Ann Tarca speech: The IASB—Reputation, legitimacy and happy families

When: 29 October 2018

Where: RJ Chambers Memorial Lecture, Sydney 

IASB Member Ann Tarca delivered the RJ Chambers Memorial Research Lecture which has been hosted by the Accounting Foundation and The University of Sydney Business School since 1985 and is held in memory of Raymond John Chambers. Ann Tarca discusses the relationships of the International Accounting Standards Board (Board) with its primary stakeholders. The lecture explores the contribution of diverse groups (preparers, auditors, regulators, national standard setters, investors and academics) to standard-setting and addresses the following questions: What are the strengths and weaknesses of these relationships? How have they developed and changed since the Board formed in 2001? What threats and opportunities lie ahead for the IASB and the communities it serves?

Introduction

Good evening. It is with great pleasure that I deliver the RJ Chambers Lecture tonight. Professor Chambers was a leading thinker who continues to inspire today’s academic researchers to pursue rigorous and innovative work. Australian academics have a fine tradition of strong academic enquiry that does not disregard the relevance of academic findings to accounting practice. Now I am an IASB Board member I appreciate more than ever the contribution of academic thought and evidence to resolving standard setting questions. Of course the views expressed are my own and not those of the IASB or the IFRS Foundation.

I will talk about the development and activities of the International Accounting Standards Board (IASB) from 2001 to the present. I will share my new understanding and experience from the inside rather than the outside. Prior to joining the IASB, I was an academic researcher who investigated the processes and effects of standard setting. I was a member of a highly engaged group who considered how standards were set and the impact and outcomes of the application of the standards. The evidence of this stream of research is familiar to many of you. Tonight I would like to share with you my deeper understanding of how the IASB and its relationships with stakeholders have evolved. I hope to provide some insights that may inform your own research and contribution to standard setting. My message is simple: the IASB operates in a consultative environment and our work can be improved through thoughtful contribution and feedback from you, our stakeholders.

I’ve called my talk ‘Reputation, Legitimacy and Happy Families’ because I want to talk about the ways the IASB works to achieve its mission, how it interacts with a wide range of stakeholders from around the globe and how those activities have evolved over time. The IASB was formed in 2001. I see its existence in four phases: (1) development of a set of global standards for use in the world’s capital markets (2001–2005); (2) the convergence program with the US Financial Accounting Standards Board (FASB) and impact of the global financial crisis (2006–2009); (3) working on the major standards (2010–2013); and (4) implementation of the major standards and the Better Communication initiative (2014 onwards).¹

I will highlight briefly events in each of these periods and examine the focus of the IASB’s work and  its  relationships with  various  stakeholders. I will also mention some  views from academia in each of these periods. Although I will enjoy describing areas where I now have better insights about the IASB, my main hope is that my comments will reveal more about IASB operations and thereby assist scholars and practitioners to better understand how the success of the IASB depends greatly on the quality of input from our stakeholders.

IASC-IOSCO-IASB

I will begin by referring to the period leading up to the formation of the IASB. The IASB’s predecessor body, the International Accounting Standards Committee (IASC), was formed in 1973. Its aim was to promote international harmonisation of accounting standards to address the diversity in practice, which was obvious to practitioners and also documented in the academic literature.² The national accounting bodies from nine countries were invited to join the IASC: Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the UK and Ireland and the US. Although the delegates worked on developing standards for use internationally, these countries did not have plans to adopt the standards themselves. International Accounting Standards (IAS) contained options (to encompass a range of acceptable practices in various countries) and suffered from ‘drafting by committee’.³

A proposal by the International Organisation of Securities Commissions (IOSCO) to endorse IAS for member stock exchanges led the IASC to revise and improve its standards by removing options and improving drafting. In 2000 IOSCO endorsed IAS Standards, but with other conditions as well (eg members could require disclosures additional to IAS and they could use other alternatives and interpretations).

During this period, pressure on national standard setters increased because some people began to see adoption of international standards as a cost-effective strategy. Some national standard setters responded by forming the G4+1. The members (Australia, Canada, UK, US, and the IASC) established a reform agenda that was, in effect, an international standard setting agenda.⁴ European members responded to the threat of the possible dominance of the G4+1 by forming E5+2, comprising the five European members of the IASC and the European Commission (EC) and the IASC.

