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AASB Forum featuring IASB Chair Hans Hoogervorst

Hosted by CA ANZ on Tuesday 10 October in Melbourne, this forum featured special guest IASB Chair Hans Hoogervorst. Hans delivered a presentation on the ‘big picture’ and the IASB’s plans for global financial reporting. He then joined a panel exploring the future of financial reporting.

The Panel

Moderated by AASB Chair Kris Peach, Hans was joined on the panel by:

  • Tanya Branwhite – Director, Equities, Future Fund
  • Regina Fikkers – Deputy Chair, AASB; Partner, PricewaterhouseCoopers
  • Charles Macek – Chairman, Sustainable Investment Research Institute; Racing Information Services Australia Pty Ltd; Vice-Chairman IFRS Advisory Council; Director, Earthwatch Australia; Member, Investment Committee, Unisuper; Australian Advisory Board MMC Inc; ASIC External Advisory Panel  
  • Andrew Porter – Chief Financial Officer, Australian Foundation Investment Company

Key discussion points

Users of financial statements

  • Better information to understand businesses, including holistic information about business model, culture and stewardship would be very useful for investors. Users of FI reports include current shareholders, employees, creditors, environment (interest groups?) ... even a thought to future shareholders.
  • Shareholder primacy view is too narrow  and long term value of entities can only be driven if broader information (eg sustainability info) to meet the needs of other stakeholders such as environmental interests, employees, is provided.
  • Financial statements provide useful historical financial information, but also should provide information to support forward-looking assessments.

Further financial information to be reported

  • Each company needs to be able tell its own story, so alternative measures should be allowed with some parameters set around them (eg consistency in treatment and presentation year to year, and reconcilable to fi statements). 
  • Management commentary should not merely be a marketing exercise.  Need factual information.
  • Remuneration reporting is a key component of information that users need and this has to be streamlined and made more informative for decision making rather than being just a compliance exercise with requirements in the Corporations Act.
  • A plethora of sustainability reporting organisations because users are looking for more than just historical financial information. IASB considering narrative reporting under banner of broader financial information.
  • The IASB should think broader than 'debits and credits' and collaborate more with other players in the field such as valuers, sustainability reporting board, etc.
  • There is a need for a good framework to enable the different reports (eg remuneration report, environment report) to be prepared on consistent principles.

Analysis of financial information

  • Future reporting will be scanned by robot programs to compact large amounts of data from the global market of reporting entities. 
  • Electronic data access will make analysis more efficient. Artificial intelligence therefore is very much in play to 'mine' information and provide analysis for short-term investors. 
  • However, Hans commented that a good management commentary or some similar narrative reporting is still needed to provide useful information for long-term investors, as they will need to understand a company more deeply than initial data analysis.

Other comments

  • The ATO requirements for SGE lodgement of GPFRs represent a disruption of the government's own existing legislative requirements.
  • Skills that accountants will need include ability to have a longer term view of their entity and considering broader issues (such as valuation, performance reporting) and providing solutions to these issues.

Polling

During the forum, the audience responded to the following questions:

Should the IASB provide or bring more structure to the income statement (eg more subtotals)? 

  • Yes: 33%
  • No: 18%
  • Only at a principal level; 43%

Should the IASB update their management discussion and analysis guidance?

  • Yes: 76%
  • No: 24%

Should the IASB address accounting for intangibles?

  • Yes, recognition, measurement and disclosure: 67%
  • No: 7%
  • Depends on other prioritiesa: 14%