The views expressed in this presentation are those of the presenter, not necessarily those of the International Accounting Standards Board (the Board) or IFRS Foundation. Copyright © IFRS Foundation. All rights reserved

IFRS® Foundation

Comparability and Convergence

15 October 2016 Contemporary Accounting Research conference

Gary Kabureck, Board member

Session Overview 2

•  Comparability, Consistency and the Conceptual Framework

•  Observations on the Research Report

•  Implications of the Research Findings

•  Relationship of the research findings to planned IASB activities

•  Suggestions for future academic research

Comparability, Consistency and the Conceptual Framework 3

•  Comparability is an enhancing qualitative characteristic to enable users to understand similarities and differences among items – over time within a reporting entity or between entities.

•  Permitting alternative accounting methods for the same economic

phenomenon reduces comparability.

•  Comparability is not the same as Consistency. Consistency is the use of the same methods for the same items.

•  Comparability is the goal, consistency helps to achieve that goal.

Key message: Comparability ≠ Uniformity. Closer is always better but reported results only need to be ‘close enough’

Observations on the Research Report 4

•  Intuitively, the research findings comport with what might have been expected – provides confirmatory value.

•  Clearly supports the value proposition of convergence and related joint IASB / FASB efforts.

•  Suggests incremental efforts towards full adoption might not be cost justified when there is a large amount of converged accounting.

Implications of the Research Findings 5

•  For principles versus rules based accounting regimes. •  For the IASB and the FASB

•  For the U.S. Securities and Exchange Commission

•  For the continuation of local GAAP regimes

•  For investors and other primary users of financial reporting

Relationship of the research findings to planned IASB activities 6

•  Continued cooperation between IASB and FASB but no joint projects. •  Primary near term US outreach will be to the investment community. •  Other than professionalism and market forces, there is no binding

mechanism to ensure what is converged today stays converged. General view – convergence is good but not at all costs!

•  Keep an eye on the goodwill and impairment projects - both boards are working on. Goodwill is converged today; impairment requirements have similarities but are not converged.

•  Agenda Consultation recently completed – four primary themes for the next five years – two are relevant today’s session:

–  Focus on implementation support to ensure greater world wide consistent application of IFRS

–  Focus on promoting better communication between preparers and investors

Suggestions for future academic research 7

•  Expand research methodology to include other countries – Japan would be ideal for many reasons.

•  Implications of these research findings vis-v-vis (1) cost/benefit relationships and (2) the laws of diminishing returns when assessing adoption versus convergence.

•  What is the tolerable ‘gap’ (if any) between reported results in converged versus adoption environments? How ‘close’ is ‘close enough’?

•  Analysis of managerial behaviour in periods leading up to adoption.

Questions 8