I haven’t read them all of course, but of the 110 comment letters received in response to the IASB’s agenda consultation, my favourite is from the Accounting Methodology Centre, a Russian organization previously unknown to me. This would be the case if only for its final flourish:
- The famous Russian writer, critic and pamphleteer of the last century Viktor Shklovsky said: “It is pointless to inspire the idea of the taste of melon to a person who has chewed shoelaces for years”. We really hope that the Board’s Agenda 2022–2026 will be aimed at stopping telling the investor about the taste of melon, offering him shoelaces on a platter, and asking how best to season these shoelaces with salt and pepper. He just needs to be allowed to taste the melon.
I dream of a day when a band of protestors descends upon IFRS Foundation headquarters with the battle cry “No more shoelaces!” But don’t take from this that the Centre’s submission is just an eccentric frivolity. In fact it’s a committedly eloquent, closely-argued call to move beyond old confining paper-based formats and to embrace the possibilities created by technology (a topic we’ve covered many times here in the past, for example here). Here’s an extract:
- Today, it has become obvious that it is impossible to create digital financial reporting without changing the IFRS standards. Along with all the good things that IFRS brought to the field of financial reporting, they did one very bad thing. These standards have linked financial statements to paper formats and made it virtually impossible to develop electronic reporting. Presently most common format of financial reporting is PDF or similar formats that mimic paper documents. Even the use of the XBRL does not help in getting rid of these formats. Today’s financial reporting user is not able to access any of the vast armoury of information visualisation tools that the digital era has created.
The submission suggests that “In modern conditions of total digitalization of all information areas, financial reporting looks like an isolated island of backwardness and primitivism, where IFRS standards do not allow any civilization.” Noting that makers of electronic maps have no need to worry about the mundane issues arising in creating a paper atlas, it goes on:
- …Imagine what would happen if, in the last quarter of the 20th century, some sort of “International Geographic Map Standards” were developed, which would contain requirements for the aggregation and disaggregation of geographic information, its distribution among “primary geographic maps” and “notes”, its fixation to some date in the past? It is unlikely that in such conditions the modern navigation systems to which we are accustomed today would appear. This is exactly the kind of misfortune that happened to financial reporting thanks to IFRS. Today, no one even tries to create some kind of navigation system for the entity’s financial position and financial performance. Because any way of presenting information other than in paper-based forms will be considered non-compliance with the IFRS.
- … If financial reporting does not say goodbye to its paper image in the coming years, investors will finally delete it from the list of noteworthy sources of information for making economic decisions, preferring other, more convenient sources that adapted to the digital age. To prevent this from happening the financial reporting should turn from a stack of stiff bureaucratic statements into an integral information system where users can compose and structure information at their discretion, where they do not look at a rigid image imprinted by an accountant in granite, but display the image on a screen in the form that is convenient for them.
This potentially allows a freedom far beyond what’s currently allowed, for example in the choice of reporting date and period:
- Today, any grandmother has the opportunity to see transactions on her bank accounts online for ANY period that she wishes, and the balances on these accounts for ANY date that she wishes. Only the unfortunate investor does not have such an opportunity in relation to financial reporting. Because the IFRS standards today, as well as 40 years ago, REQUIRE entities to limit their published financial data to a predetermined reporting period and predetermined reporting date…Why not open the project “Reporting date and reporting period at user discretion” instead? Again because such a project seems “complex” and therefore not “feasible”? The Board has no “capacity to make timely progress” on it?
The AMC has relatively less to say about the current or potential future standards, saying “we consider that the Board has achieved a fine balance between its main projects considering the challenges it faced up to date.” However, again: “we believe that the further development of activities in this direction is increasingly losing its meaning, as long as the reporting formats remain extremely unfriendly for users.”
I couldn’t find any information online on the Accounting Methodology Centre (or Methodological Centre, as the letter also puts it) or the signatory Oksana Sukhareva. But I hope this isn’t the last time we (and in particular the IASB) will be hearing from them…
The opinions expressed are solely those of the author