Financial reporting research – is it relevant to practice?

BUSINESS WITH CONFIDENCE icaew.com

Brian Singleton-GreenFinancial Reporting Workshop, Rome: 13-14 June 2013

Financial reporting research – is it relevant to practice?


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Is FR research relevant to practice?

Obvious answersObstaclesThe IASB’s new approachFour styles of standard settingThe IASB, research and the future


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Is it relevant to practice? Obvious answers

No


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AAA membership

Year Practitioners Academics

1970 8,500 4,000

1979 5,500 5,500

2009 600 6,000


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NoYes


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Practitioner concerns

What should I do? (practice)

What should we be required to do?

(policy)


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Corporate reporting questions

• Who uses corporate reporting?• What use do they make of it?• What other information do they use?• What are the effects of corporate reporting (effects ≠

uses)?• Eg, effects of different disclosures?• Effects of different forms of measurement?Answers will depend on context


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The corporate reporting debate

The standard setting debate


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NoYesDepends


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Obstacles

• Incomprehensible• Disagreements• Normative conclusions• Perceived irrelevance


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AAA membership: what happened?

• Research changed• Practice changed


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The IASB’s new approach

Feedback Statement: Agenda Consultation 2011 (December 2012)


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… the IASB should establish, or facilitate the establishment of, a dedicated research capability to provide leadership in the thinking about financial reporting


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“Priority research projects”

• Emissions Trading Schemes• Business Combinations under Common Control• Discount Rates• Equity Method of Accounting• Intangible Assets; Extractive Activities; and Research &

Development Activities• Financial Instruments with the Characteristics of Equity• Foreign Currency Translation• Non-financial Liabilities (amendments to IAS 37)• Financial Reporting in High Inflationary Economies


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Four styles of standard setting

Codifying best practice

Implementing a theory

Doing what works

Doing what people want

Finding out what current practices are

-

Finding out what works

-


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The IASB, research and the future


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IASB: motivations for change

• The financial crisis• Unsuccessful projects• The end of convergence

Credibility


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What the IASB means by “research”

• Academic research• Staff research• Work


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The IASB and research: the future

• More use of academic research• Will have to be positive results• Research is not a panacea• Change is reversible


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The long term

• Engage with the IASB• Engage with practitioners• Create forums for interaction


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Information for Better Markets

• Academic events• ICAEW lectures and conferences


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ICAEW lectures and conferences

• “International Financial Reporting Standards (IFRS): pros and cons”, Ray Ball, Accounting and Business Research (2006)

• Over 18,000 downloads from SSRN


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Information for Better Markets Conferences

• London, 16-17 December 2013• Reporting Financial Performance• Alfred Wagenhofer (Graz)• Charles Lee (Stanford)• Robert Libby (Cornell)• Steven Young (Lancaster)


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Information for Better Markets

• Academic events• ICAEW lectures and conferences• Reports


© ICAEW 2013


© ICAEW 2013


© ICAEW 2013

The long term

• Engage with the IASB• Engage with practitioners• Create forums for interaction• Communication: clear, short and simple• Explain policy-relevance

Impact

A world leader of the accountancy and finance profession


Documents

Financial reporting research – is it relevant to practice?