The IASB recently posted a summary report of a joint outreach event held in Brussels in June 2014, titled: Investors and Advisers: What role can you play in ensuring quality financial reporting?

Here’s the executive summary:

• “Panellists emphasised that the information provided by financial reporting needed to be of high quality so that it is of relevance to all users, irrespective of whether they are a retail investor, analyst or another type of user.
• Financial and non-financial reporting needs to work together, but they have different roles to play. Financial statements have a big part to play in this, particularly for those who have limited access to other sources of information or have no access to management. In some instances, information provided in financial statements comes too late to be decision-useful, for example during takeovers; but for small listed entities or somebody looking at a company for the first time annual financial reports can be the main source of information.
• There are a variety of views on how to make capital markets more efficient and reduce the cost of capital, especially for long-term infrastructure investing. Panellists held different views on the role of fair value: some viewed it as potentially favouring a short term view others believed the use of fair value is appropriate in some situations and the challenge is ensuring it is used when and where appropriate. Overall it was agreed that volatility is a fact of life, but the volatility depicted should reflect real, economic volatility to which the entity is subjected, rather than being caused by accounting.
• Financial statements that are high quality will lead to confidence and trust from investors. Investors are interested in consistency and are forward looking, using financial statements as a basis to forecast future returns. Financial reporting needs to be able to enable users to see through any potential bias of management and provide an accurate view of a company’s position.
• There is a growing number of data sources, including electronic data, but it is not clear to what extent these are used. Reporting requirements need to be proportionate but at the same time facilitate comparability.
• Above all, panellists agreed that it was vital that investors are involved in the standard-setting process. EFRAG, the IASB and the European Commission all welcomed EFFAS’s involvement and the important role it has to play in developing high quality financial reporting.”

Regardless of the apparent quality of the discussion, it’s hard not to think that this summary (and the 20 pages of greater detail attaching to it) consists almost entirely either of statements of, if not the obvious, at least of assertions that are long established by now (financial reporting needs to be of high quality etc.), or else of expressions of disagreement between participants. The document bulges with statements that may seem reasonable taken in isolation (e.g. “It was necessary to distinguish amongst different types of users, who have different information needs and levels of access at different times for different purposes”) but which don’t really have any obvious implication in terms of what standard-setters should actually do; likewise, the closing paragraph above expresses something that could hardly have been in doubt (i.e. there can’t have been much practical likelihood that such a roundtable would conclude the views of investors on financial reporting were unimportant) but provides little clarity on what it means as a practical matter, if anything. After all, no matter how much the representatives of these and other groups emphasize “reaching out to members” and suchlike, it’s unclear that the views they harvest from these processes, however well-founded and persuasively expressed, will ever carry as much weight as the personal inclinations of those who happen to have a seat at the table.

I don’t say this to dismiss the value of the exercise (financial reporting is hardly the only major area of existence afflicted by a large dose of doubt and uncertainty), but rather to hold this up as a counterpoint to the ill-founded but strenuous certainty that often seems to drive assertions about accounting elsewhere. For example, how can the necessity of IFRS as the only viable response to the demands of globalization (as asserted by IASB Vice-Chair Ian Mackintosh in the speech I discussed here) be so obvious, when this report expresses so little clarity about what financial reporting (of any kind!) actually achieves, and how? How can we have confidence in any bland claims about the value a particular standard delivers to users (whoever they are), when the report documents such little consensus among such an elite group of individuals on something as fundamental as, say, the utility of fair value (the EU, for instance, is still stuck on its preoccupation with “prudence” and its fear that “fair value measurement may favour short-term behaviour (with) unintended consequences…that may disincentive long-term investors.”).

As the executive summary indicates, the report expresses quite a bit of unease about the timeliness of financial statements, indicating that in the real world they’ll often be overtaken by other kinds of information; hardly a new issue of course, but one that only seems to become more acute over time. No doubt these other information sources aren’t the direct responsibility of the IASB, but doesn’t that only mean it’s in danger of becoming like a manager of an old-time city-centre grand hotel – imposing and respected, but irrelevant to the movers and shakers, who are all partying in the new cool districts? The establishment may still trudge over there for formal get-togethers, as tradition dictates, but how long can even that continue, when all the stuff that really creates and destroys wealth is happening elsewhere?

The opinions expressed are solely those of the author