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Date: 30 September 2019

Where: World Standard-setters Conference, London

Chair of the International Accounting Standards Board (Board) Hans Hoogervorst delivered the opening speech at the annual gathering of accounting standard-setters from around the globe, the World Standard-setters Conference. He called on the standard-setters to ready themselves to contribute with comments to important upcoming consultations from the Board.

Fellow standard-setters. Let me begin by thanking all of you for coming along to this World Standard-setters Conference.Many of you have travelled long distances to get here. We are happy to have you with us, and we will do everything possible to maximise the value of your trip.

This is my eighth WSS meeting. I still remember that first meeting back in 2011, knowing very few faces in the room. Ever since, I have been fortunate to work closely with many of you. In the many platforms where we have been able to meet, we have done some great work together.

Against the backdrop of increased geopolitical friction, where the recent G7 meeting couldn’t even agree on a common statement, our standard-setting community provides an excellent example of what can be achieved when people from all parts of the world work together towards a common goal. In a world where much of the global infrastructure of rules and agreements is breaking down, our global accounting standards are still a source of stability. We have lots to be proud of.

2020 is going to be busy—We really need your help

2019 has been an unusual year. We’ve had a lot on our plate, but relatively few consultations. I am sure it was a welcome breather for many of you! However, 2020 is shaping up to be a big one. We’ve got a lot coming up, and we’re really going to need your help. We’ll need to lean heavily on you, your local knowledge and expertise, and your intellectual horsepower to push forward. You have contributed considerably in the past few years: since 2014, we have received more than 1,100 comment letters from 75 different standard-setters. That equates to about one quarter of the letters we received in that period.

This conference is all about giving you the tools to do that job. Information, resources, and personal relationships with the teams who lead this work. Tell us what you need, and we’ll do our best to provide it.

2020 and beyond

What does our work programme look like? In the next year or so, we’ll have three exposure drafts, two discussion papers and three requests for views.

So, let me give you a top-line introduction to what will land on your desks first. 

Primary Financial Statements

Much of our recent work has focused on improving the communications effectiveness of financial statements—what we call our ‘better communication’ initiative. A core component of this work is the Primary Financial Statements (PFS) project, and we plan to publish an exposure draft at the end of this year.

PFS is all about providing better structure and content in IFRS financial statements. The project has three main elements.

First, we’re looking at introducing new subtotals in the income statement. Both preparers and investors like to use subtotals to better explain and understand performance. The most important subtotal we are looking at is operating profit.

Second, we’re looking at improving discipline around management performance measures, or MPMs. These are performance measures created by the management of a company, rather than anything defined by IFRS Standards. Investors tell us that MPMs can be a good thing, but their use needs more discipline and transparency. So, we’re looking at requiring companies to locate and explain MPMs in a single note in the financial statements. This will make it much easier for investors to find and understand these measures, and to reconcile them back to information contained within the IFRS numbers.

Third, we’re going to improve disaggregation—where some companies lump together different items into a big, single number that’s difficult to pick apart. Again, this will make it easier for investors to analyse information.

If we get this right, PFS could be a game-changer for improving the communication effectiveness of financial statements for investors. After all, that’s why we’re all here. So, we really need your help.Please do engage in this consultation and encourage your own stakeholders to do the same.

Goodwill and Impairment

Next up is goodwill. This project is really about giving investors better information about the motivation for the acquisition and whether those expectations have been met further down the line. Our plan is to publish our views in a discussion paper in February. 

Goodwill is one of the most difficult topics to deal with.Instinctively, many of us feel that the impairment model isn’t great.However, are any of the alternatives any better? To paraphrase Winston Churchill’s quote about democracy, is it the worst possible system—apart from all the others that have been tried?

Goodwill has been debated many times before so there are many well-known arguments. What we’re hoping for this time round is new evidence and insights. Again, we really need you to get people engaged on this. It’s a great opportunity to shape the debate.

Rate-regulated Activities

Next, we have rate-regulated activities. Some companies, for example utility companies, are subject to regulations that say how much and when they can charge their customers. Companies use different accounting models to report the effects of this rate regulation. However, the information currently provided is not complete. Therefore, we have developed an accounting model that will improve the information to investors about what rights and obligations a company has.

Have we got the model right? If not, how should we change it? We’ll publish an exposure draft in the first half of 2020. Again, please get involved.

Other work

I’ve signposted the major consultations we have for next year. But as this slide shows, that isn’t everything. We’re also going to consult on a revised Management Commentary Practice Statement and on our upcoming proposals on Business Combinations under Common Control. Management Commentary is another big one, because it could help provide better information in the front section of annual reports. ESG and intangibles are dominating the headlines right now, so once again we’ve got a great opportunity to help investors make sense of this area.

We’re also going to ask for your views on whether—and to what extent—we should update the IFRS for SMEs Standard to reflect changes in full IFRS Standards. Finally, we’ll kick off a consultation on our future agenda – to be delivered under a new Chair of the IASB, I should add!

In addition to these projects we will continue to support implementation of our new and existing Standards, collaborating with the IFRS Interpretations Committee. I encourage you to keep an eye on the Committee’s work and to engage when it consults on tentative agenda decisions and possible Interpretations.

Close

That’s more than enough to do in a single year. Let me close by once again thanking you for your support and encouragement. I wish you a very good conference.