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Multiple-choice questions

Adam Deller is a financial reporting specialist and lecturer

For many of us accountants, the concept of creating new inventions may not exactly be in our natural wheelhouse. For example, I look back to my design technology exam where the task was to design new bins for a shopping centre, and I designed effectively a cavernous basement with multiple trucks. Surprisingly, I did not pass, but I do maintain that it was still a better idea than a classmate who suggested a rapid rotating blade.

While the financial reporting specialists may not be known for our creative ideas (or for our after-dinner conversation), we probably all have ideas of areas of standards that we would like to fix.

Many of us have stood in lecture theatres, fielding questions from students who ask why the standard does it this way. Some of us may think back and shudder at the old ‘corridor’ approach that previously existed within pensions accounting.

Every five years, the International Accounting Standards Board (IASB) undertakes a public consultation on its agenda and work plan. In addition to gathering views on the IASB’s current direction, comments are invited on new financial reporting issues that could be added.

Take your pick

At the moment, the IASB puts 40% to 45% of its focus on research issues and the development of new standards. This is the largest individual area of its focus, ahead of stakeholder engagement and the maintenance/consistent application of standards. While the elements of research are also areas that the IASB is seeking focus on, this shows that the largest proportion of its time is spent looking at issues arising around financial reporting.

One day you just may be able to look at your grandchild and say, ‘You see IFRS 23? I had a part in that’

Based on the current work plan and pipeline, the board expects that in the next five years it will be be able to start two to three large projects, or four to five medium projects, or seven to eight small projects. This is where the financial reporting lovers come in. The IASB has produced a list of 22 potential projects, which it is asking respondents to rank from high to low. This is not an exhaustive list, and commenters are invited to suggest other areas if they consider them important.

Some of the major items under consideration currently are:

  • Government grants. Many standard-setters have questioned the principles of IAS 20, Accounting for Government Grants. Areas that cause the most discussion surround the choices available with capital grants and the presentation in the income statement, which reduce comparability. Any work on government grants is likely to result in a thorough review of all the questions raised within the standard, resulting in a medium project at least. As some national standard-setters have already conducted work on government grants, the IASB recognises that this could inform its work.
  • Intangible assets. My top choice. The thinking among many stakeholders is that IAS 38, Intangible Assets, is applied to a number of transactions that weren’t envisaged when the standard was written. There are also issues over the recognition and measurement of internally generated assets. If this is selected, it could result in a new standard, which would undoubtedly be a large project. As these are becoming increasingly prevalent, there is the concern that current accounting under IAS 38 is insufficient. The possibilities of this project could be to enhance educational materials, amend IAS 38 or even develop a new standard. If work is done on developing intangible assets, it seems entirely sensible that any cryptocurrency project could fit in alongside it.
  • Cashflows. Commenters have suggested that the IASB undertake a project to amend or replace IAS 7, Statement of Cash Flows. It has been noted that it can be difficult to reconcile the statement of cashflows to the other primary financial statements. Any work on this could focus on non-cash elements in the statement of cashflows, or even look at the currently used sections of operating, investing and financing activities. Any work on providing information about non-cash movements would be a medium-sized project, whereas a full review of the standard itself would be a large project.

This list is by no means exhaustive, and you may immediately think of something you want added. I would certainly consider commenting on the use of fair values at the grant date in equity-settled, share-based payments and suggesting that to the IASB also.

Play your part

So, for the technical accountants reading this, comments are to be received by 27 September 2021.

We may not design new products, or produce great feats of engineering, but one day you just may be able to look at your grandchildren and say, ‘You see IFRS 23? I had a part in that’.

It’s unlikely that many family members will care, but you can know that you had the chance to play a small part in accounting history, which is surely something we could all take pride in.