IFAC, IASB, FEE, EU Updates

IFAC: The G-20 Must Prioritize Public Sector Accounting

Argentina’s most recent default adds to the long list of government defaults, bailouts, and restructurings over the years. It also serves to highlight that sovereign debt problems evident during the recent global financial crisis continue to exist. Like many countries, Argentina does not prepare accrual-based financial statements, which are essential for effective financial management. Many countries around the world—including many in Europe, that received multi-billion dollar bailouts over the last few years—are also in need of better government financial reporting.

“Countries continue to default on their debt, yet aren’t pushed by governments, credit rating agencies, or financial commentators to significantly improve public sector financial reporting,” said Fayezul Choudhury, Chief Executive Officer of the International Federation of Accountants (IFAC). “These same countries require private sector companies in their jurisdictions to publish audited, accrual-based, financial statements when raising funds in capital markets. What justifies the double standard whereby a government compels private companies to be transparent and accountable, when it avoids using accrual accounting itself—despite having bonds traded on the capital markets?” IFAC strongly recommends that the G-20 makes enhanced public sector financial management a key priority this year and in the future.

Ethics Board Welcomes Appointment Of Stavros Thomadakis As Chair; Publishes 5-Year Strategy & Work Plan

Dr. Stavros B. Thomadakis has been appointed chair of the International Ethics Standards Board for Accountants® (IESBA®), beginning January 1, 2015 for a three-year term. Dr. Thomadakis’ professional career includes a 40-year tenure as professor of financial economics at the University of Athens, the City University of New York, and MIT, as well as a number of regulatory and oversight roles. As chair of the Ethics Board, Dr. Thomadakis will lead the board in the implementation of its newly published Strategy and Work Plan, 2014-2018.

“Ethics standards are a foundation of trust in the accounting profession and essential to its fulfilling the responsibility to act in the public interest. It is an honour to lead the work of the Ethics Board. I am looking forward to advancing the board’s agenda and particularly to continuing the extended outreach program initiated by the late chair, Jörgen Holmquist, whose dedication and leadership will not be soon forgotten,” said Mr. Thomadakis.

The Ethics Board also recently released its Strategy and Work Plan, 2014-2018. The publication highlights the board’s priorities and planned actions toward achieving the objective of setting high-quality ethics standards for professional accountants that are widely adopted around the world.

The Strategy and Work Plan lays out four inter-connected strategic themes that articulate the board’s vision over the medium to longer term:

  • maintaining a high quality Code of Ethics for Professional Accountants™ (the Code) for application by professional accountants globally;
  • promoting and facilitating the adoption and effective implementation of the Code;
  • evolving the Code for continued relevance in a changing global environment; and
  • increasing engagement and cooperation with key stakeholders.

“The Code has now been adopted or used as the basis for national ethics standards in over 100 jurisdictions around the world. Continued strengthening of the Code, and thereby moving toward even greater acceptance of and global convergence with the Code, is at the heart of our five-year Strategy and Work Plan,” noted Interim Chair Wui San Kwok.

IFAC Offers Guidance on Supplementary Financial Measures

IFAC’s Professional Accountants in Business Committee (PAIB Committee) has recently issued guidance on developing and reporting supplementary financial measures that fall outside of GAAP.
The PAIB Committee has issued guidance on developing and reporting supplementary financial measures that fall outside of GAAP. The guidance provides recommendations for the use of supplementary financial measures as part of high-quality financial reporting in organizations. Since such measures fall outside of GAAP, the Professional Accountants in Business Committee noted, they may lack transparency, comparability and consistency, which are essential qualities for investors and other stakeholders who wish to assess financial performance. To address this challenge, the PAIB Committee’s guidance establishes a set of principles that allows accountants to develop and report useful measures in accordance with the qualitative characteristics of financial information.
The guidance builds on several characteristics of useful financial reporting, including relevant and faithful representation, along with comparability, verifiability, timeliness and understandability. The guidance aims to reinforce accountants’ ability to produce high-quality reports that enable sound decision making about organizations.

IPSASB Seeks To Align Public Sector Accounting Standards With Recent IASB Pronouncements

The International Public Sector Accounting Standards Board (IPSASB) has released an exposure draft of proposed improvements to the International Public Sector Accounting Standards (IPSASs).
The proposals incorporate relevant amendments made by the International Accounting Standards Board (IASB) in the 2009-2011 and 2010-2012 cycles of annual improvements, and the changes made by ‘Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)’.
The existing IPSAS is not fully converged with IFRSs, especially in the areas of borrowing costs, related parties, employee benefits, segment reporting, financial instruments. The proposals would see amendments made to the clarification of comparative information requirements (IPSAS 1).

The Juncker Commission: A Strong And Experienced Team Standing For Change

Recently, President-elect Juncker unveiled his team and the new shape of the next European Commission. The new European Commission will be streamlined to focus on tackling the big political challenges Europe is facing: getting people back to work in decent jobs, triggering more investment, making sure banks lend to the real economy again, creating a connected digital market, a credible foreign policy and ensuring Europe stands on its own feet when it comes to energy security. The new way the Commission will be set up reflects these Political Guidelines, on the basis of which Jean-Claude Juncker was elected by the European Parliament.

President-elect Jean-Claude Juncker said: “In these unprecedented times, Europe’s citizens expect us to deliver. After years of economic hardship and often painful reforms, Europeans expect a performing economy, sustainable jobs, more social protection, safer borders, energy security and digital opportunities. I am presenting the team that will put Europe back on the path to jobs and growth. In the new European Commission, form follows function. We have to be open to change. We have to show that the Commission can change. What I present to you is a political, dynamic and effective European Commission, geared to give Europe its new start. I have given portfolios to people – not to countries. I am putting 27 players in the field, each of whom has a specific role to play – this is my winning team.”

The new College (see figure) will have seven Vice-Presidents, in addition to the High Representative of the Union for Foreign Policy and Security Policy (Federica Mogherini), each leading a project team. They will be steering and coordinating the work of a number of Commissioners in compositions that may change according to need and as new projects develop over time. These project teams mirror the Political Guidelines. Examples include ‘Jobs, Growth, Investment and Competitiveness’, ‘Digital Single Market’ or ‘Energy Union’. This will ensure a dynamic interaction of all Members of the College, breaking down silos and moving away from static structures. The Vice-Presidents will all act as real deputies to the President. There are 5 former PMs, 4 Deputy PMs, 19 former Ministers, 7 returning Commissioners, and 8 former MEPs; 9 women, 19 men.

The Structure

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DG’s of Interest to the Profession

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