International Accounting Standards Board chairman Hans Hoogervorst told attendees at a financial conference in Mexico City that the board plans to give accountants a period of relative stability to give them time to adjust to all the new standards.

He noted that the IASB is approaching the completion of its convergence program with the Financial Accounting Standards Board in the U.S. “It is 10 years since the boards set out on this path, and a great deal has been achieved,” he said in a speech Wednesday. “We have four remaining convergence projects to complete and I am hopeful that we can complete this work in relatively short order.”

The two boards have been in the process of re-exposing several of the standards, which include leasing, revenue recognition, financial instruments and insurance contracts, to get further feedback before finalizing them (see Accounting Boards Plan More Outreach on Revenue Recognition and FASB, IASB Hone Differences in Financial Instruments Standards). However, there remain important differences between the standards that still need to be resolved (see FASB and IASB Part Ways on Leasing Standards and FASB and IASB’s Irreconcilable Differences). Meanwhile, the Securities and Exchange Commission has not yet made a decision on whether or not to approve the incorporation of International Financial Reporting Standards into the U.S. financial reporting system (see SEC Resists Pressure on IFRS Decision).

In his speech, Hoogervorst described the agenda consultation that the board has been carrying to elicit feedback on what projects it should tackle next (see IASB Looks for More Unfinished Work to Do).

“The IASB spent its first five years improving IFRSs in time for adoption by Europe and other countries,” he said. “The following five years were largely dominated by its convergence work with the FASB. Both of these events have delivered substantial improvements to the quality of financial reporting but they also predetermined the IASB’s work program. This work is largely now behind us. For the first time in the history of the IASB, we will have a relatively clean slate.”

Hoogervorst noted that the IASB received more feedback from investors on the agenda consultation than on any other IASB activity to date. The common request they had received was for a period of “relative stability.”

“This is quite understandable,” he said. “Ten years ago no major economies used IFRS. Now, more than 100 do. At the same time, many of our standards have been re-written. That is 10 years of unprecedented change. It is not surprising that our friends around the world want some time for the dust to settle. Now we have most of the world on board, even a small change to a standard can be like dropping a pebble into still water. The changes will ripple out and affect tens of thousands of preparers. Investors must become familiar with the new rules. Auditors must learn how to audit them and regulators will need to enforce them.”

Hoogervorst noted that not only the final standard must be digested, but also every call for feedback on the IASB’s proposals, in the form of discussion papers, exposure drafts and other documents that need to be considered and responded to by accounting organizations.

“This is a responsibility that we take very seriously,” he said. “That is why determining the IASB’s future work program will involve cherry-picking the most important areas where change is required. Let’s fix what needs fixing, and no more.”

For its post-convergence work program, Hoogervorst said there was almost universal support for completing revisions to the IASB’s conceptual framework, particularly in the area of measurement. “This framework serves as a point of reference for the IASB’s decision-making,” he added. “Where choices are not clear-cut, the framework serves to encourage the IASB to make decisions that are consistent across the standards. The framework is also an important reference for companies when applying principle-based standards.”

Hoogervorst also noted that there would also be changes in disclosures. “It has become increasingly clear that we are suffering from disclosure overload,” he said. “This is not entirely due to financial reporting. The plain fact is that businesses have become more complex. It is the job of financial reporting to describe this complexity, not to mask it. Not all disclosures provide useful information to investors. Standard boilerplate responses are more about ticking boxes than helping investors really understand what is going on under the hood of the business. This is an issue that preparers, auditors, regulators and standard-setters will have to tackle together.”

He emphasized that the disclosure requirements need to be appropriate. While each individual disclosure requirement may have made sense when a standard was first introduced, the disclosures in totality may not improve the clarity of financial reporting and instead could make it more difficult to really see what is going on. However, it will be difficult to strike a balance.

“One investor’s disclosure clutter is another investor’s golden nugget of information,” said Hoogervorst. “Taking information away is never easy. Nevertheless, feedback from the agenda consultation indicates that this is an important area for many respondents—particularly smaller listed companies, many of whom believe that the disclosure overload falls disproportionately on their shoulders.”

He noted that several accounting organizations in the U.S., the U.K., France, New Zealand, and Europe have all conducted useful research on the current disclosure requirements.

Another priority cited in the agenda consultation involves Other Comprehensive Income. “OCI is increasingly used as a home for income of a less than certain nature,” said Hoogervorst. “It is true that income reported in OCI should come with a health warning, yet investors ignore OCI at their peril. Providing a clearer conceptual definition of OCI will help to address the endless debates about volatility and financial reporting, as well as tackling the thorny issue of recycling. There are no easy or clear answers, but this is a project that I am very much looking forward to getting my teeth into.”

Hoogervorst said the IASB may also consider taking on several other “less ambitious projects” in areas such as agriculture, business combinations under common control, hyperinflation and rate-regulated industries. “We have a few further round-table discussions planned, but I think it is fair to say that our direction of travel is becoming clear,” he said. “I am not ruling out other projects for consideration by the IASB, but if we are to provide a period of relative calm then difficult choices will have to be made.”

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