Erkki Liikanen, Chair of the IFRS Foundation Trustees, delivered his opening remarks at the IFRS Foundation Conference 2022 in London. He reflected on the changes that have happened since the International Accounting Standards Board was created in 2001. He also explained the rationale for the formation of the International Sustainability Standards Board.
Ladies and gentlemen, friends and colleagues at the conference hotel in London and online. It’s a pleasure to welcome you to this year’s IFRS Foundation annual conference.
A lot has changed since our conference last year—both on the global stage and in our organisation.
A year ago, our event was held virtually due to the pandemic. I am pleased that we can have so many people meeting each other in person again. At the same time, we can deliver our first truly hybrid event. We are hosting many participants online.
At this conference a year ago, the IFRS Foundation hosted the International Accounting Standards Board (IASB) as it has done for more than two decades. The IASB has been and is a respected standard-setting board. Before that conference, we had announced the appointment of a new IASB Chair: Andreas Barckow, though he had not yet started in his new position at the time of the conference.
This year, we have two boards and two chairs.
The International Sustainability Standards Board (ISSB), which we announced at COP26 in Glasgow last November, is taking shape under the leadership of its Chair, Emmanuel Faber.
We now have two boards, and it has made an impact on the format of this event. Day one is focused on sustainability and connectivity. Day two is dedicated to accounting.
You will get an opportunity to hear presentations from Andreas and Emmanuel, from ISSB Vice-Chair Sue Lloyd and many of the technical staff supporting both sides of the house.
Before we go there, I'd like to offer some reflections on the changes we have seen since the creation of the International Accounting Standards Board in 2001.
Then, there were significant challenges with financial accounting. We were experiencing challenges with transparency and comparability across country borders.
In October 1998, the G7 Finance Ministers and Central Bank Governors agreed on the need for greater transparency and openness in countries, companies and the international financial institutions.
Their view was that internationally agreed accounting standards would be the cornerstone to meeting this need. They called on the IASC—the IASB’s predecessor—to finalise its proposal for a full range of internationally agreed accounting standards.
There was a clear demand for the IFRS Foundation—in the shape it was back then—to help meet capital market information needs and to serve the public interest.
The G7 also called for IOSCO to review the standards.
The year after, the IASC completed its standard-setting and suggested it should be succeeded by a new board, the IASB.
Not long after, IOSCO recommended that its members permitted the use of the international standards for companies listed on foreign stock exchanges.
In 2001, the IASB held its first meeting and adopted the IASC’s standards. The current accounting standard-setter was born.
Today, the reporting landscape looks vastly different. Much of the world requires or allows the use of IFRS Accounting Standards, set by the IASB.
And we have seen the benefits of this throughout the economic system. It benefits investors because it provides the information they need to make informed capital allocation decisions. It helps companies because they have clarity on which rules to follow in preparing their financial statements. And, it supports regulators in achieving their objectives of facilitating capital flows.
The continued efforts of my colleagues at the IASB have created a gold standard for global standard-setting. They are providing a trusted and effective tool for fostering well-functioning capital markets.
Twenty years after that first IASB meeting, I had the privilege to speak during finance day at COP26 in Glasgow and to make three announcements.
First was the creation of the ISSB.
Second was the consolidation of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) with the IFRS Foundation. The consolidation will help tackle the ‘alphabet soup’ of sustainability organisations, initiatives, standards and frameworks. CDSB was consolidated with the IFRS Foundation at the end of January and we are about to consolidate the VRF with the Foundation later this month.
Third was the publication of two prototypes developed by a working group of bodies in the sustainability standard-setting space to give the ISSB a solid base on which to start its work.
As was the case 20 years ago, we did this in response to external demand—from investors, companies, IOSCO and jurisdictions.
We have received much support and encouragement from jurisdictions during COP, from the G7, G20, IOSCO and others.
The ISSB’s focus is on meeting the information needs of investors as has been the focus of the IASB.
The IFRS Foundation’s defining role is to develop standards that result in the provision of transparent and comparable information to the capital markets.
Many other stakeholder groups than investors are also interested in sustainability information. That is why the ISSB was given the task of developing a comprehensive global baseline of sustainability disclosures focused on the capital markets. Jurisdictions can build on that baseline to meet the needs of other stakeholder groups or public policy goals.
A lot happens now in the area of sustainability disclosures. There is a great drive. We need to make the most of that. Expectations are high.
We have maintained strong momentum since COP26. We are putting the institutional structures in place to help us meet those expectations.
These institutional arrangements are part of responsibilities of the Trustees. The Trustees are also responsible for strategy, for board member nominations and for funding.
The standard-setting and technical decisions belong to the two boards.
In addition to Emmanuel and Sue, we have moved on with nominations of the ISSB Board. So, the ISSB can start taking decisions as a board. Our aim is to reach the full complement of ISSB members—which is 14—by the end of the third quarter this year.
And we are committed to creating a diverse and inclusive board, with a good mix of expertise and from a range of geographies.
To support the ISSB’s work, we are also progressing the formation of the various bodies and committees that will advise the ISSB on an ongoing basis. Some of those will resemble the bodies advising the IASB.
The IASB and the ISSB will work together. Our stakeholders have been clear—connectivity is important. The accounting and sustainability disclosure requirements must tie in with each other.
These developments are truly momentous for the IFRS Foundation, and it is a privilege to be a part of them.
But we must also remember that we are only one piece in a large context.
The support from jurisdictions during COP in response to our announcement is encouraging, as are the supportive statements from G20, IOSCO and others over the past year.
The G7 Finance Ministers and Central Bank Governors in May welcomed the inauguration of the International Sustainability Standards Board and its progress of work on the global baseline of sustainability reporting standards.
They also urged the ISSB to work with national and regional standard-setters and other reporting initiatives so the baseline can be implemented globally.
The same week of the G7 statement, the ISSB has had its first fruitful discussions with the newly created jurisdictional working group.
Focus is to promote compatibility between the ISSB’s proposed standards and ongoing jurisdictional initiatives on sustainability disclosures.
We need international collaboration and wide engagement in our work to create a disclosure system that can be implemented globally.
I am pleased that we have Ashley Alder, Chair of the IOSCO Board, as our first keynote speaker.
IOSCO brings together the world’s securities regulators. It plays an incredibly important role in promoting international standards. Now— as 20 years ago— IOSCO is reviewing the ISSB’s proposed standards. Endorsement by IOSCO would be a real catalyst for the uptake of IFRS Sustainability Disclosure Standards around the world.
We have exciting times ahead. And a lot of work to do. I appreciate the engagement in our work by stakeholders all over the world.
A special thank you to those of you attending the conference.
I wish you a successful event. Thank you.