IFRS expert Noor Nakato gives a behind-the-scenes look at how the International Accounting Standards Board (IASB) develops standards and explains how CFOs can contribute to that process.
As a CFO in East Africa who prepares financial statements using IFRS accounting standards, your practical experience is invaluable to the standard-setting process. Feedback from stakeholders around the world is critical for the IASB to develop standards that bring transparency, accountability and efficiency to capital markets.
The IASB develops standards following a well-established process. The due process enables stakeholders all over the world to contribute to and scrutinise the standard-setting, helping the IASB ensure the best thinking worldwide informs the development of the requirements.
This is essential both for developing high-quality standards and for ensuring that stakeholders can be confident that all relevant views have been considered when they are developed. The process is intended to build trust, legitimacy and global acceptance of the standards.
The standard-setting process starts with an agenda consultation, which is undertaken every five years with the aim of defining international standard-setting priorities and developing the IASB’s project work plan. Projects typically begin with research to explore the issues and identify possible solutions. Often, the IASB sets out its ideas in a discussion paper for public consultation.
If there is sufficient evidence that a pervasive accounting problem exists and it appears that a feasible standard-setting solution can be found, the IASB begins standard-setting. The IASB reviews the research, including comments on the discussion paper, and makes proposals to resolve the issues identified.
Proposals for a new standard or an amendment to an existing standard are published in an exposure draft for public consultation. To gather additional evidence, the IASB consults with a range of stakeholders from all over the world. The IASB analyses feedback on the exposure draft and other research, and refines proposals before a new standard or amendments are issued.
The IASB’s work doesn’t stop once a standard is issued or amended. The board supports the consistent application and maintenance of IFRS accounting standards. After a new standard has been in use for a few years, the IASB also conducts a post-implementation review to assess whether it is achieving its objective and, if not, whether any amendments should be considered.
Post-implementation review of IFRS 16 leases
One such project that the IASB is currently undertaking is the post-implementation review of IFRS 16 leases. Leasing provides an important and flexible source of financing for many companies. However, when applying the previous lease accounting requirements, companies reported on the balance sheet only leases classified as 'finance leases'. Other leases classified as 'operating leases' were only disclosed in the notes to the financial statements.
This somewhat arbitrary distinction made it difficult for investors to compare companies. It also meant that investors and others had to estimate the effects of a company's off-balance sheet lease obligations, which in practice often led to overestimating the liabilities arising from those obligations.
To enable investors and others to get an accurate picture of a company’s lease assets and liabilities, the IASB developed a new lessee accounting model in IFRS 16. The model requires almost all leases to be reported as assets and liabilities on a company's balance sheet.
The objective of the post-implementation review of IFRS 16 is to assess whether the benefits and costs of applying the new requirements of IFRS 16 are as the IASB intended when it developed those new requirements.
A review begins with the IASB identifying matters to be examined, which are then published in a request for information (RFI). In the post-implementation review of IFRS 16, the IASB identified matters to include in the RFI drawing on research and discussions with a broad range of stakeholders, including investors, preparers, auditors and regulators. These discussions took place between June 2024 and January 2025. The RFI was published on June 17 and sets out questions in six sections.
Section one seeks information on stakeholders’ experiences relating to IFRS 16 and their overall views on the Standard. Sections two - four seek information about matters in IFRS 16 that the IASB has identified as areas of interest to examine further in this post-implementation review. Section five seeks suggestions for improvements to future transition requirements. Section six seeks other information relevant to this review that is not covered in sections one – five.
Companies that prepare financial statements applying IFRS 16 can respond to these questions either individually or collectively through preparer groups like the CFO East Africa Forum.
As a CFO, your unique experience applying IFRS accounting standards in East Africa's dynamic market is invaluable information for a global standard-setter. Whether the IASB is conducting an agenda consultation or a post-implementation review, or consulting on a discussion paper or exposure draft, views from different stakeholders and from different jurisdictions are critical in developing high-quality standards that bring transparency, accountability and efficiency to capital markets around the world. By sharing your practical insights, you help ensure that IFRS accounting standards are designed to work effectively across different jurisdictions.
The IASB will consider all written comments received by 15 October. CFOs can submit a comment letter online through the IFRS website or by email to commentletters@ifrs.org.
