The IFRS Foundation has published its annual report and audited financial statements for the year ended 31 December 2020 setting out priorities for 2021 and flagging a decline in revenue due to the pandemic
Outgoing chair of the International Accountancy Standards Board (IASB) Hans Hoogervorst said: ‘2020 turned out to be a challenging year because the coronavirus pandemic affected our stakeholder engagement, our working patterns and our priorities.’
The Foundation, like many other organisations in 2020, had to adapt to the Covid-19 pandemic, which forced the organisation to swiftly roll out upgraded IT systems. Back in 2018 the Foundation started to invest in technology to improve digital working, and modernise systems and processes that would make their engagement with stakeholders more efficient. The aim was originally to have the systems in place by 2022.
When remote working was put in place in 2020 during the first lockdown, the Foundation accelerated the rollout of new cloud-based systems. Building on this, the Foundation will also be launching a new website in 2021 with improved search capability and a new IFRS standards navigator, to improve stakeholder engagement.
During the pandemic, the Foundation also focused particularly on supporting their 156 members of staff around the world. The annual report stated that 97% of staff across 36 countries responded to the Foundation’s engagement survey and said they felt ‘supported at work during the pandemic’.
The IFRS Foundation reported total income from all activities was £30.1m for year end 2020, down £800,000 from £30.9m in 2019, made up of £18.1m in contributions, which fell by 9.5%, and £11.7m from publications and related activities. More than two thirds of the annual budget was allocated to board and staffing costs with a total of £19.7m, marginally up year on year by 1%.
The Foundation’s income comes from voluntary contributions and revenue from the sale of subscriptions, publications and licensing of intellectual property, and through conferences and speaker events.
Contractual licensing arrangements with international accounting firms increased licensing revenue by £1.6m in 2020 which resulted in a decline of voluntary contributions for the Foundation.
The impact of Covid-19 meant that the revenue for subscription services decreased by £237,000 and the switch from live to virtual conferences during the year contributed to the decline of publications revenue by around £120,000.
The external audit of the financial statements of the IFRS Foundation for year end 31 December 2020 stated that the Foundation gave a ‘true and fair’ view of the financial position, and that their cash flows for the year ended in accordance with IFRS Standards as issued by the IASB.
In the report the Foundation stated that for 2020, their ‘work did not identify any material misstatements concerning unpaid revenue from contributions. We are satisfied that the accounting policies are appropriate, consistently applied from previous years and in line with the IFRS’.
In 2020, the Foundation did review a previously unrecognised tax loss and as a consequence the deferred tax asset of £569,000 was recognised in that year.
The IASB does not plan to increase the price of their services and the 2021 budget is based upon on the assumption of a constant level of contributions, and it confirmed that the business process and technology programme will continue to progress with funding of £2.6m allocated in the annual budget.
Looking to 2021, the Foundation plans to consolidate the work they are currently doing. This includes continuing work to support consistent application of IFRS standards, development of the IFRS taxonomy, and efforts to enhance IFRS standards by consulting on rate-regulated activities.
It will also be consulting on its five-year plan for 2022-26 to set out a long-term agenda. The board will continue working on projects already underway, including consulting on an updated version of the management commentary practice statement and on proposals to improve the effectiveness of disclosures in the notes to the financial statements.
Another major tranche of work will be to assess whether IFRS standards are working as intended by conducting post-implementation reviews of IFRS 9 Financial Instruments, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. They will also complete the work on a comprehensive review to determine how to update the IFRS for SMEs standard.
Another important part of the Foundation’s work will be to support the creation of a separate standard setting board for climate reporting and disclosures to create a single reporting framework. In September 2020, the Trustees published a consultation paper on sustainability reporting. The aim of the paper was to assess demand for global sustainability standards.
Throughout a three-month consultation period, the Trustees led comprehensive outreach and the feedback and related comment letters indicated the growing demand for improving the global consistency and comparability of sustainability reporting. The IASB recognised the urgency of climate change and agreed that there was a broad demand for the Foundation to play an active role.
In terms of external factors, the Foundation did not highlight any risks around Brexit, stating that as an international organisation, the IASB ‘did not expect a high level of disruption to their operations following the UK departure from the EU, but it will continue to monitor this position in 2021’.
The senior management of the IASB will also see a change when chair Hans Hoogervorst’s term comes to an end after over 10 years leading the board since 2011. He will be stepping down on 30 June and will be replaced by Andreas Barckow from July 2021.
In his final introduction to the annual report, Hoogervorst said: ‘The past 10 memorable years have had many highlights. I have thoroughly enjoyed visiting many parts of the world, discussing a range of financial reporting issues with a variety of people and organisations that make up our stakeholders. I was often struck by the passion of the accounting community and the intensity of the debates, which made my job really interesting. Some debates, such as the one on the merits of fair value measurement, have actually subsided as we put a lot of effort in better explaining our positions.
I would like to take this opportunity to thank all my colleagues and friends both within the IFRS Foundation and across the world for the engaging discussions, helpful contributions and immense support over the past decade.’