Posted 10 months ago
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XRB plans for challenging next five years

from XRB Chief Executive, Warren Allen

I am thrilled to commence a new chapter in XRB’s communication strategy by drawing attention to global/national developments, challenges facing the accounting profession relating to standard-setting and general topical items by way of a regular blog.  I am looking forward to sharing these matters with you, at least monthly.

XRB Strategic Plan coverIt is fitting that this initial blog coincides with the release of our new Strategic Plan for the five-year period, 2018–2023.

Over the past three years we have adopted a rolling five-year strategic plan to ensure the Plan remains a dynamic living document, avoiding significant lurches that may arise if our strategic planning was done less frequently. It is interesting, the past two years the changes to the strategic plan could be described as “fine-tuning”, still important but not “game-changing”.

 

This year’s update, for the period 2018 – 2023, is bordering on meeting the game-changing tag.  We find ourselves heading into a period of possible significant disruption. 

Yes, standard-setting in the fields of accounting and auditing & assurance could be joining the ranks of motels (Airbnb), fossil fuel powered cars (Tesla and others), taxis (Uber), and single use rockets (SpaceX).

brand images of AirBNB, Tesla, Uber and SpaceX   

Who would have believed this three years ago!

This disruption is likely to come from a combination of the following global trends:

  • Technology advances, especially machine-learning opportunities;
  • Greater regulator involvement in global standard-setting;
  • Changes to accounting firm structures driven by business economics and regulatory demands;
  • The demand for annual external reporting to include a wider set of metrics—financial statements alone will not satisfy report-user needs;
  • The slow withdrawal from the globalisation initiative, and
  • Possible move from principle-based international standards.

We have witnessed, and have been active in, all these fronts over the past 12 months.  It has been a period of unprecedented challenge to the accepted norm of the past 20 to 30 years.

We currently perceive the greatest change will impact auditing, but accounting standard-setting is not totally unaffected.

Whilst we may consider the present way we set standards in New Zealand, our relationship with the regulators and the level of stakeholder implementation is working effectively, we could face a dichotomy of retaining our international competitiveness versus what is appropriate for New Zealand users.  As a trading nation we need to be responsive to international changes and impacts, so any complacency as to our current situation could be dangerous.

With this background it is not surprising I describe our annual revision to the Plan as maybe game-changing.

Whilst we have no crystal ball—who knows how and when all of this is going to play out— we need to be ready for some significant change over the next five years.  

One certainty is, our standard-setting world will alter.

So, to avoid any future criticism of us being “sleeping at the wheel” we have made considerable amendments to our Plan.

These can be summarised as:

  • Responding to external report users’ demands, we will become more proactive in the Extended External Reporting (EER) space;
  • We will grow our relationships with regional bodies of similar thinking to our own, to prepare for any adverse change to international standard-setting procedures;
  • We will move ahead quickly to commence our previously signalled Post Implementation Review (PIR) on the accounting framework. This will ensure the framework, which was implemented in 2012-2016, is still meeting user needs and remain fit-for-the-future;
  • We will explore establishing additional fora for constituent outreach looking at “Lab” or “Think-tank” approaches to involve younger, more diversified (non-accounting/auditing) expertise and technology-aware individuals;
  • We will enhance our communications strategy with the better use of social media to keep all interested parties aware of the changes, as they develop; and
  • We will start to challenge our influencing strategies to ensure we remain effective in ensuring the standards we develop and issue, are fit for users’ needs in New Zealand.

One of the keys of this new strategy is to “take the stakeholders with us”.  In a period of uncertainty, which we will obviously face until these disruptions manifest themselves, communication is king. 

Being active on the principal international standard-setting boards has been our strong premise of the past decade, whilst adopting international standards.  This, together with utilising an approach of not amending the international standards—unless there is a compelling need to facilitate New Zealand implementation—could be challenged in the future.

One of the scary aspects of being involved in this wonderful profession for over 45 years, you experience some “back to the future” moments. I hope the time I have remaining in the profession will not see a move back to national standard-setting. 

It is my strongly held view, one of the “top-five” innovations, I have witnessed, is the development, adoption and implementation of global accounting and assurance standards.

photo of Warren AllenIn my humble view, any move away from this direction would be a significant retrograde step, not to mention a negative to New Zealanders’ economic wellbeing.

Buckle up, the ride is going to be full of intrigue.

Warren


 

 

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Comments

  • Ceri-Ann Ross FCA 27/08/2018 3:57pm (10 months ago)

    Congratulations Warren and the XRB on your first blog - very insightful!
    New Zealand has certainly benefitted from the adoption of international accounting and auditing standards. Aside from the benefits to business of using a single 'language' that both local and international investors understand, international standards also facilitate a globally mobile accounting and auditing profession which, in my view, is crucial for attracting and delivering the skills that we need. Change is inevitable. It's up to us to make it change for the better.