Complexity in Focus—Keynote Address by the IASB Chair

Complexity in Focus—Keynote Address by the IASB Chair

By Prathamesh 9 July, 2024
news

June 26, 2024

Complexity and uncertainty might not be twins, but they are definitely relatives. They often coexist and influence each other, but they also present distinct obstacles to the financial reporting environment.

Complexity is not a new phenomenon in human history. But modern complexity is very much rooted in today’s economic world. At the heart of the matter is the growing complexity of business transactions. The evolving complexity of the business environment has led to increasingly complex business transactions, which ultimately end up being reflected in financial reporting.

But it is not just transactions that are more complex. The business world has plenty of evidence of companies having to operate with more complexity in their supply chains, for example. They also face a multitude of other risk factors that, when coupled with the rapid pace of change, introduce an additional layer of complexity. All these factors continuously shape and reshape our business environment, compelling all of us to adapt to new realities.

The effect of complexity is felt throughout the entire financial reporting landscape—by companies, investors, auditors and standard-setters alike. The layers of complexity can be a barrier to effective decision-making. They have the potential to make it harder for companies to effectively communicate their story to investors, and for investors to understand and properly use financial information. Complexity also poses challenges for auditors in exercising their professional judgement when auditing financial statements and providing assurance to financial reports more widely.

Larger institutions may have the resources to navigate complexity, but smaller players might struggle to keep up, particularly when they are grappling with several layers of complexity at the same time.

Now, some might argue that they at the IASB are also a source of complexity, both from the perspective of those who apply IFRS Accounting Standards to prepare financial information and those who use the financial reporting outcomes produced by the Standards. That—in our efforts to faithfully represent the economic realities of today and tomorrow—our Accounting Standards have become more elaborate. And there is some truth to this argument.

To find out more details please visit : https://www.ifrs.org/