Consequently, as IAS gained visibility and support, political tensions increased. Market regulators responded to the possible use of IAS in global capital markets and national standard setters reacted to protect their domain. Obviously they are the national experts, with deep knowledge about standards and regulation; a reaction from them is to be expected. The IASC responded to the pressures by restructuring to form the International Accounting Standards Board (IASB), based on an independent expert model.⁵ This followed from criticism that the IASC lacked legitimacy because it was ‘a creature of the accounting profession with its own narrow self-interests’.⁶ While the expert model suited some parties, others would have preferred a more participative model. Not surprisingly, this issue has arisen again over time as various parties seek to influence the standard setting outcomes of the IASB. Overall, scholars and others have recognised the enormous achievements of the people behind the IASC and, in particular, the foundation laid by the IASC for the successful operation of the IASB.⁷

Phase 1: 2002–2005 High quality standards, suitable for use in global capital markets

The IASB’s mission was to establish a single set of high-quality global accounting standards. It comprises a board of independent experts with prior knowledge and experience relevant to setting accounting standards and commitment to the mission. The IASB was well positioned to have global influence. It took over the standards of the IASC, that is the IAS, and also decided to name new standards issued by the IASB as International Financial Reporting Standards (IFRS).

However, the IASB’s position changed dramatically with the announcement in 2002 by the EC that IAS would be used by European Union (EU) consolidated listed companies from 2005. The EC vision was for a single capital market and IAS (ie one set of common accounting standards) was a crucial aspect of achieving this goal. The IASB’s focus on high-quality, best possible standards would now be influenced by a major stakeholder—the European Commission.⁸ The EC decision was a catalyst for decisions in other countries, and quickly announcements of adoption in 2005 were made by Australia and South Africa followed by Hong Kong and New Zealand. The IASB was now centrally positioned as a creator of standards that, when endorsed by appropriate governments, had the force of law. Consquently, one would expect more attention to the work of the IASB and more activity by parties seeking to influence its output.

Academic commentary in this period focused on the impact of adoption for individual countries– for regulators, markets and listed companies. Scholars discussed concerns about national sovereignty over law-making and the changes from current national accounting practices, which some viewed as superior to IAS or more suited to their national environment. Some were concerned about the diminution of local knowledge in standard setting and others questioned entities’ abilities to influence standard setting outcomes when the entity’s voice is one among many on the global stage.⁹

Researchers have investigated the decision-making process leading to IFRS adoption by examining the behaviour of powerful interest groups, such as international corporations and stock exchanges, and other lobbyists.¹⁰ Studies have also explored how patterns of adoption emerge in countries that are connected by culture or trade. The World Bank has also been a force promoting adoption of IFRS Standards, including the IFRS for SMEs Standard.¹¹ These studies point to the demand for comparable information and therefore a common set of international standards as a necessary ingredient to achieve high quality, transparent information upon which financial decisions and investments can reliably be based. These demand elements for IFRS Standards are still present today.

Academics have also explored areas of key impact arising from adoption of IFRS Standards. In some jurisdictions, for example in the EU, fair value measurement and hedge accounting under IAS 39 Financial Instruments were concerns. In Australia there was particular impact from IAS 38 Intangible Assets. As you may recall, the standard prohibited recognising internally generated intangible assets and effectively prevented revaluing intangible assets; adoption required significant changes for some entities in these areas. Lobbying of Australian politicians and David Tweedie, then IASB Chairman, by some Australian constituents was not successful – there would be no concessions regarding recognition and measurement of intangible assets when Australian entities adopted IFRS Standards.

On the subject of lobbying, many studies have investigated the participation of various stakeholders in the standard setting process. For example, Anne Jorissen and her co-authors examined the comment letters sent to the IASB in the period 2002–2006.¹² Not surprisingly, they found that preparers sent the most letters, followed by the accounting profession and standard setters. These groups reacted more to issues affecting an entity’s accounting numbers while investors, stock exchanges and supervisory authorities were more likely to comment on disclosure issues. Preparers were more likely to participate later in the process (perhaps when they perceive decisions are closer). Other research has investigated the way the IASB has responded (eg made changes to consultation documents) following stakeholder feedback. Overall, research suggests engagement and dialogue throughout the standard setting process and more engagement with the IASB than the IASC.¹³ Comment letters have provided a wealth of detail for study. What is not so visible is other ways stakeholders influence the Board. Researchers assume other ways of influencing are used but find it difficult to obtain data to capture this process.

