By Tom Ravlic

Accounting standard setters need to be careful to avoid creating new problems for preparers of accounts as they strive to provide guidance to deal with immediate problems, says the new chairman of the International Accounting Standards Board (IASB).

Andreas Barckow officially took over from Hans Hoogervorst as the IASB’s chairman in July 2021, at a time when standard setters have been under pressure to provide guidance on some of the reporting challenges posed by the coronavirus pandemic.

“Acting quickly and adhering to due process will always be a balancing act, and there is no natural blueprint that we can follow,” says Barckow, a former member of Deloitte’s expert IFRS group in Germany and former president of the Accounting Standards Committee of Germany, who studied at Monash University in 1993.

“What is important, though, is that by acting faster on a matter we do not cut corners, as it could entail further issues arising down the line for our stakeholders.”

He points to the IASB’s work during the coronavirus pandemic, which had two key components: the publication of educational materials on how to apply the accounting standard on leasing and financial instruments.

There were also specific amendments made to the leasing standard in order to provide for circumstances in which entities are given rent concessions from landlords as a result of the pandemic.

Applying IFRS standards to new developments

Amendments to accounting standards may be necessary in some circumstances, the new IASB chair observes, but not every single innovation in the marketplace – including the emergence of new digital assets such as digital currencies – will require immediate tweaks to accounting standards.

“The digital age is about innovation, and so we as standard-setters have a duty to keep up the pace by monitoring evolving issues and acting on them when appropriate. That is not to say that every new development requires prompt action, as many of our principles should still be capable of allowing companies to find an appropriate answer (and if only by analogy),” Barckow explains.

Picture: Andreas Barckow, IASB chair.

“The digital age is about innovation, and so we as standard-setters have a duty to keep up the pace.”

“Where they do not, we obviously should act. In order to be prepared we should regularly scan the horizon for any new developments, products and events, so that we are ready to act when needed.”

Mapping to a taxonomy of standards

Barckow has an interest in the digitisation of financial reporting, and he believes that it is not moving fast enough. One of the reasons for this, the IASB chairman observes, may be the cost of digitisation to the entities that prepare financial statements.

He says the greater benefits from digitisation would come from having a chart of accounts that map completely to a taxonomy for accounting standards, but there are some obstacles that stand in the way of analysts, academics and journalists being able to get into the fine detail of the accounts.

“The biggest benefit would arise if an entity’s chart of account is mapped fully to the taxonomy of the standards. To my knowledge, there is no jurisdiction that has gone down that path,” says Barckow.

“The biggest benefit would arise if an entity’s chart of account is mapped fully to the taxonomy of the standards.”

“This means that any tagging of financial information occurs at a higher and, thus, more aggregated level, which conflicts with the primary benefit of allowing for greater disaggregation by going digital.”

Accelerating the digitisation of financial reporting

Barckow notes that the IASB can help the process of digitisation along by ensuring it has a current taxonomy and that the IASB is reviewing its taxonomy as standards are amended.

It is not enough for the IASB to do this work and the chairman points to the role individual jurisdictions can play in ensuring digitisation of reporting becomes the norm.

“The IASB is already investigating the entire digital landscape and any potential changes this may bring to its standard-setting work,” Barckow says.

“What would assist us would be having more jurisdictions requiring the use of our taxonomy so that we get consistency in the electronic version of IFRS financial statements.”

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