The new head of the International Accounting Standards Board is setting his priorities for the rule maker, including potentially changing requirements around intangible assets and weighing in on sustainability disclosure.
Andreas Barckow took the helm of the London-based IASB in July. The organization sets international financial reporting standards, or IFRS, that apply in more than 140 jurisdictions around the world, though not in the U.S.
The IASB is seeking public comment by Sept. 27 on what its agenda should look like over the next five years. While Mr. Barckow has his own ideas and priorities, the rule maker’s 12-member board ultimately decides its long-term direction, in part based on the outcome of the consultation. The IASB expects to make a decision in early 2022, Mr. Barckow said.
The Wall Street Journal’s CFO Journal spoke with Mr. Barckow about his plans for the IASB and what his tenure could bring for public and private companies. Edited excerpts follow.
WSJ: What do you see as the most pressing accounting issues for the IASB?
Mr. Barckow: When it comes to a new agenda, intangible assets [such as brands and patents] is a topic that has come up several times. Intangibles are growing in importance. Many jurisdictions have moved from a manufacturing world to a service-oriented world. The second reason I would cite is the growing gap between book value and market value for many service-oriented firms. Providing more clarity and transparency as to what is really driving a company’s value would be helpful for a start.
The second area is the entire debate around sustainability and [environmental, social and governance] issues. While I realize that this is not a core issue for a financial reporting standard-setter, you may be well aware that our trustees are considering setting up [the International Sustainability Standards Board], a sister board to the IASB. It will be concerned with setting standards for sustainability-related financial disclosures. Now, you could say, “Let them take care of ESG and concentrate on your core stuff.” But a message that we are also hearing very consistently from jurisdictions is you should not really separate the two domains, as they go hand in hand. It could very well mean we’re tackling standards together from an ISSB and an IASB perspective.
WSJ: Why should there be new rules on accounting for intangible assets?
Mr. Barckow: The IASB does have a standard, [International Accounting Standard 38], which is fairly old, almost 25 years old now. It has never been reviewed or reconsidered. I think when the board developed that standard, it met the requirements that existed at that date. But the environment has changed quite dramatically.
WSJ: Are you looking to persuade more countries to adopt IFRS standards?
Mr. Barckow: The more the merrier. I certainly would be happy for any new jurisdictions that would sign up to our standards. As to the jurisdictions that have not yet made a full commitment, I would try [to] convince them that going the full mile is certainly a benefit to them. The full benefit is, obviously, you create a uniform, consistent reporting language around the globe.
WSJ: The IASB and the Financial Accounting Standards Board—the U.S. accounting standard-setter—in 2011 ended a project to make their standards identical. They still try to align their rules. What’s the likelihood the organizations revive convergence while you’re chair?
Mr. Barckow: Reviving convergence is not imminent. Obviously, it takes two to tango. You can hardly deny that convergence is out of the window, because we do have largely converged standards with the FASB on business combinations, revenue recognition, lease accounting and other issues. We want to keep a good relationship with our friends at the FASB and convince them that we should really do our utmost to stay converged.
WSJ: How do you make sure that companies get heard when the IASB sets new standards?
Mr. Barckow: We want to take the company perspective into account. More often than not, companies believe that they only bear the cost and the users [of financial statements] get all the benefits. I do not necessarily agree with that. We enable them to communicate more clearly with a global market. It may be that there is a direct cost in terms of having to change systems that have to comply with requirements. But I think there is at least an indirect benefit, in that we provide users with a clearer set of information. And that should be to the benefit primarily of the companies.
WSJ: There are no specific accounting rules for cryptocurrencies. Should that change?
Mr. Barckow: There are several types of cryptocurrencies. Before deciding whether standard-setting is needed, we should categorize them and then test how our current requirements apply to see if it gives a reasonable presentation [of companies’ financial position]. If it doesn’t, then we may need to do standard-setting.
Write to Mark Maurer at [email protected]
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