The period leading up to adoption created pressure on the IASB to produce a ‘stable platform’ of standards by March 2003, that could be adopted for 2005. Warren McGregor, an inaugural member of the IASB, stated that this meant the reforms in accounting that some Board members were keen to pursue (such as leases, post-employment benefits, performance reporting and the conceptual framework) could not be addressed.¹⁴

Criticism of the IASB for not addressing some issues seen as important occurred then as it does now. However, the IASB achieved a significant milestone by 2003 by improving the IASC standards and developing new standards on business combinations, share-based payments, first time adoption of IFRS, non-current assets and interim standards on extractive activities and insurance contract accounting. The IASB’s approach to standard setting was to develop ‘principle-based’ standards, a matter which has been widely discussed in the literature.¹⁵ This approach is necessary for standards that are applied by thousands of entities in a wide range of jurisdictions, but it has been criticised because of difficulties experienced by some when interpreting and applying the Standards.

Researchers have explored the standard setting process of the IASB and the FASB. The way standards are set, how issues are resolved and who is influential in the process has led to a rich stream of research. The issues have proved to be of enduring interest, because of the potential wealth distribution effects of accounting standards. In 2001 Philip Brown and I expressed the view that standard setting is ‘inescapably political’.¹⁶ Subsequent events provide a great deal of support for that view.

Phase 2: 2006–2009 Working with FASB, convergence projects, impact of Global Financial Crisis

Previously, in 2002, the IASB and FASB signed a memorandum of understanding (MOU) (the Norwalk Agreement) with the objective to ‘make their existing financial and reporting standards fully compatible as soon as it is practicable’.¹⁷ In 2006 the IASB and FASB issued another MOU continuing their commitment to work together on several major standards. The goal was to complete this work by 2011 and for the US Securities and Exchange Commission’s (SEC) 20F reconciliation requirement for foreign private issuers who were IFRS preparers to be removed. In an important step forward for the IFRS Foundation, the reconciliation requirement was removed in 2007. During this period discussion of harmonisation was replaced with a focus on convergence and, for many, high hopes that the SEC would permit domestic registrants to use IFRS Standards.

The activities of two major standard setting boards, the IASB and the FASB, who have worked together and independently, has provided extensive material for research. The topic of the possible adoption of IFRS Standards in the US also generated much discussion and debate.¹⁸

Overall academics and other commentators recognised that cross-border comparability had increased significantly. E&Y advanced the view that ‘the implementation of IFRS has been a great success overall with companies rising to the challenge of introducing fundamental accounting and reporting changes’.¹⁹ Noted scholar Ray Ball, writing in 2006, concluded that ‘extraordinary success has been achieved in developing a comprehensive set of ‘high quality’ IFRS standards, in persuading almost 100 countries to adopt them, and in obtaining convergence in standards with important non-adopters (notably, the US)’.²⁰

During this period, as data became available in companies’ annual reports and databases, academics began to explore the impact of adoption of IFRS Standards, this so-called ‘watershed’ event in capital markets. Addressing the EAA in 2006 Professor Martin Hoogendoorn described adoption of IFRS Standards in Europe as the most revolutionary development since Pacioli’s double entry bookkeeping, so even if you weren’t around in 2002–2005 you can still get a flavour of the enthusiasm.²¹Early studies pointed to possible positive capital market effects from adoption of IFRS Standards, although scholars cautioned that the evidence was preliminary and could be affected by concurrent changes in other institutional factors in countries adopting IFRS Standards.²²

In 2007 the IFRS Foundation Trustees introduced a formal post implementation review (PIR) process for each new Standard. This forms an important part of the ongoing maintenance of IFRS Standards, because the review provides feedback from a wide range of stakeholders about whether Standards are operating as expected. PIRs have been completed for IFRS 8, IFRS 3 and IFRS 13.²³ In each case, a review of the academic literature has been an important input in the PIR. I thank people present this evening for the efforts they have expended on a number of studies that have been included in these reviews.

A major event with striking impact for the IASB and FASB was the financial crisis that followed the collapse of Lehman Brothers and the suspension of market trading around the world in October 2008. The financial crisis had both short term and long term effects for the IASB. EU constituents called for changes in IAS 39, arguing that its requirements were different to those of US GAAP, to the disadvantage of EU banks. Although the differences in the standards permitted reclassification in only ‘exceedingly rare circumstances’²⁴ a full consideration of the circumstances of the financial crisis and the effect of a proposed intervention to change IAS 39 requirements by the EC led the IASB to amend IAS 39 without the usual due process.²⁵ Warren McGregor saw the IASB’s position in this way: ‘Make an amendment permitting reclassification or hold its ground...risk the loss of its EU constituency and face the prospect of never achieving its ultimate goal of worldwide adoption of IFRS’.²⁶ Other commentators have concluded that the IASB’s reputation for independence was adversely affected by these events, with detrimental effects on how others view the IASB.²⁷

In the longer term, the IASB and the FASB faced criticisms about the requirements of accounting standards, with some blaming the standards (and specifically fair value measurement) for causing the financial crisis. Subsequently the balance of academic opinion did not support this view.²⁸ Nevertheless, both boards have been involved in significant standard setting activity for financial instruments since the financial crisis indicating, once again,  that  they are responsive to stakeholders and recognising the  fundamental role of accounting standards in the information exchange process that underpins the operation of efficient markets. Critics may claim that the Standards should have been better or different before the crisis, but that is easy to say with hindsight. Developing standards for financial instruments has proved particularly challenging, in part because of the complexity and risks of the instruments. One should recall that standard setters did not create these instruments and it is reasonable of standard setters to require entities using them to provide information about them.

