The UK’s Financial Reporting Council has joined with its counterparts in France, Germany and Italy and with the European Financial Reporting Advisory Group (EFRAG) to involve a wider audience of European interests in what it sees as a “critical debate for the future of IFRS”.
The aim, the FRC says, is “to ensure ultimately that the revised conceptual reflects an underlying accounting model that European stakeholders believe is conducive to robust and effective financial reporting”.
The International Accounting Standards Board is restarting work on the framework which it hopes to complete by September 2015. It is an important exercise because it will provide the context within which new accounting standards are developed and current ones revised. It will also influence the way emerging issues are dealt with.
As EFRAG points out in its consultation paper, Getting a Better Framework, the framework’s influence will last for at least 10 years, if not longer. “The IASB’s stakeholders around the world will make substantive and well-argued submissions. It is important that European views are among those heard in the debate.”
The need for a new framework is becoming more urgent because of the widely recognised inadequacies of the current one. It is unclear and open to interpretation; as a result, the IASB has struggled to complete major projects. In some cases, proposals have been based on creative interpretations of the existing framework and in others, on concepts that are unclear and have not been generally agreed.
“A new framework should ensure that new standards are based on clear principles that the IASB’s stakeholders understand and support,” EFRAG adds.
Several years ago, the IASB started work on revising the framework in partnership with the US Financial Accounting Standards Board. It issued two new chapters, covering the objective of general purpose financial reporting and qualitative characteristics of useful financial information, which proved highly controversial.
This time, the IASB will own the project itself. It intends to issue a discussion paper for consultation in the summer.