World's leading accounting bodies call for global debate

TORONTO, January 27, 2009 – We urgently need a global debate on how to reduce complexityin financial reporting and how to accelerate the move towards principles based financial reportingstandards.

The need for such a debate is the key conclusion of the first major research project undertaken by theGlobal Accounting Alliance (GAA), a group of the world’s leading professional accountancy bodies.

A financial reporting environment where judgement, rather than adherence to a rulebook, allows thepreparers and auditors of accounts to focus on the true economic substance of financial transactions.

“It is clear from our research that a body of principles based international standards is viewed aroundthe world as the best basis on which to report the economic substance of financial transactions, and thatfurther steps are needed to ensure that principles are embraced more fully,” said Kevin Dancey, GAA Chair.“This could include a professional judgement framework that is accepted by regulators and others around theworld. It is also clear that there is a strong interest in turning back the tide of growing complexity infinancial reporting. But there are major legal, cultural and regulatory challenges that will need to betackled if we are to achieve these objectives. The report identifies some of the important questions thatneed to be addressed, but the only way to resolve these issues will be through a global debate involving allkey stakeholders.”

Dancey, who also is President and CEO of the Canadian Institute of Chartered Accountants (CICA), added:“The GAA is arranging a number of roundtable events where regulators and other stakeholders in financialreporting around the world can begin discussions on the ideas emerging from the research. This will assistthe broader adoption of principles based standards and address the increasing complexity and detail incompany financial statements. We look forward to making a full contribution to that debate.”

The GAA report, Getting to the heart of the issue – Can financial reporting bemade simpler and more useful?, is published today. It draws on interviews conducted in early-mid2008 with financial regulators from the UK, Canada, Australia, China, the United States of America, SouthAfrica, France, the European Commission and international regulators. Interviewees also included a leading USlitigation lawyer and representatives of the world’s leading accounting and auditing practices.

NOTES TO EDITORS

1. The Global Accounting Alliance (GAA) is now an alliance of ten of the world’s leading professionalaccountancy bodies, which was formed by nine Institutes in 2005. The GAA is intended to promote qualityservices, share information and collaborate on important international issues. It works with nationalregulators, governments and stakeholders, through member-body collaboration, articulation of consensus views,and working in collaboration, where possible, with other international bodies, especially IFAC.
2. The GAA report, Getting to the heart of the issue – Can financial reporting bemade simpler and more useful?, is available for download from the GAA website at www.globalaccountingalliance.com
3. The GAA is calling for the following questions to be debated by key international stakeholders infinancial reporting:
   1. Should an agreed international framework for accounting standards be adopted - with a clear hierarchycomprising (i) the conceptual framework which sets out the fundamental principles; (ii) outcome-oriented andprinciples based standards which establish how the fundamental principles are applied to particular subjectareas; and (iii) sufficient additional guidance to facilitate practical implementation of the standards?
   2. Should guidance be provided for preparers and auditors on the exercise of judgement in the application ofprinciples based standards and on the documentation of reasons for the judgements made, for example by meansof an internationally accepted professional judgement framework?
   3. Should regulators be encouraged to accept a reasonable degree of variation in accounting treatments and totake a more effective, outcome oriented approach to regulating, engaging more experienced staff as necessaryto support this approach? As a first step, should we encourage a debate with regulators as to what is a“reasonable degree of variation” in accounting treatments?
   4. Should a single definitive set of general purpose financial statements be retained, or should we acceptthat it is impossible to fulfil the needs of all users with one set of financial statements?
   5. Should standard setters, in conjunction with business, investors and other users, be encouraged toactively seek to drop requirements considered redundant or superfluous?
   6. How can company boards be encouraged to focus on the communication value of the financial statementsrather than the compliance aspects? Why are Warren Buffett’s letters regarded as so effective?
   7. By reference to existing precedents and market practices in this area, should an international frameworkfor high level summary financial statements be developed which can provide information suitable for retailand less sophisticated investors, encapsulating summary financial information drawn from the general purposefinancial statements and balanced and informative narrative information?
   8. Should general purpose financial statements be developed and published in XBRL format so as to form aninformation database which allows users to drill down to whatever level of detail is required?
   9. Should company communication be improved through the use of clearer language, less jargon and codedlanguage, and a focus on clarity and transparency?
   10. How has the recent financial crisis affected the debate on these issues?

The Canadian Institute of Chartered Accountants (CICA), together with the provincial,territorial and Bermuda Institutes/Ordre of Chartered Accountants, represents a membership of approximately74,000 CAs and 10,000 students in Canada and Bermuda. The CICA conducts research into current business issuesand supports the setting of accounting, auditing and assurance standards for business, not-for-profitorganizations and government. It issues guidance on control and governance, publishes professionalliterature, develops continuing education programs and represents the CA profession nationally andinternationally. CICA is a founding member of the International Federation of Accountants (IFAC) and theGlobal Accounting Alliance (GAA).

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For more information, contact:
Peter McLean, Manager, Communications
CICA
(416) 204-3268
peter.mclean@cica.ca

David Wood, Project Leader:
Executive Director - Technical Policy, The Institute of Chartered Accountants of Scotland
E-mail: dwood@icas.org.uk
Telephone: +44 131 347 0240