Some academics have proposed that the financial crisis severely challenged the legitimacy of the IASB. These scholars argued that the IASB does not have political legitimacy (because its members are not elected or representative) and therefore justifies itself with procedural and substantial legitimacies. They concluded that the financial crisis had undermined the IASB’s legitimacy.²⁹ Other writers disagreed and pointed to the support for the IASB by the leaders of the world’s major economies (G20), the European Parliament and the European Commission.³⁰

Now is a suitable time to mention another important jurisdiction, Japan. During this period of feverish activity between the FASB and the IASB changes were also occurring in one of the world’s major economies, one with particular significance for Australia. In 2007 the Accounting Standards Board of Japan signed a MOU with the IASB with the objective of converging IFRS and Japanese GAAP. The progress of adoption of IFRS Standards in Japan has been phenomenal – in 2012 ten companies were using IFRS Standards and by 30 June 2018 204 companies (representing 33 per cent of the market capitalisation of the Tokyo Stock Exchange) have adopted or planned to adopt IFRS Standards.³¹

The Japanese experience also illustrates another matter. Companies listed on the Tokyo stock exchange have the choice to use Japanese GAAP, US GAAP, IFRS Standards, or modified IFRS. Significantly, all companies choosing IFRS Standards elect to use full IFRS not Japanese modified IFRS. This provides evidence that these companies seek the benefits that follow from their financial statements including being directly comparable with other large listed companies throughout the world. Japanese companies with subsidiaries in Australia and in other IFRS adopting jurisdictions enjoy the operational benefits of being able to use just one set of accounting standards throughout their operations. This is a far cry from the days when I began research in international accounting and BHP Limited (as it was then) prepared financial statements in compliance with eight (yes, eight) sets of national GAAP.

Phase 3: 2010–2013 Work on major standards

Completing the FASB MOU projects proved to be more difficult than expected. By 2010 four MOU projects had been completed: Fair value measurement, Consolidations, Derecognition and Post-Employment benefits. The IASB and FASB were still working on five MOU projects: Leases, Revenue, Financial Instruments, Financial Statement Presentation, Financial Instruments with the Characteristics of Equity as well as Insurance.

Subsequently two projects were deferred, the Financial Statement Presentation and Financial Instruments with the Characteristics of Equity projects. This was done in order to allow the boards to focus on completing the other projects. The IASB issued IFRS 9 Financial Instruments in 2014, IFRS 15 Revenue from Contracts with Customers in 2015, IFRS 16 Leases in 2016 and IFRS 17 Insurance Contracts in 2017. This was a massive achievement by the IASB and its staff. The IASB was responding to commitments of the MOU but also to pressure from the G20 who called for completion of the converged standards because of their expected contribution to global capital market efficiency.³²

During this period the IASB increased its involvement with consultative groups and liaison activities with national standard setters. Standard setters, regulators, preparers and users of financial statements provided feedback on the core standards in all stages of their development. The IASB now meets regularly with national standards setters, through the Accounting Standards Advisory Forum (ASAF), International Federation of Accounting Standard Setters (IFASS) and World Standard Setters (WSS) meetings. The input of the standard setters, who are in regular consultation with their constituents and have extensive knowledge and experience, is highly valued by the IASB. It is true that the IASB makes final decisions about the content of standards but it regularly seeks and responds to the input of other experts along the way.

Following on from the financial crisis of 2007–2008 several relationships were strengthened between the IASB and stakeholder groups. Early in 2009 the IFRS Foundation Monitoring Board was created to enhance the organisation’s public accountability.³³ There was enhanced dialogue with prudential supervisors and markets regulators, including meetings with the Basel Committee on Banking Supervision, the Financial Stability Board and the European Financial Reporting Advisory Group (EFRAG).³⁴ The IASB also took the opportunity to extend engagement with investors.³⁵ These relationships have been developed and strengthened in recent years.

