Everchanging financial reporting environment
In the past couple of years, I see a lot of changes in the world of financial reporting, be it IFRS, US GAAP or some other local GAAP. The most notable ones are introduction of new revenue, financial instruments (including impairment), leases and insurance standards. These are the most complex standards in financial reporting. Although, not all of these standards may affect you, the ones that affect are likely to impact your P&L and balance sheet numbers significantly (and I haven’t even mentioned the immense effort to prepare transitional disclosures that are required by these standards!).
Just when you think that this must be it, current business and tech environment throws a new challenge to the accountants worldwide, with … bitcoins! Currently, no GAAP has an accounting standard for cryptocurrencies (or even fancier ‘crypto-assets’). Some account for them as cash, some as inventory, and some as financial instruments (think about consequences of different accounting treatments on their measurement and hence your financials!). Thank you, Satoshi Nakamoto, for making the lives of accountants and auditors a nightmare!
These are not the easiest times for accounting professionals and students worldwide. We must keep ourselves updated all the time.
So, what and who is driving the changes?
Well, a number of factors:
1. Accounting scandals (think Enron, WorldCom, and Madoff). See my analysis here (coming soon) of how poor governance and loopholes in financial reporting led to recent accounting scandals.
2. Standard setters. IFRS and US GAAP have been trying to converge for ages now and they had a deadline of 2015. As I’m writing this blog, it’s almost 2019 outside, and guess what? Read my post on why haven’t IFRS and US GAAP merged!? (coming soon)
3. Financial crises (think Lehman Brothers). Read my post on introduction of expected credit losses model (coming soon), and how could IFRS 9 have prevented Lehman crash.
4. As IFRS have become a global set of principles, this has resulted in disagreements within different regulators. Now, new standards have to be locally adopted before they can be introduced in certain jurisdictions. Heard of IFRS as endorsed by European Union?
How can you master IFRS within a short period of time? How can you be constantly up-to-date with latest standards, FAQs and issues, without getting bored with pages and pages of text?
Well, I for one, have spent over 10 years in the field and recently resigned from a managerial position at the Big 4 in their capital markets and accounting advisory department. I’ve spent 3 years to become a chartered accountant (ACCA), attended endless trainings and e-learnings and spent most of my work days reading through texts of over 1,000 pages trying to solve clients’ accounting issues. At PwC, I became IFRS 9 champion and that ‘financial instruments guy’.
Not all of us have this luxury called ‘time’ or are willing to swim in textbooks for years to master IFRS. I left my job to become independent IFRS consultant and little did I know that outside Big 4 or even my accounting advisory department, everyone hated complexities and technicalities of IFRS.
I stared my journey of searching for ‘easy to read’ IFRS material and like you, have found nothing of that sort. So, here we go – in my spare time from my office, clients and family, I will be translating IFRS into everyday English, and hope this initiative will ease lives of thousands of accountants and auditors a tad easier.
Till then,
JU
