The views expressed in this presentation are those of the presenter, not necessarily those of the International Accounting Standards Board (the Board) or IFRS Foundation. Copyright © IFRS Foundation. All rights reserved
IFRS® Foundation
Comparability and Convergence
15 October 2016 Contemporary Accounting Research conference
Gary Kabureck, Board member
Session Overview 2
• Comparability, Consistency and the Conceptual Framework
• Observations on the Research Report
• Implications of the Research Findings
• Relationship of the research findings to planned IASB activities
• Suggestions for future academic research
Comparability, Consistency and the Conceptual Framework 3
• Comparability is an enhancing qualitative characteristic to enable users to understand similarities and differences among items – over time within a reporting entity or between entities.
• Permitting alternative accounting methods for the same economic
phenomenon reduces comparability.
• Comparability is not the same as Consistency. Consistency is the use of the same methods for the same items.
• Comparability is the goal, consistency helps to achieve that goal.
Key message: Comparability ≠ Uniformity. Closer is always better but reported results only need to be ‘close enough’
Observations on the Research Report 4
• Intuitively, the research findings comport with what might have been expected – provides confirmatory value.
• Clearly supports the value proposition of convergence and related joint IASB / FASB efforts.
• Suggests incremental efforts towards full adoption might not be cost justified when there is a large amount of converged accounting.
Implications of the Research Findings 5
• For principles versus rules based accounting regimes. • For the IASB and the FASB
• For the U.S. Securities and Exchange Commission
• For the continuation of local GAAP regimes
• For investors and other primary users of financial reporting
Relationship of the research findings to planned IASB activities 6
• Continued cooperation between IASB and FASB but no joint projects. • Primary near term US outreach will be to the investment community. • Other than professionalism and market forces, there is no binding
mechanism to ensure what is converged today stays converged. General view – convergence is good but not at all costs!
• Keep an eye on the goodwill and impairment projects - both boards are working on. Goodwill is converged today; impairment requirements have similarities but are not converged.
• Agenda Consultation recently completed – four primary themes for the next five years – two are relevant today’s session:
– Focus on implementation support to ensure greater world wide consistent application of IFRS
– Focus on promoting better communication between preparers and investors
Suggestions for future academic research 7
• Expand research methodology to include other countries – Japan would be ideal for many reasons.
• Implications of these research findings vis-v-vis (1) cost/benefit relationships and (2) the laws of diminishing returns when assessing adoption versus convergence.
• What is the tolerable ‘gap’ (if any) between reported results in converged versus adoption environments? How ‘close’ is ‘close enough’?
• Analysis of managerial behaviour in periods leading up to adoption.
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