ThinkTWENTY20

In a speech delivered December 7, 2021, to delegates at the AICPA and CIMA Conference on Current SEC and PCAOB Developments in Washington, Andreas Barckow, Chair of the International Accounting Standards Board (IASB) said that, given the role IFRS Accounting Standards play in United States – and worldwide – he would focus on three strategic topics: sustainability, the IASB’s current and future work program and convergence.

He began with sustainability, saying “the principle-based nature of IFRS means that sustainability issues such as climate change and other emerging risks are already covered by our existing requirements, even though such risks are not explicitly referenced—companies are required to consider sustainability-related matters in their financial statements when their effect is material to users of the financial statements.”

About a year ago, the IASB published educational material that highlighted the potential relationship between current IFRS requirements and climate-related matters. “The bottom line is that even if a Standard does not say ‘this applies to risks and obligations arising from climate-related matters, too’, those requirements need to be considered.”

Sustainability has become a mainstream topic for every company board of directors, Barckow said. “The topic is making its way from the investor relations and communications functions straight to the finance department, and for good reason – it is here where robust processes and controls resides. So, for those involved in financial reporting, let me assure you – sustainability is going to become part of your day job – if it isn’t already!”

Barckow noted that the job of the new the International Sustainability Standards Board (ISSB) is to develop a comprehensive global baseline of investor-focused, sustainability-related disclosure standards for the global capital markets. “To facilitate a running start of the new Board, the ISSB will benefit from recommendations to create two standards – one on climate-related disclosures and one on general disclosure. These recommendations – or prototypes—have been developed in a joint effort by the IASB and leading investor-focused sustainability organizations.

While both the ISSB and the IASB will be independent, he said, “our Trustees have made clear that the two Boards are expected to work in very close cooperation to drive compatible reporting from the outset. This is a message that we have also heard loud and clear from our stakeholders and advisory bodies – connectivity between accounting requirements and sustainability disclosure requirements is essential. The left hand must work in sync with the right. Hence, we will strive to make our Standards compatible and complementary – to facilitate seamless reporting by companies to provide investors with a comprehensive, decision-useful set of information.”

He pointed out, however, that there is also clear delineation between the boards’ responsibilities. “The IASB is predominantly focused on reporting transactions and events that have taken place up until the reporting date; the ISSB’s focus is on risk and opportunities that could impact the company’s future value and cashflows. We must work to avoid gaps, frictions or unnecessary overlaps in the two boards’ literature. The two types of information should neatly fit together like two pieces in a puzzle.”

Working with the ISSB will be important, Barckow said, “but we also have a lot to get on with ourselves.” Some of the bigger projects on the IASB’s current agenda include Primary Financial Statements, Post-implementation Reviews and Goodwill and Impairment.

He also noted that among the new projects stakeholders have suggested as high priorities for the IASB’s future work plan include work on climate-related risks (including pollutant pricing mechanisms), cryptocurrencies and related transactions, going concern, intangible assets and the statement of cash flows. “We yet need to determine whether these issues are all for us – some items in this list may be better suited to the ISSB or may be areas to be considered jointly – and whether and how we should approach them. I have already confessed that I am very interested in starting work on intangibles. It’s a thorny issue but one where I think transparency is utterly needed and where I am sure we can make improvements.”

For much more of Barckow’s informative speech, read IFRS - Connectivity, core work and convergence—what next for IFRS Accounting Standards?