Discussion of ‘Different approaches to corporate reporting regulation How jurisdictions differ and why’
This art icle was downloaded by: [ Universit as Dian Nuswant oro] , [ Ririh Dian Prat iwi SE Msi]
On: 04 Sept em ber 2013, At : 01: 36
Publisher: Rout ledge
I nform a Lt d Regist ered in England and Wales Regist ered Num ber: 1072954 Regist ered office: Mort im er
House, 37- 41 Mort im er St reet , London W1T 3JH, UK
Accounting and Business Research
Publicat ion det ails, including inst ruct ions f or aut hors and subscript ion inf ormat ion:
ht t p: / / www. t andf online. com/ loi/ rabr20
Discussion of ‘ Different approaches to corporate
reporting regulation: How j urisdictions differ and
why’
Ken Wild
a
a b
Nat ional Direct or of Account ing and Audit , Deloit t e, UK
b
Global Leader of IFRS, Deloit t e Touche Tohmat su's
Published online: 04 Jan 2011.
To cite this article: Ken Wild (2010) Discussion of ‘ Dif f erent approaches t o corporat e report ing regulat ion: How
j urisdict ions dif f er and why’ , Account ing and Business Research, 40: 3, 257-258, DOI: 10. 1080/ 00014788. 2010. 9663399
To link to this article: ht t p: / / dx. doi. org/ 10. 1080/ 00014788. 2010. 9663399
PLEASE SCROLL DOWN FOR ARTI CLE
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and are not t he views of or endorsed by Taylor & Francis. The accuracy of t he Cont ent should not be relied
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not be liable for any losses, act ions, claim s, proceedings, dem ands, cost s, expenses, dam ages, and ot her
liabilit ies what soever or howsoever caused arising direct ly or indirect ly in connect ion wit h, in relat ion t o or
arising out of t he use of t he Cont ent .
This art icle m ay be used for research, t eaching, and privat e st udy purposes. Any subst ant ial or syst em at ic
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Accounting and Business Research, Vol. 40. No. 3 2010 International Accounting Policy Forum, pp. 257–258
257
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 01:36 04 September 2013
Discussion of ‘Different approaches to
corporate reporting regulation: how
jurisdictions differ and why’
Ken Wild*
I think there is some good research and some good
thinking, and it is an excellent paper. I do not
completely agree with the paper’s conclusions,
particularly as regards the global positioning system
(GPS), because I am not completely convinced that
will work and I will say a little more about that. In
terms of the conclusions, when I looked at them and
thought about them and thought that I was not
necessarily agreeing, I started to think through why
I was not agreeing and where we parted company.
I think there is a question that should have been
pursued slightly more vigorously, and that is: what
do you mean by regulation? The term ‘regulation’ is
used in the paper, talking about rules and enforcement. The paper refers at one stage to protection
versus informing, and I think that this is something
we have seen in recent months very, very strongly,
coming from some countries, where I think there
has been a conscious blurring of what we are talking
about when we talk about regulation. The paper has
referred repeatedly to financial reporting regulation,
but I would just like to dig underneath and ask: what
do we mean by financial reporting regulation?
It seems to me, coming back to the idea in the
paper that International Financial Reporting
Standards (IFRS) is a ‘language’. I think that is
essentially what we are talking about. We are
talking about accounting and financial reporting. I
know the paper makes a distinction between the
reporting rules and the practices but we are talking
about accounting as being a language and how do
you inform? We started in the position where we
had a lot of different languages. We had languages
that were not communicating. The idea of international financial reporting is around coming to a
common language, and that seems to me to be a
highly desirable thing to do. You will have a better
understanding and greater confidence if you are
*The author is National Director of Accounting and Audit at
Deloitte in the UK and is Deloitte Touche Tohmatsu’s Global
Leader of IFRS.
CCH - ABR
using a common language. But it is rather naïve just
to think we will say: ‘Okay, we will have a common
language and that will make everybody understand
what everybody else is saying.’ You will not. You
need some sort of standardisation.
What we are really talking about when we talk
about financial reporting regulation is, as the first
step, that standardisation. It is around trying to have
certain words carrying the same meaning crossborder. I think where this becomes very important is
when you take the paper’s analysis around convergence being unachievable. The paper refers to
convergence as though it is an absolute. We will
never get to convergence. If you think of any
language you will never get to convergence in that
language. No two people will ever use the same
phrase in the same way in describing something
even if they are speaking the same language. What
we are trying to do in financial reporting is to move
to a position where we have a single language,
IFRS, that we are using. Long-term we will
endeavour to make that as consistent as possible.
