Olivier Servais is Director of the XBRL Activities at the IASC Foundation, which is responsible for the development of the IFRS taxonomy. He has been European Director of XBRL International and has served as a member of the XBRL International Steering Committee, the Consultative Working Group of CESR Transparency, and the Eurostat XBRL Pilot Task Force. He is the author of various publications about XBRL.
This is the second part of a two-part interview. The first part contains questions 1 to 7.
(8) Do you perceive any differences in business cultures around the world that make it harder or easier to implement XBRL in individual countries? Or put another way, are there certain conditions that make it easier to adopt XBRL in some countries than others?
I believe that most of the requisite conditions for the efficient implementation of XBRL are now in place: political decisions have been made, taxonomies are available and software solutions, including ERPs, are affordable. The financial crisis is playing an ambiguous role. Few people doubt XBRL’s potential to improve information exchange and therefore restore market confidence by providing transparency. Yet at the same time few, if not forced, are willing to dedicate the time and money to implement it.
This applies to all countries and regions as all are affected, though some have been quicker on the uptake than others. I recently spent a week in Japan and was highly impressed that XBRL as a concept or idea is no longer discussed because it is already implemented. It is a similar situation in Belgium, where all non-listed/non-financial companies (approximately 280,000 of them) have been filing in XBRL for almost two years.
In this sense, XBRL is becoming a nonissue. Why? Dedication and endorsement from high level decision-makers, who want to see XBRL embraced in their markets. As well as Japan and Belgium, there are interesting examples of XBRL adoption in Australia, China, India, Spain, and the US.
(9) The IFRS taxonomy recently released a simplified Chinese translation of the complete label linkbase for the IFRS Taxonomy 2008. As the IFRS strives to provide taxonomies in so many languages, what kinds of problems or issues arise? Are language and translation issues a significant problem for IFRS taxonomy development?
I am not sure if there is a “problem.” Providing IFRSs in English only would delay their adoption around the world. Therefore translation of the IFRSs is considered vital by the IASC Foundation and its Trustees and a dedicated team is now devoted to this effort. Since January this year, the translation effort of the IFRS Taxonomy has been integrated with the translation effort of the IFRSs, and IFRS translators/reviewers are also reviewing the taxonomy. This change in the translation process will significantly reduce the term, hopefully to no longer than six months and also make translations of the IFRS taxonomy more quickly available. Currently we are preparing translations in Chinese, Dutch, French, German, Italian, Japanese, and Spanish. Other languages will be made available, depending on resources and market demand.
(10) The SEC issued its Roadmap for IFRS adoption in November. One of the milestones the Roadmap provides is that:
In order to realize the improvements in the usefulness and comparability of financial information anticipated upon the widespread use of interactive data, U.S. issuers would have to be capable of providing IFRS financial statements to the Commission in interactive data format at a greater level of detail than is currently available. Therefore, the state of development of an IFRS list of tags for interactive data reporting will be a consideration in the Commission’s determination of whether to require the use of IFRS for all U.S. issuers….The Commission staff is actively involved in the improvement and monitoring of the IFRS list of tags via participation in the IASC Foundation’s XBRL Advisory Council.
How do you view this requirement, and could you tell us how that work is proceeding?
There is another important element of the SEC Roadmap: the use of two sets of accounting requirements, US GAAP and IFRSs as published by IASB. If you consider the very first standard, IAS 1, you will see that the IFRS taxonomy can be used to file with the US SEC. However, there are concerns over the differing number of elements in the US GAAP taxonomy and the IFRS taxonomy and the need for more detail in the IFRS Taxonomy. Indeed, during my recent trip to Tokyo the Japan FSA expressed concerns about the level of detail in the IFRS Taxonomy in comparison with the EDINET taxonomy.
The XBRL Advisory Council and Interoperable Taxonomy Architecture (ITA), a joint initiative by the European Commission, the Japan FSA, and the US SEC, are forums where such improvements are being discussed. However, despite such demands from stakeholders, our role remains focused on producing a high quality product that reflects the IFRSs, and does not currently extend beyond that. It’s fair to say that things could change.
(11) In a recent KPMG survey, some 65 percent of investment executives and analysts surveyed expect that U.S. adoption of IFRS will make U.S. capital markets more attractive to foreign investors. Fifty-seven percent of the investors and analysts surveyed believe the timeline proposal announced by the SEC in November to be “about right,” while 18 percent said it wasn’t aggressive enough. Why do you think IFRS apparently enjoys such strong support in the US financial community?
Transparency and comparability are definitely the main reasons. Some years ago, it was commonly believed throughout the XBRL community that XBRL adoption was a matter of “when” rather than “if." I believe that the same statement applies now for the adoption of IFRSs in the US, and that the 18 per cent would like to see IFRS adoption now.
(12) Have you seen an impact from the global recession on the pace of adoption of IFRS standards? Do you think IFRS implementation will slow because policymakers (a) put their energies elsewhere (b) fear IFRS will only complicate recovery, or (c) cynically use the downturn as an excuse not to adopt IFRS? Or alternatively, do you think policymakers will see adopting IFRS as part of the long-term solution to stable economies, financial transparency, and a step toward averting future financial crises?
From my perspective, I haven’t seen a slowing down in the pace of IFRS implementation by the US. Without wanting to congratulate my colleagues too much, the IASB has been globally recognised as having made appropriate decisions and providing effective resources when needed. Even with growing staff numbers, we remain a relatively small organisation with a limited budget. Also it should be noted that developing accounting standards is a necessarily lengthy process. Furthermore the IASC Foundation is governed by a Board of Trustees that represents international business sensibilities. Therefore without wanting to sound complacent, I truly believe that IFRSs are ready to be applied as part of the solutions being drafted by governments to protect financial markets in the future, and I am confident that XBRL will be part of those solutions as well.
(13) The IASB is located in Europe, it has much interaction with European institutions, and a quick review of the staff roster would indicate most or all are European. Do you have any concerns that the final IFRS and XBRL products will be too Eurocentric? Even if that’s not the case, do you fear they may be perceived as such?
Do you ask the question because I’m Belgian and come from the heart of Europe? More seriously, the Trustees and staff of the IASC Foundation and the members of the IASB are drawn from almost 30 countries across the world. Our Director of Technical Activities (aka accounting matters) is from New Zealand, the Chief Operating Officer and the Director of International Affairs are both American, and the membership of the IASB and the Board of Trustees is managed to ensure that there is geographical diversity and representation. Of course there is much interaction with European institutions, mainly because the European Union was the first region to adopt our standards. However recent adoption decisions in Canada, China, India, Japan, and Korea have directly affected the diversity of our staff, and citizens of each of those countries are to be found in the IASB and IASC Foundation.
(14) Are you concerned that global implementation of IFRS will undermine traditions in business culture that are reflected in the accounting standards of individual nations? Do you think that national accounting and business communities may come to resent IFRS because it has superseded national accounting standards? Or do you think that ultimately local bodies will see that the advantages of international standardization more than offset this negative?
The heterogeneity of the IASC Foundation staff, the IASB and also the Trustees is the best warranty that local “flavours” are considered when developing IFRSs. Even if some communities attempt to use the crisis as a pretext for protectionism, capital markets are interconnected and therefore solutions need to be global, and all of us at the IASB, and the IASC Foundation are working together to ensure that we perform our duties and meet our responsibilities.
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