The amount of data available to academics increased markedly with the passage of time and more countries adopting IFRS Standards. There are now substantial literature reviews that give us an overview of the results of the many studies investigating the effects of widespread adoption of IFRS Standards.³⁶ An insightful review of the research was published by Brian Singleton-Green of the ICAEW. He concluded that ‘there is evidence of benefits following IFRS adoption in relation to financial reporting transparency and comparability, the cost of capital, market liquidity, corporate investment efficiency and cross-border capital flows. But the evidence on some of these matters is disputed and it is unclear how far the benefits identified are attributable to the adoption of IFRS or to other concurrent institutional changes, particularly in enforcement. What is clear is that the benefits found are uneven, varying with the institutions and incentives that apply for different companies in different countries.’³⁷

I would encourage academics (and this includes journal editors and reviewers) not to give up on IFRS studies – please don't get IFRS fatigue. There are many questions about the impact of IFRS Standards for which we do not have conclusive answers. Replication studies, which are widely used and positively regarded in other academic disciplines, have an important place in international studies in accounting and finance, particularly because some of the present evidence is unclear, research tools and data are improving and expanding, and researchers are studying a continually evolving environment.

Also in this period the IASB introduced an agenda consultation process to determine its future work program. As part of this widespread consultation, the IASB sought input from investors and business communities, including those who were not regular IASB respondents. Public discussions were held in Asia-Oceania, Europe, North and South America. More than 240 comment letters were received. After due consideration and discussion with the Board’s Advisory Council, the IASB published a feedback statement and explained its priorities for the next three years.³⁸ The Agenda Consultation process is further evidence of the IASB’s keenness to work with a wide range of stakeholders.

Academics have examined how the IASB used the agenda consultation process to build legitimacy. Some scholars recognised that the consultation process showed the user orientation of the IASB although some have suggested that this was formal rather than substantial and that the IASB worked to portray agenda setting as objective and evidence based when it may be about ‘enlarging discretionary leeway of IASB and staff’.³⁹ The fact is that many issues raised in the first agenda consultation have driven the IASB’s activities in subsequent years. They include: a deeper research phase in projects, prioritising work on the Conceptual Framework, and more focus on maintenance and implementation support. The IASB is planning for a third Agenda Consulation process, evidence of our commitment to hearing from stakeholders about our work plan.

Researchers propose that constituent participation, such as I have just described, is one way an organisation achieves legitimacy and success. One study where this is investigated relates to participation in the IFRIC (the predecessor body of the Interpretations Committee).⁴⁰ The study classified respondents by geography (country/region) and by stakeholder group (preparers, users, accounting profession, regulators). The researchers examined the comment letters on the IFRIC’s first 18 Draft Interpretations. Most letters were from stakeholders in the EU, predominantly from the UK. There were few letters from the US, Canada or developing countries. Accounting professional bodies and standard setters were the most likely respondents; users were the least likely to respond. Stakeholder participation increased over the period of the study. However, the authors concluded that the IASB should ‘promote more constituent participation to achieve greater legitimacy’.⁴¹ I would respond that the IASB has done this, through changes to the operations of the Interpretations Committee. In 2012 the Interpretation Committee procedures were changed so that it could deal with a wider range of requests and have more methods to address implementation matters.

I should also mention here that the IASB has expanded its ways of consulting with stakeholders and obtaining feedback. You will have noticed that we now make more use of our website and social media in recent years. Writing a formal comment letter, although helpful, is not the only way for constituents to share a view with the IASB.

The IASB is aware that a primary user group, investors, are less likely to respond through formal consultation such as comment letters. Consequently, the IASB conducts outreach directly with investors to obtain their views as well as discussing investors’ views with members of the consultative group, the Capital Markets Advisory Group (CMAC), which meets three times a year.

Phase 4: 2013 onwards. Adoption of Better Communication theme, work on maintenance, application and interpretation

The implementation of the major standards is a dominant feature of this period. Stakeholders have called for a period of calm, while they implement the leases, revenue and financial instruments and insurance contracts standards. We know that the listed company sector, their auditors, national regulators and investors are stakeholders who are greatly affected by the new IFRS Standards. Consequently, the IASB has expanded its activities to support implementation. We have set up transition resources groups for IFRS 9, 15 and 17 to provide discussion forums which can help stakeholders during implementation to support robust and consistent implementation. About a third of our technical staff work on implementation issues and the Interpretation Committee meetings feature careful considerations and lively discussions. In recent years, the Interpretations Committee has provided guidance on many issues in a timely way.⁴² We look forward to seeing the output of research about the costs and benefits of these new Standards and, in particular, the effect of the change in the information provided for investors.

