In my blog of 4 October I noted that, more than six months since formal negotiations on the UK’s departure from the European Union began, the repercussions of Brexit for financial reporting had yet to receive sufficient public debate. In this second in a series of short blogs, I look at a key challenge facing the UK: how to ensure its voice as a global financial centre is heard loud and clear in future international debates on financial reporting.
The UK financial reporting community has long been influential in the development of international accounting practices and standards. UK approaches to accounting issues have had a powerful impact within Europe and internationally and UK support has become important to the IASB. Efforts are now required to ensure that the UK takes full advantage in the coming years of opportunities to retain and expand its influence by focusing on two areas: institutional participation and more general influencing activity.
Within the IFRS Foundation’s governance structure, the high level Monitoring Board exists to enhance the public accountability of the IFRS Foundation. More recently, the Accounting Standards Advisory Forum (ASAF) was created to formalise relationships between the IASB and representatives from the global standard-setting community.
These are important bodies, alongside the IFRS Foundation's Trustees and the IASB board, on which UK investor Nick Anderson now sits. Given the status of the UK as a major IFRS jurisdiction and global capital market, the UK authorities should make the case for UK participation on both the Monitoring Board and ASAF on completion of the Brexit process.
General influencing activity
Sustainable global influence over reporting developments requires much more however. The UK financial reporting community needs to cement its position as a leading member of the unique global partnership that has emerged from the widespread adoption of IFRS. It should plan to collectively up its game in terms of developing and sharing accounting thinking and practice. For example, the FRC and other UK bodies should look to do more to support relevant academic research and should continue to produce high quality thought leadership reports. Collaboration with standard setters and professional and other organisations outside of the UK will be important.
All of this assumes of course that the UK continues to use IFRS. There will be different views on this as the debate about the implications of Brexit moves up a gear. However, the IASB’s standards are now regarded as the global benchmark for reporting by listed companies. To move away from using IFRS would risk making the UK a less attractive market for investors from around the world and for overseas companies considering listing in London. Especially at a time when the UK will be seeking to re-invigorate trading relationships and reinforce its’ position as a global financial centre, it seems likely that the UK will choose to continue to adhere to internationally accepted standards.
ICAEW's Financial Reporting Faculty will continue to play its part in promoting debate and advancing thinking in this area. On 22 November I'll be chairing a panel session discussing the implications of Brexit for financial reporting at the Faculty’s annual IFRS conference. Please come along and join the debate.
Download the full report Brexit: Implications for Financial Reporting published as part of ICAEWs ongoing programme to respond to the challenges of the UK’s decision to leave the EU.