What do I mean by consistent? I do not mean
without accent; there will always be cultural,
national accent to accounts, to financial reports.
That is natural, and I think that is what we are seeing
from some of the research into clusters, namely that
you will see the accents. Where we probably are at
the moment is that we have dialects. The difference
between a dialect and an accent is that accents are
around the way you pronounce words, the emphasis
you apply, the general thrust of how you say things,
but the words are broadly the same. With dialects
there are words that are different. If you take the
English language as used in the UK, there are
regional dialect words. We are at that stage, and we
need to pull that together, but we are never going to
get convergence as an absolute because convergence is not an absolute in terms of language – it is a
bringing-together.
The paper talks about clusters. It talks about the
forces that tend to pull apart a lot of those natural
Data Standards Ltd, Frome, Somerset – 11/6/2010 09 ABR Wild Comment.3d Page 257 of 258
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 01:36 04 September 2013
258
cultural and national forces, and they will pull apart.
If you think of language over the last century or so,
where there has been much greater communication,
much greater travel, languages tend to drift together.
I think there will be a natural tendency for languages
to drift together, which is why we are losing, even
within regions in the UK, the dialects. Those
differences are tending to die out naturally, and I
think that will tend to happen in terms of financial
reporting.
I would draw a distinction in financial reporting
regulation between the coming together in the way I
am describing, the common language, which seems
to me to be in everybody’s interests, and the
enforcement of the regulation, which is something
quite different. You do need enforcement. You do
need to make sure that people are not lying. You do
need to make sure that people, although not lying,
are not misleading. And it is that latter point that is
probably the most interesting, because I do not think
a lot of people out there actually lie in their
accounts. There are some people, albeit a relatively
small number, who try to shift the emphasis to
mislead.
That is where enforcement comes in and where
the role of the regulator comes in. I am not saying
that IFRS financial reporting is completely different
from regulation and that there is no regulatory role
to it. Clearly there is a regulatory role to it, but you
need to understand that language role where the
pressures are different. That regulatory role has
been used a number of times recently around bank
regulation, around procyclicality and similar issues,
to confuse what I see as the language for everyone.
As regards the GPS, that is concerned with the
enforcement of everything, not the development of
the language. I do not think it would work anyway;
it is just too big. The paper refers to it in relation to
reviewing accounts, about it having powers of
access, about having sanctions. The paper talks
ACCOUNTING AND BUSINESS RESEARCH
about sanctions including exclusion from the GPS.
One of the things that sprang to my mind was: what
do you mean by sanctions?
If I just look at it in terms of size, if you think
what the SEC does in the US, if this was going to be
done on a global basis it would have to be that much
bigger. The paper refers to having a panel of
auditors, so you have something of the size of SEC
plus the PCAOB if it was on a global basis. I think it
is too big.
It is not just a matter of size, I think you would hit
the major problem that we already see with Europe.
As soon as you see something where there are
sanctions, where there is enforcement, local legislators say: ‘Hang on, I do not want you enforcing
that on my companies’ or ‘I am not going to enforce
those conditions on my companies, and your
approach contradicts my approach. Therefore, I
am not going to let yours in without some sort of
endorsement mechanism.’ I think the endorsement
mechanism would start producing what in the EU is
called carve-outs, and that would potentially break
the GPS apart. So I think it is too big for that. I think
it would not work from the point of view of other
legislators not accepting it. I also think it is
unnecessary. You have to separate out the enforcement regulation from the standardisation. I see the
enforcement regulation as being different from
financial reporting. Standardisation is trying to
make the language common and trying to move a
common language across the world, which seems to
me to be a desirable objective from every point of
view including the companies’ point of view.
I come back to the basic question of the
conference: who should lead corporate reporting,
markets or regulators? My answer to ‘lead’ is
‘markets’ – because this is about language that
markets use. If I talk about ‘enforcement’, that
would be for the regulators. The leadership derives
from the markets.