The IASB is also assisting a wider group of countries in their adoption activities. With IFRS Standards used in more than 144 (out of 166) jurisdictions⁴³ the reach of IFRS into emerging economies continues and the IASB works with stakeholders in these countries through the Emerging Economies Consultative Group. The World Bank aims to increase trade and financing in emerging economies and considers IFRS Standards have a fundamental role in its activities. The World Bank and the IFRS Foundation signed a MOU in 2017 to develop education materials and to support IFRS implementation in developing economies.⁴⁴

For some users, there is more work that the IASB needs to do. In particular, stakeholders in the investor community have provided feedback through Agenda Consultations and other forums regarding ways in which financial reporting can be improved. The IASB has adopted a theme of ‘Better Communication’ in response to stakeholder feedback about the quality of IFRS Standards and the information provided by entities in compliance with the Standards. Current projects in this theme include the Disclosure Initiative, Primary Financial Statements and an update to the Management Commentary Practice Statement.⁴⁵

The IASB is also continuing its work on the IFRS Taxonomy⁴⁶ as part of the Better Communication initiative. We know that much accounting data is consumed electronically. The taxonomy assists in this process. Through the IFRS Taxonomy consultative group we are working with preparers, regulators and software providers to both improve the taxonomy and to develop ways it can be a more powerful tool to assist investors in this age of digital information. Academic research has begun to explore the impact of financial reporting taxonomies. But we would like to see more evidence about taxonomies and digital reporting, particularly as more tagged data becomes available because security market regulators have mandated the use of the IFRS Taxonomy. This includes the SEC mandate for foreign private issuers in the US from 2017 and in Europe by ESMA from 2020.

The IASB has begun a research project on Extractive Activities, which will be of interest in Australia and elsewhere. This issue and others are on the program of the IASB’s sixth Research Forum which sponsored by Abacus, the journal of the Accounting Foundation of the University of Sydney. This journal was was edited by Professor Chambers for many years. We hope you will join us for the Forum on 11–12 November in Sydney or follow the discussions via our website.

While the IASB works on the current agenda, there are many opportunities for contribution from academics. In particular, the IASB research agenda indicates the matters that the Board will address over the next several years.⁴⁷ Academics may be the most independent of our constituent groups. In theory, at least, they do not have a particular position to promote and they have the skills and incentives to contribute to the standard settings process.⁴⁸ The IASB pursues an ‘evidence-based’ approach to standard setting and academics are well positioned to provide this evidence.⁴⁹ Academics also want to show the contribution and practical impact of their research, so providing evidence to the IASB is one way in which they can do so. I look forward to seeing the output of your work in the years ahead.

In conclusion - Challenges ahead

Academics and practitioners acknowledge the enormously productive period of the 17 years of the IASB; use of IFRS Standards in 144 out of 166 jurisdictions and the most successful endeavour so far to a framework for international financial reporting. Others point to a range of challenges facing the IASB. The structure and operation of the IASB is based on the premise of independent experts working in consultation with stakeholders. We appreciate your contribution and encourage you to get involved or to stay involved in the process.

The IASB’s short history shows the impact of political forces on the work of the IASB, and the steps we take to mitigate those forces. In the title of my speech I mentioned happy families. In the IFRS family, like all families, there can be differences in opinion about how to get the best outcome and, indeed, what the best outcome should be. There are those who consider the IASB too captive to particular groups in the economy or specific regions. Taking another perspective, some consider the IASB’s work is done, now the major standards are complete. In contrast, others point to outstanding issues that need attention; financial reporting matters that are crying out for improvement. The global reach of IFRS Standards is wide, but IFRS Standards are not enforced by the IASB or the Foundation. Academics have long recognised that the success (of failure) of IFRS Standards depends on the work of many parties, not just the quality of IFRS Standards.⁵⁰

Therefore the IASB has expanded its work with stakeholders over the years and will continue to engage with them as it pursues its mission of developing high quality standards that promote transparency, accountability and efficiency in the world’s capital markets. The need for a harmonised accounting language through international accounting standards was identified many years ago when the IASC formed. The demand for global standards, because of their potential benefits in countries around the world, is as strong as ever. I invite you to stay part of this exciting story through your support of the mission of the IFRS Foundation.

¹For further information on the IASB-related events referred to in this speech, see https://www.ifrs.org/about- us/who-we-are/#history.

²Nobes, Christopher. "Towards a general model of the reasons for international differences in financial reporting." Abacus 34.2 (1998): 162–187.

³McGregor, Warren. "Personal reflections on ten years of the IASB." Australian Accounting Review 22.3 (2012): 225–238.

