE REPORTING IFRS
Global momentum While a large and growing number of jurisdictions have adopted International Financial Reporting Standards, others – notably the US – still require persuading
t is 11 years since the European Union agreed to adopt International Financial Reporting Standards (IFRS) for the consolidated accounts of listed companies. In that short space of time, the number of jurisdictions using IFRS has risen to more than 100. As International Accounting Standards Board chairman Hans Hoogervorst told ACCA’s last International Assembly, the IASB ‘is well along the path to becoming the global standard-setter’. According to Deloitte, which collects comprehensive information on convergence through its IASplus website, 128 jurisdictions now permit or require IFRS for domestic-listed companies and there are just 25 jurisdictions where IFRSs is not permitted. The IFRS Foundation recently completed the first phase of its own project to assess the global adoption of IFRS and found that of the G20 nations plus a further 46 jurisdictions, 95% had made a public commitment supporting IFRS as the single set of financial reporting standards suitable for global adoption. The IASB’s ultimate aim is to develop a single set of high-quality standards for use by constituents around the world, regardless of the size of their capital market. For emerging economies in particular, the standards are seen as critical. ‘Many of these rapidly growing economies have the ambition of developing their own global financial centres,’ Hoogervorst told the ACCA Assembly, ‘and the use of IFRS is increasingly seen as a prerequisite for such financial centres to exist.’ As such, the IASB has taken specific steps to make sure that the needs of economies beyond the largest ones are fed into the standardsetting process. The IASB itself now includes several representatives from the BRIC (Brazil, Russia, India and China) and similar nations, including the Brazilian Amaro Luiz de Oliveira Gomes, Chung Woo Suh from South Korea and Wei-Guo Zhang, former chief accountant at the China Securities Regulatory Commission. A similarly broad range of stakeholders is represented on the trustees and advisory groups, while the Emerging Economies Group (EEG) provides a forum for the issues that such economies face in applying the standards.
PG38 EDITION 07
In terms of the major markets that are on the rise, Brazil has adopted IFRS and Russia is committed to full transition for all companies by 2018 (it already requires IFRS for the consolidated statements of public interest entities). China introduced its Accounting Standards for Business Enterprises (ASBEs), which are substantially converged with IFRS, in 2007, and the country is continuing to work towards further convergence. India, along with Pakistan and Thailand, has adopted selected IFRSs, but significant differences remain between some IFRSs and national standards. COMPLICATED PICTURE This raises the most important point – that while the momentum for a global accounting language seems to be gathering pace, ‘convergence’ comes in many forms. Full IFRS adoption is the simplest option for countries that have no (or insubstantial) national GAAP of their own, but for developed countries with an established GAAP, IFRS convergence is
Case study: Indonesia Indonesia has been converging with IFRS since 2008. Indonesian GAAP is very close to IFRS and we aim to continue working toward full IFRS adoption, although a decision on the target year has not been made. As more Asian countries have decided to adopt, or converge with, IFRS, implementation challenges will increase. Asia is more fragmented than Europe, with a different level of maturity in its accountancy profession and capital markets, as well as different socioeconomic characteristics, legal framework and business culture. In Indonesia, the main challenge is the multi interpretations to the principles-based standards among accounting practitioners. The Indonesian Financial Accounting Standards Board (IFASB), as a member of the Asian-Oceanian Standard-Setters Group (AOSSG) and EEG Working Group, has been very active in discussing countryspecific accounting issues with the IFRS interpretations committee (IFRIC). With the current mechanism, however, it is very difficult for national standard-setters (NSS) to seek IFRIC resolution as the deliberations can be time consuming. Accounting for land rights and telecoms towers are two examples of Indonesian issues raised by IFASB recently. We need a formal mechanism between IASB/IFRIC and NSS, which allows NSS to develop its own interpretation should a country-specific issue genuinely emerge. Rosita Uli Sinaga is chairperson of the IFASB, senior partner at Deloitte in Indonesia and accounting lecturer at the University of Indonesia. Ersa Tri Wahyuni is technical adviser at IFASB and PhD researcher at Manchester Business School