On: 04 Sept em ber 2013, At : 01: 36
Publisher: Rout ledge
I nform a Lt d Regist ered in England and Wales Regist ered Num ber: 1072954 Regist ered office: Mort im er
House, 37- 41 Mort im er St reet , London W1T 3JH, UK
Accounting and Business Research
Publicat ion det ails, including inst ruct ions f or aut hors and subscript ion inf ormat ion:
ht t p: / / www. t andf online. com/ loi/ rabr20
Discussion of ‘ Different approaches to corporate
reporting regulation: How j urisdictions differ and
why’
Ken Wild
a
a b
Nat ional Direct or of Account ing and Audit , Deloit t e, UK
b
Global Leader of IFRS, Deloit t e Touche Tohmat su's
Published online: 04 Jan 2011.
To cite this article: Ken Wild (2010) Discussion of ‘ Dif f erent approaches t o corporat e report ing regulat ion: How
j urisdict ions dif f er and why’ , Account ing and Business Research, 40: 3, 257-258, DOI: 10. 1080/ 00014788. 2010. 9663399
To link to this article: ht t p: / / dx. doi. org/ 10. 1080/ 00014788. 2010. 9663399
PLEASE SCROLL DOWN FOR ARTI CLE
Taylor & Francis m akes every effort t o ensure t he accuracy of all t he inform at ion ( t he “ Cont ent ” ) cont ained
in t he publicat ions on our plat form . However, Taylor & Francis, our agent s, and our licensors m ake no
represent at ions or warrant ies what soever as t o t he accuracy, com plet eness, or suit abilit y for any purpose of
t he Cont ent . Any opinions and views expressed in t his publicat ion are t he opinions and views of t he aut hors,
and are not t he views of or endorsed by Taylor & Francis. The accuracy of t he Cont ent should not be relied
upon and should be independent ly verified wit h prim ary sources of inform at ion. Taylor and Francis shall
not be liable for any losses, act ions, claim s, proceedings, dem ands, cost s, expenses, dam ages, and ot her
liabilit ies what soever or howsoever caused arising direct ly or indirect ly in connect ion wit h, in relat ion t o or
arising out of t he use of t he Cont ent .
This art icle m ay be used for research, t eaching, and privat e st udy purposes. Any subst ant ial or syst em at ic
reproduct ion, redist ribut ion, reselling, loan, sub- licensing, syst em at ic supply, or dist ribut ion in any
form t o anyone is expressly forbidden. Term s & Condit ions of access and use can be found at ht t p: / /
www.t andfonline.com / page/ t erm s- and- condit ions
Accounting and Business Research, Vol. 40. No. 3 2010 International Accounting Policy Forum, pp. 257–258
257
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 01:36 04 September 2013
Discussion of ‘Different approaches to
corporate reporting regulation: how
jurisdictions differ and why’
Ken Wild*
I think there is some good research and some good
thinking, and it is an excellent paper. I do not
completely agree with the paper’s conclusions,
particularly as regards the global positioning system
(GPS), because I am not completely convinced that
will work and I will say a little more about that. In
terms of the conclusions, when I looked at them and
thought about them and thought that I was not
necessarily agreeing, I started to think through why
I was not agreeing and where we parted company.
I think there is a question that should have been
pursued slightly more vigorously, and that is: what
do you mean by regulation? The term ‘regulation’ is
used in the paper, talking about rules and enforcement. The paper refers at one stage to protection
versus informing, and I think that this is something
we have seen in recent months very, very strongly,
coming from some countries, where I think there
has been a conscious blurring of what we are talking
about when we talk about regulation. The paper has
referred repeatedly to financial reporting regulation,
but I would just like to dig underneath and ask: what
do we mean by financial reporting regulation?
It seems to me, coming back to the idea in the
paper that International Financial Reporting
Standards (IFRS) is a ‘language’. I think that is
essentially what we are talking about. We are
talking about accounting and financial reporting. I
know the paper makes a distinction between the
reporting rules and the practices but we are talking
about accounting as being a language and how do
you inform? We started in the position where we
had a lot of different languages. We had languages
that were not communicating. The idea of international financial reporting is around coming to a
common language, and that seems to me to be a
highly desirable thing to do. You will have a better
understanding and greater confidence if you are
*The author is National Director of Accounting and Audit at
Deloitte in the UK and is Deloitte Touche Tohmatsu’s Global
Leader of IFRS.
CCH - ABR
using a common language. But it is rather naïve just
to think we will say: ‘Okay, we will have a common
language and that will make everybody understand
what everybody else is saying.’ You will not. You
need some sort of standardisation.
