“The UK government and other stakeholders should explicitly recognize the economic importance of financial reporting in considering the policy implications of Brexit”, says a recent report issued by the Institute of Chartered Accountants in England and Wales.

You might suppress a dark laugh at this, in that it’s not clear the UK government has explicitly recognized anything in considering the policy implications of Brexit, or even that it’s yet made a coherent start on considering those implications. But let’s leave that aside and just go with the premise. Here are some of the report’s main findings, as summed up in the executive summary:

• We note that the rapid spread of IFRS-based reporting in recent years means that the benefits of using international standards are no longer theoretical or merely asserted: a growing body of research shows that they are increasingly evident in practice.
• We suggest that, at a time when the IASB’s standards are increasingly regarded as the benchmark for reporting by listed companies around the world, a move away from IFRS would risk making the UK a less attractive market for investors. We conclude that, as a major global financial centre, the UK should continue to adhere to internationally-accepted standards….
• We consider the principal options for IFRS adoption available to the UK as an IFRS jurisdiction outside of the EU. We consider whether the UK should simply accept the standards issued in future by the IASB, establish a national IFRS endorsement mechanism, or continue in some way to participate in the existing EU mechanism. We also examine the main advantages and disadvantages of each option. We argue that the case for introducing a UK endorsement mechanism are [sic], on balance, persuasive.
• … We conclude that an endorsement mechanism should render the applicable UK authority able to reject new standards or interpretations in exceptional circumstances. While the case should be explored for facilitating other, very limited modifications (for example, adding to required disclosures), we stress that the IFRS brand should not be trifled with lightly…

I imagine  most of that is going to seem fairly uncontroversial. In particular, there doesn’t seem to be a widespread expectation at present that Brexit may mean dumping IFRS. In an interview earlier this year, Andrew Watchman of the European Financial Reporting Advisory Group considered a scenario where “the UK decides to drop IFRS and revert to UK GAAP,” commenting:

• … it would not quite be ‘reverting’ as such because, although there is a body of UK GAAP for private companies, there is no body of UK GAAP for consolidated financial statements of listed companies. It seems unlikely to me that the UK would opt for some new version of GAAP for listed companies…The practical difficulty of creating a hypothetical new version of UK GAAP, and the long-term support that the UK has given to IFRS, makes it unlikely that IFRS would be ditched altogether.
• I believe that the UK will choose to stay with IFRS, under its own regime of checks and balances…

Watchman also regards an endorsement mechanism as providing the most likely version of this regime, commenting:

• … in practice, even if the UK goes for its own endorsement mechanism, I think there will be very little divergence between financial reporting in the UK and financial reporting in the EU.
• If any divergence does occur, it is more likely to be caused by long-held traditions to which different countries still adhere – and which can create regional and national ‘dialects’ in the application of IFRS. For example, the UK is historically a strong advocate of principle-based standards and the primacy of the true and fair view….

I suppose there’s a wild card in the fact that Brexit, looked at in a certain way, is all about the strident assertion of such suppressed national dialects, and that IFRS could theoretically become an attractive medium for expressing them. I first wrote about this over a year ago, pointing out some of the forces that might become relevant, and noting:

• On the symbolic level alone, such a major statement (as Brexit) against the free flow of capital and commerce and people is seriously misaligned with the philosophy and vision that drives the IFRS project – if barriers are back in fashion, then why wouldn’t “taking back our country” extend to taking back our capacity to decide what profit is?…

Watchman notes that “there is broad consensus in the UK, even between ‘Remainers’ and ‘Brexiteers’, that the UK needs to remain internationally focused and outwards looking.” But the state of Brexit-related public discourse and negotiations to date suggests those terms are so malleable and subjective as to be a meaningless predictor of anything that might actually come to pass. Certainly, IFRS remains an unlikely battlefront in this unimaginably rash project, but on the other hand, the Brexiteers might settle at some point for scoring “victories” (measured against their own destructive criteria) where they can get them…

The opinions expressed are solely those of the author