⁴McGregor, W. (2012) op. cit.

⁵McGregor, W. (2012) op. cit.

⁶Zeff, Stephen A. "The Evolution of the IASC into the IASB, and the Challenges it Faces." The Accounting Review 87.3 (2012): 807–837 (page 813).

⁷Camfferman, Kees, and Stephen A. Zeff. Financial reporting and global capital markets: A history of the International Accounting Standards Committee, 1973–2000. Oxford University Press, 2007. Kirsch, Robert J. "The evolution of the relationship between the US Financial Accounting Standards Board and the international accounting standard setters: 1973–2008." Accounting Historians Journal 39.1 (2012): 1–51.

⁸McGregor, W. (2012) op. cit.

⁹Haswell, Stephen, and Ian Langfield‐Smith. "Fifty‐Seven Serious Defects in ‘Australian’IFRS." Australian Accounting Review 18.1 (2008): 46–62. Howieson, Bryan, and Ian Langfield‐Smith. "The FRC and Accounting Standard‐Setting: Should I Still Call Australia Home?." Australian Accounting Review 13.29 (2003): 17–26.

¹⁰Chua, Wai Fong, and Stephen L. Taylor. "The rise and rise of IFRS: An examination of IFRS diffusion." Journal of accounting and public policy 27.6 (2008): 462–473. Godfrey, Jayne M., and Ian A. Langfield-Smith. "Regulatory capture in the globalisation of accounting standards." Environment and Planning A 37.11 (2005): 1975–1993.

¹¹Ramanna, Karthik, and Ewa Sletten. "Network effects in countries' adoption of IFRS." The Accounting Review 89.4 (2014): 1517–1543. Kaya, Devrimi, and Maximilian Koch. "Countries’ adoption of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)–early empirical evidence." Accounting and Business Research 45.1 (2015): 93–120.

¹²Jorissen, A., Lybaert, N., Orens, R., & Van Der Tas, L. (2012). Formal participation in the IASB's due process of standard setting: a multi-issue/multi-period analysis. European Accounting Review, 21(4), 693–729.

¹³Jorissen, A., Lybaert, N., Orens, R., & van der Tas, L. (2014). Constituents’ Participation in the IASC/IASB’s due Process of International Accounting Standard Setting: A Longitudinal Analysis. In Accounting and Regulation (pp. 79–110). Springer, New York, NY.

¹⁴McGregor, W. (2012) op. cit.

¹⁵Carmona, Salvador, and Marco Trombetta. "On the global acceptance of IAS/IFRS accounting standards: The logic and implications of the principles-based system." Journal of Accounting and Public Policy 27.6 (2008): 455–461.

¹⁶Brown, Philip, and Ann Tarca. "Politics, processes and the future of Australian accounting standards." Abacus 37.3 (2001): 267–296.

¹⁷www.iasplus.com/en/projects/completed/other/iasb-fasb-convergence.

¹⁸Hail, Luzi, Christian Leuz, and Peter Wysocki. "Global accounting convergence and the potential adoption of IFRS by the US (Part I): Conceptual underpinnings and economic analysis." Accounting Horizons 24.3 (2010): 355–394. Hail, Luzi, Christian Leuz, and Peter Wysocki. "Global accounting convergence and the potential adoption of IFRS by the US (Part II): Political factors and future scenarios for US accounting standards." Accounting Horizons 24.4 (2010): 567–588.

¹⁹Zeff, S. (2012:827) op. cit.

²⁰Ball, Ray. "International Financial Reporting Standards (IFRS): pros and cons for investors." Accounting and Business Research 36.sup1 (2006): 5–27. See Abstract.

²¹Hoogendoorn, Martin. "International accounting regulation and IFRS implementation in Europe and beyond—experiences with first-time adoption in Europe." Accounting in Europe 3.1 (2006): 23–26.

²²Daske, H., Hail, L., Leuz, C., and Verdi, R. (2008). Mandatory IFRS reporting around the world: Early evidence on the economic consequences. Journal of Accounting Research, (2008) 46(5): 1085–1142.

²³https://www.ifrs.org/news-and-events/2017/09/role-of-post-implementation-reviews/

²⁴Zeff, S. (2012:829) op. cit.

²⁵For more detail see Camfferman, Kees, and Stephen A. Zeff. Aiming for Global Accounting Standards: The International Accounting Standards Board, 2001–2011. Oxford University Press, (2015):407–414.

²⁶McGregor, W. (2012:233) op. cit.

²⁷Zeff, S. (2012) op. cit.

