Now that the International Accounting Standards Board (IASB) has formally launched its fourth agenda consultation, what better time to look back at what happened with the last one? Three years after the IASB completed the consultation on that third agenda, can we say that significant progress has been made?
The IASB shortlisted seven research projects in March 2022 and then chose two – cashflow and intangible assets – to add to its six existing projects. The cashflow project was formally launched earlier this year and I doubt we will see any externally visible progress during the rest of 2025. My guess is that implementation is a minimum of five years away, despite many investors identifying it as a priority.
I have some reservations about IFRS 18, but overall I think it is a major improvement from an investor’s perspective. It is hard to be precise about the evolutionary timetable, but I think we can trace IFRS 18 back at least 10 years. And it doesn’t come into force until 2027. We therefore arrive at a rule of thumb that a new project will typically take at least 10 years to evolve into a standard.
I do not think that recent standards pass this test
One might imagine that after a decade-long gestation period, the resulting standard would be extremely robust. This is obviously a very personal observation, but I do not think that recent standards pass this test. There have been too many weaknesses for the IASB’s post-implementation reviews (PIRs) to address, and the PIR process itself has no defined timetable.
Bloated backlog
There are currently around 27 projects in the backlog. Some are of major importance to investors – business combinations and cashflow, for example – and others seem to me to be a lot less critical. I assume that all will require some dedicated resourcing, thus diluting the time available for high-priority projects.
Even for high priorities, the timetables seem very extended. I helped to draft a comment letter on business combinations in mid 2024, and the current goal is to decide the ‘project direction’ in 2026. It is hard to win investor engagement when it takes two years just to decide the project direction.
Top three
Personally, my priorities for the IASB would be to address cashflow, business combinations and intangibles. Two of these have been major weaknesses for decades, and sooner or later we have to have a proper conversation about what to do with intangibles.
I think that many accounting bodies have struggled to get investors involved in the standard-setting process. This is partly due to the glacial timetables but it is also down to long and turgid questionnaires. There is an art to designing a good survey to ensure the answers are useful. The questions should be short, few in number and unbiased. Even then, outreach usually works better with targeted interviews rather than surveys, which can tax the life force of the participant.
Should the IASB attempt to do less, do it better and move faster?
I sometimes wonder how the Scottish independence referendum would have turned out if the question had been: ‘Do you want Scotland to enjoy a happy, prosperous future as a free country or do you want it to stay shackled to the rest of the UK?’ Asking the appropriate question is much harder than it looks.
Coming back to the agenda consultation, I think the IASB is potentially asking the wrong question. I have been told that the last consultation received more than 70 suggestions for new projects, which is not surprising.
My suggestion is simple but radical. I would like to ask three questions. Should the IASB attempt to do less? Should it do it better? And should it move faster? I think the answer to all three would be a resounding yes.
