Ian Wright, FRC

Those who live and breathe US GAAP spend more time debating the question ‘which piece of literature is required to be applied?’.

By comparison, aficionados of IFRS spend more time debating ‘how do we communicate best with what the literature permits?’.

I know which of these groups I want to be associated with ­ debates about which piece of literature may apply seem a pretty poor use of the time of very bright professionals.

The increasing volume of IFRS literature is an important source of increased complexity in corporate reporting. But if unchecked, it risks us all falling into habits we will later regret. And this is one of the reasons that the Financial Reporting Council has launched a project to reduce the complexity, which is a brave aspiration.

But it is unfair just to blame accounting standard setters and their regulators when the creation of much of this additional literature was strongly supported by companies, auditors and others.

Comment letters from con-stituents almost always call for more detail. Also, every time there is a crisis of confidence ­ just like we are experiencing over the credit crisis, prospects for lower growth, and perhaps recession ­ lots of groups are formed to find solutions.

Unfortunately, history tells us that too often an easy target for action is to add to the content of annual reports, whether merited or not, and today’s agenda looks little different.

So how do we develop a culture that enables us to keep a focus on outcomes that support top quality company communications with investors and other stakeholders?
There are lots of things that can be done.

One strand is that we all need to help the IASB improve rather than increase IFRS.
When you next write a comment letter to the IASB about one of its exposure drafts, remember to ask yourself: what could be deleted; is there a way to express requirements more concisely, and can detailed guidance for narrow areas of accounting be avoided?

Improved clarity is often best achieved by deleting or amending a word or sentence.
And lessons for today’s stressed environment?

It is more important than ever to focus on improving quality rather than adding volume ­ less is so often more.

Ian Wright is director of corporate reporting at the Financial Reporting Council

Like this story? Spread the news by clicking below:

 del.icio.us     Digg this     reddit!