EC Conference FINANCIAL REPORTING IN A...
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Standing for trust and integrity EC Conference FINANCIAL REPORTING IN A CHANGING WORLD 7 and 8 May 2009 How to keep financial reporting relevant? Presentation by Hans van Damme, FEE President
Transcript of EC Conference FINANCIAL REPORTING IN A...
Standing for trust and integrity
EC ConferenceFINANCIAL REPORTING IN A CHANGING WORLD
7 and 8 May 2009
How to keep financial reporting relevant?
Presentation by Hans van Damme, FEE President
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Federating Member Bodies
43 professional institutes of accountants 32 European countries, including all 27 EU
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Representing the profession
Combined membership of more than 500.000 professional accountants
In public practice, small and big firms, government and educationAll contributing to a more efficient, transparent, and sustainable European economyRecognising the public interest
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Recent relevant FEE pronouncements
FEE Policy Statement on Dynamic Provisioning
Submissions on the Financial Crisis related issues: FCAG, IASB, EC, …
FEE Position on the EC Consultation Paper on Review of the Accounting Directives
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Presentation
A. Need for Global Standards
B. Needs of providers of information
C. Needs of users of information
D. My vision for the future: How do we keep financial reporting relevant?
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A. Need for Global Standards
High-quality principles-based standards
General purpose financial statements vs regulatory financial statements
Financial stability
Regulatory adjustments
Transparency
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A. Need for Global Standards
Reducing Complexity of financial statementsAre financial statements still a communication tool?Stewardship role of financial statementsAre disclosures well balanced?
• Is there a need for a disclosure framework?• How to identify the relevant and more meaningful
disclosures?
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A. Need for Global Standards
Need for a proper due processLevel Playing Field is not the holy grail
• Risk of a race to the bottom/lowest common denominator• Political pressure: where does it needs to come in and
where not? • But Accountability • Independence of the standard setter needs to be
guaranteed
Focus at good quality: respecting full due process• Always some form of due process • Avoid ad-hoc changes • Need for a stable platform
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A. Need for Global Standards
Convergence: to move towards a new modelConvergence to the best standards? Developing new standards based on best and more recent thinking Cooperation and coordination between standard setters and other financial reporting stakeholders Call on G20 to support new concept of convergence
IASB Work Plan and agenda setting Is the work plan well adapted to the current situation of the crisis Are all projects relevant? Need for appropriate external consultation on the agenda
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B. Needs of providers of information
Timeliness Relevance vs Complexity
Relevance for internal purposes (general management) External reporting through the eyes of management
Information overloadReliability and Credibility of information
AuditabilityGlobal reporting standards require Global auditing standards: ISAs
• ISA adoption in Europe• ISA implementation in Europe
Financial statements: more than a compliance exercise
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C. Needs of users of information
Users may have other resources of information Information overload: do users need a helicopter view of the information
How to select the key information Presentations separate from financial statements
Value of an audit: confirmation of the financial statements reflecting the past What is relevant for users: should information be tailored for specific user groups
Stakeholders vs ShareholdersUsers often ask for more information about fair value
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D. Vision for the future: How do we keep financial reporting relevant?
Current crisis has shown that financial reporting is still highly relevant and we need to ensure that it continues to be by:
Being responsive to the needs of investors
Ensuring financial reporting reflects economic reality and information is meaningful for communication
• Principles-based standards
• Reducing complexity
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D. Vision for the future: How do we keep financial reporting relevant?
Current crisis has shown that financial reporting is still highly relevant and we need to ensure that it continues to be by:
Communication with shareholders, investors and stakeholders• Building on strengths audited financial statements
Management: accountable for stewardshipInvestors and others: confirmation that information provided is reliable
• Acknowledge limitations of financial reportingMD&A, narrative reportingRisksProactive informationSustainability and other non-financial information
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D. Vision for the future: How do we keep financial reporting relevant?
Current crisis has shown that financial reporting is still highly relevant and we need to ensure that it continues to be by:
Focusing standard setters efforts on
• Global solutions
• Key areas to be focused on
• Rethink of objectives of convergence
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Standing for trust and integrity
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