My firm is trying to research the views of investors and companies on the best way to communicate business performance. In particular we are looking at how performance statements should be constructed to help those communications.
We are conducting a series of one to one interviews with investors and analysts in many parts of the world and that process is nearing completion. However, to gain a comprehensive understanding of your views as preparers of financial statements we have set up an on-line survey.
We have over 200 responses to date, but would really appreciate your personal views. Many thanks for your help.
The IFRS bug is clearly catching. Earlier in the year I wrote about being in Canada and the significant drive in that market to adopt IFRS in full in 2011, despite their national standards including some US GAAP elements and their proximity to US markets. Well, the last few months have seen a wave of activity in other parts of the world.
Korea recently finalised its plans to adopt IFRS in 2011 and the last few weeks have seen similar moves by India and Japan. The effect is to create a second wave of adoption that follows Australia, Europe and others that moved in 2005.
You can imagine the increasing pressures that this must create for US markets where we have already seen proposals to drop the requirement for companies that use IFRS to reconcile to US GAAP. The comment deadline for that consultation expires in September, so if you are a foreign US registrant you should consider responding.
This process will take some time as the initial consultation will need to be followed up with detailed rule proposals. But if there is strong support, we could be looking at US companies having an option to use IFRS in place of US GAAP in 2011, or shortly thereafter.
Share your thoughts on this proposal with us too by email or by commenting here.
To those of us in the Northern hemisphere, August is a traditional time for vacations and a slower pace of life. I know that is not universal and we should spare a thought for our friends in Australia and similar locations where there are a significant number of June year ends. But still - I am glad it's their turn and not mine!
So for some of us it is a good moment to look into the crystal ball and plan for a busy September and onwards. Three things on the current International Accounting standards Board's agenda look set to make the next 12 months particularly challenging at conceptual and at practical levels: revenue recognition, debt and equity, and financial instruments. All of these will be initial discussion papers probably containing preliminary views on the way forwards.
It might be tempting to worry more about exposure drafts than discussion papers, and there are a good number of these scheduled over the same period. But if you want to be influential and need a fundamental change of direction, you stand more chance of moving the debate in the early phases of projects. Securing a significant change between an ED and a standard is much harder as Board members have formed firm views and there is significant resistance to re-exposure that comes with any substantial change of conclusion. So, you might like to use some of your reflection time to work out which project is likely to make the most difference to you and your organisation so that you can plan your involvement in the debate.
Revenue recognition is a major topic and a highly influential metric for those that value companies. When changes are made to revenue recognition policies it often leads to the market amending its conclusions about share values. The current literature seems to have some significant inconsistencies and very little guidance on how to break apart complex transactions with multiple service elements. So this could be the important one if you are a manufacturer as well as a service provider.
Debt and equity is more often in sharp focus for banks and insurance companies where capital structures are keenly looked at by the market and by regulators, but it is not exclusively a financial services industry issue. The current boundary that depends on whether there is a contractual payment obligation has given rise to significant practical challenges. So this could be relevant to you, particularly if you already have convertible debt and other more complex financial instruments in issue.
Financial instruments might otherwise be labelled as son of IAS 39. The discussion paper is likely to debate an extension of fair value accounting and significant changes to hedge accounting approaches. IAS 39 was the most hotly debated proposed accounting standard in recent times. But it has also been heavily criticised for its extensive rules and multiple accounting models that make it exceedingly complex to apply in practice. We can expect similarly intense interest in the successor standard.
Let me know which of these issues has most impact on you and what changes, if any, you think would improve reporting by email or by commenting here.
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