²⁸Laux, Christian, and Christian Leuz. "Did fair-value accounting contribute to the financial crisis?." Journal of Economic Perspectives 24.1 (2010): 93–118.

²⁹Burlaud, Alain, and Bernard Colasse. "International accounting standardisation: is politics back?." Accounting in Europe 8.1 (2011): 23–47.

³⁰Danjou, Philippe, and Peter Walton. "The Legitimacy of the IASB." Accounting in Europe 9.1 (2012): 1–15.

³¹IFRS Application Around the World Jurisdictional Profile - Japan. See https://www.ifrs.org/-/media/feature/around-the-world/jurisdiction-profiles/japan-ifrs-profile.pdf

³²https://www.iasplus.com/en-gb/resources/global-organisations/g20.

³³https://www.ifrs.org/-/media/feature/about-us/our-history/2009-pr-trustees-enhance.pdf?la=en. “The Monitoring Board will comprise the relevant leaders from the Emerging Markets and Technical Committees of the International Organization of Securities Commission (IOSCO), the European Commission, the Japan Financial Services Agency (FSA), and the US Securities and Exchange Commission (SEC). The Basel Committee on Banking Supervision will sit as a formal observer at Monitoring Board meetings”.

³⁴EFRAG (European Financial Reporting Advisory Group) is a private association established in 2001 with the encouragement of the European Commission to serve the public interest. See http://www.efrag.org/About/Facts

³⁵https://www.ifrs.org/-/media/feature/about-us/our-history/2010-pr-investor-outreach-programme.pdf.

³⁶Brüggemann, Ulf, Jörg-Markus Hitz, and Thorsten Sellhorn. "Intended and unintended consequences of mandatory IFRS adoption: A review of extant evidence and suggestions for future research." European Accounting Review 22.1 (2013): 1–37. De George, Emmanuel T., Xi Li, and Lakshmanan Shivakumar. "A review of the IFRS adoption literature." Review of Accounting Studies 21.3 (2016): 898–1004.

³⁷Singleton-Green, Brian. "The Effects of Mandatory IFRS Adoption in the EU: A Review of Empirical Research. " (2015). Available at https://www.icaew.com/technical/financial-reporting/information-for-better- markets/ifbm-reports/copy-of-the-effects-of-mandatory-ifrs-adoption-in-the-eu-for-ifbm-link. See Abstract.

³⁸Feedback Statement Agenda consultation 2011 https://www.ifrs.org/-/media/project/disclosure-initative/disclosure-initiative-amendments-to-ias-1/research/feedback-statement-agenda-consultation-dec-2011-2012.pdf

³⁹Pelger, Christoph, and Nicole Spiess. "On the IASB’s construction of legitimacy–the case of the agenda consultation project." Accounting and Business Research 47.1 (2017): 64–90.

⁴⁰International Financial Reporting Interpretations Committee.

⁴¹Larson, Robert K. "Constituent participation and the IASB's international financial reporting interpretations committee." Accounting in Europe 4.2 (2007): 207–254 (Page 1).

⁴²In 2018 the Interpretations Committee discussed 22 topics, of which 16 were addressed by the Committee leading to 14 Agenda Decisions with explanatory material and two amendments or additions to IFRS Standards.

⁴³https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/

⁴⁴https://www.ifrs.org/-/media/feature/around-the-world/memoranda/world-bank-memorandum.pdf?la=en

⁴⁵https://www.ifrs.org/projects/better-communication/

⁴⁶https://www.ifrs.org/issued-standards/ifrs-taxonomy/

⁴⁷https://www.ifrs.org/projects/work-plan/research-programme/

⁴⁸Fülbier, Rolf Uwe, Joerg-Markus Hitz, and Thorsten Sellhorn. "Relevance of academic research and researchers' role in the IASB's financial reporting standard setting." Abacus 45.4 (2009): 455–492.

⁴⁹In February 2012, the Trustees’ review of the strategy of the IFRS Foundation recommended the IASB should establish, or should facilitate the establishment of, a dedicated research capability to provide leadership in intellectual thinking in financial reporting. Such a research capability could draw upon some combination of internal and external intellectual resources, including resources from the academic community.

⁵⁰Ball, Ray. "International Financial Reporting Standards (IFRS): pros and cons for investors." Accounting and Business Research 36.sup1 (2006): 5–27. Ball, Ray. " IFRS – 10 years later." Accounting and Business research 46.5 (2016): 545–571. Pope, Peter F., and Stuart J. McLeay. "The European IFRS experiment: Objectives, research challenges and some early evidence." Accounting and Business Research 41.3 (2011): 233–266.