What we are really talking about when we talk
about financial reporting regulation is, as the first
step, that standardisation. It is around trying to have
certain words carrying the same meaning crossborder. I think where this becomes very important is
when you take the paper’s analysis around convergence being unachievable. The paper refers to
convergence as though it is an absolute. We will
never get to convergence. If you think of any
language you will never get to convergence in that
language. No two people will ever use the same
phrase in the same way in describing something
even if they are speaking the same language. What
we are trying to do in financial reporting is to move
to a position where we have a single language,
IFRS, that we are using. Long-term we will
endeavour to make that as consistent as possible.
What do I mean by consistent? I do not mean
without accent; there will always be cultural,
national accent to accounts, to financial reports.
That is natural, and I think that is what we are seeing
from some of the research into clusters, namely that
you will see the accents. Where we probably are at
the moment is that we have dialects. The difference
between a dialect and an accent is that accents are
around the way you pronounce words, the emphasis
you apply, the general thrust of how you say things,
but the words are broadly the same. With dialects
there are words that are different. If you take the
English language as used in the UK, there are
regional dialect words. We are at that stage, and we
need to pull that together, but we are never going to
get convergence as an absolute because convergence is not an absolute in terms of language – it is a
bringing-together.
The paper talks about clusters. It talks about the
forces that tend to pull apart a lot of those natural
Data Standards Ltd, Frome, Somerset – 11/6/2010 09 ABR Wild Comment.3d Page 257 of 258
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 01:36 04 September 2013
258
cultural and national forces, and they will pull apart.
If you think of language over the last century or so,
where there has been much greater communication,
much greater travel, languages tend to drift together.
I think there will be a natural tendency for languages
to drift together, which is why we are losing, even
within regions in the UK, the dialects. Those
differences are tending to die out naturally, and I
think that will tend to happen in terms of financial
reporting.
I would draw a distinction in financial reporting
regulation between the coming together in the way I
am describing, the common language, which seems
to me to be in everybody’s interests, and the
enforcement of the regulation, which is something
quite different. You do need enforcement. You do
need to make sure that people are not lying. You do
need to make sure that people, although not lying,
are not misleading. And it is that latter point that is
probably the most interesting, because I do not think
a lot of people out there actually lie in their
accounts. There are some people, albeit a relatively
small number, who try to shift the emphasis to
mislead.
That is where enforcement comes in and where
the role of the regulator comes in. I am not saying
that IFRS financial reporting is completely different
from regulation and that there is no regulatory role
to it. Clearly there is a regulatory role to it, but you
need to understand that language role where the
pressures are different. That regulatory role has
been used a number of times recently around bank
regulation, around procyclicality and similar issues,
to confuse what I see as the language for everyone.
As regards the GPS, that is concerned with the
enforcement of everything, not the development of
the language. I do not think it would work anyway;
it is just too big. The paper refers to it in relation to
reviewing accounts, about it having powers of
access, about having sanctions. The paper talks
ACCOUNTING AND BUSINESS RESEARCH
about sanctions including exclusion from the GPS.
One of the things that sprang to my mind was: what
do you mean by sanctions?
If I just look at it in terms of size, if you think
what the SEC does in the US, if this was going to be
done on a global basis it would have to be that much
bigger. The paper refers to having a panel of
auditors, so you have something of the size of SEC
plus the PCAOB if it was on a global basis. I think it
is too big.
It is not just a matter of size, I think you would hit
the major problem that we already see with Europe.
As soon as you see something where there are
sanctions, where there is enforcement, local legislators say: ‘Hang on, I do not want you enforcing
that on my companies’ or ‘I am not going to enforce
those conditions on my companies, and your
approach contradicts my approach. Therefore, I
am not going to let yours in without some sort of
endorsement mechanism.’ I think the endorsement
mechanism would start producing what in the EU is
called carve-outs, and that would potentially break
the GPS apart. So I think it is too big for that. I think
it would not work from the point of view of other
legislators not accepting it. I also think it is
unnecessary. You have to separate out the enforcement regulation from the standardisation. I see the
enforcement regulation as being different from
financial reporting. Standardisation is trying to
make the language common and trying to move a
common language across the world, which seems to
me to be a desirable objective from every point of
view including the companies’ point of view.
I come back to the basic question of the
conference: who should lead corporate reporting,
markets or regulators? My answer to ‘lead’ is
‘markets’ – because this is about language that
markets use. If I talk about ‘enforcement’, that
would be for the regulators. The leadership derives
from the markets.