Speech: IASB Chair’s virtual keynote in Japan

When: 16 December 2020

Hans Hoogervorst, Chair of the International Accounting Standards Board (Board), delivered the keynote speech at a virtual seminar on IFRS Standards, organised by the Japanese Institute of Certified Public Accountants. He discussed the impact of covid-19 on the Board’s work, developments in IFRS Standards during his chairmanship and future challenges.

Dear colleagues, dear friends—it is a pleasure to address this online conference, organised by my friends at the Japanese Institute of Certified Public Accountants, JICPA.

In an ideal world I would now be in Japan, meeting many of you face-to-face. But unfortunately, covid has made this impossible. Japan has always been a special country for me. It is, in fact, the country I have visited the most during my tenure—more than once every year. I still hope that a vaccination will make it possible for me to say goodbye to you in person sometime next year!

In the meantime, virtual get-togethers are useful alternatives to face-to-face meetings, and I send you my well-wishes from my London home.

As I am now on the final stretch of my chairmanship at the IASB, I thought this is a good opportunity to reflect on some of the developments over the past 10 years, including IFRS developments in Japan. I will also touch upon two topics that I know are of interest to many in Japan: sustainability and goodwill accounting. But first let me make a few brief comments on the effect of the pandemic on our work.


The coronavirus situation is affecting us all. In the UK, we have just come out of a second lockdown, but we are still quite restricted in what we can do. My colleagues and I have all been working predominantly from home since March. I can assure you: it is no fun and I miss the informal contact at the workplace.

We have responded to covid in two main ways. Early in the pandemic, we published educational materials to support the application of the financial instruments Standard, IFRS 9, and the leases Standard, IFRS 16. We also worked swiftly to amend IFRS 16 in relation to covid-19-related rent concessions. This amendment made the accounting easier for lessees. I’d like to thank the regulators, companies, auditors, investors and standard-setters that helped us act so quickly.

Second, we have made changes to our work plan to give stakeholders more time to engage with our ongoing and upcoming consultations.

Our priority has been to finalise our most time-sensitive projects: the amendments to the insurance Standard, IFRS 17 and our response to the reform of the interest rate benchmarks. My colleague and friend Rika Suzuki will go into more detail about other technical developments.

Looking back

In looking back and thinking about key developments over the past decade, I reread some of my old speeches. One thing that clearly surprised me in the early days was how passionate the accounting community is and how intense the debates can be. I am no longer surprised by that. I have had many exciting discussions about accounting topics over the years—especially in Japan, which is easily one of the most passionate accounting countries in the world!

Another thing that struck me when looking back at old speeches, is that it is reassuring that other comments I made then still ring true!

For example, at the opening of the IFRS Foundation’s Asia-Oceania office in Tokyo in 2012, I said that Asia-Oceania has some really smart thinkers and that we always look forward to comment letters and other input from your part of the world. That is very much still the case.

The support the Foundation has had from the Financial Accounting Standards Foundation and the Accounting Standards Board of Japan is much appreciated. And the many contributions from a range of Japanese stakeholders to the development of IFRS Standards cannot be underestimated. I have always very much appreciated our close cooperation with the JICPA and I have visited your offices many times.

In that very same speech in 2012, I also set out to dispel some myths that were rife at the time. Such as the myth that IASB would only be interested in fair value and the balance sheet. Looking back at the 10 years of my chairmanship, our actions have provided plenty evidence that such myths are not valid.

The revised Conceptual Framework from 2018 made it clear that we do not favour one measurement method over others. Indeed, an important Standard like IFRS 9 uses a mixed measurement model and most of a bank’s accounting remains based on historical cost. Clearly, the IASB is far from obsessed with fair value accounting.

Our Primary Financial Statements (PFS) project, one of our most important projects, makes very clear that the IASB is not fixated on the balance sheet. Quite the opposite; the project has very much focused on the income statement and its accompanying note disclosures. We know that in most cases, investors base their valuations on the income statement and that is why we have focused on it in the PFS project.

There are a few other developments that I would like to highlight.

All the big, important Standards have been completed—IFRS 9, IFRS 15, IFRS 16 and IFRS 17. All but one have been implemented. We have dedicated a lot of effort to supporting their implementation. We have shifted our attention from improving recognition and measurement to improving presentation and communication of financial information. We have done a lot of work to improve the effectiveness of disclosures. The PFS project improves the structure of the income statement and increases transparency of so-called non-GAAP information. Last, but not least, our work to update the Management Commentary Practice Statement is very important. It will give more and better guidance to companies on how to write the narrative that complements the financial statements. Tom Scott and the management commentary team will discuss this topic today in a later session.

We have stronger engagement now than 10 years ago with the investor community. Investors have always been key to our standard-setting, but the engagement has become more formalised than in my early days. We also now have more Board members with an investor background.

Ten years ago, a lot of our time was spent discussing development of new Standards. That is still important, but we are now putting a lot more effort into supporting consistent application of the Standards. The IASB works closely with the IFRS Interpretations Committee to support application of our Standards. We have become more aware of application questions and provide answers on a timely basis.

In 2013, we launched a project to assess adoption of IFRS Standards around the world. Back then, we had researched 66 jurisdictions. Fifty-five required use of our Standards. Now, we have over 160 profiles on our website. More than 140 jurisdictions require use of IFRS Standards, and quite a few others permit their use.

Japan has chosen a unique path to adoption by allowing voluntary adoption of IFRS Standards by individual companies. When I joined the IASB, in 2011, only a handful of Japanese companies had adopted our Standards. Even after the United States decided not to adopt IFRS Standards (for now, at least), developments in Japan remained positive—indeed, more positive than I expected immediately after the Great East Japan Earthquake struck. The market capitalisation of companies on the Tokyo Stock Exchange using IFRS Standards has reached 42%, according to the latest data.1 I am confident that in the next decade this number will go well over 50%!

By the way, I still think the Japanese path of voluntary adoption of IFRS Standards would also be the most likely way forward for the United States. I am sure that some day in the future, if American companies were to be given free choice, many American multinationals would opt for an accounting language that they can use all over the world, just like their Japanese counterparts have done. It doesn’t seem to be in the cards right now, but I have never lost hope that it will happen one day…

Our Asia-Oceania office, ably led by Makoto Takahashi, has played an important role in encouraging adoption of IFRS Standards in Japan and in engaging with stakeholders in Japan and across the region. The office is a dedicated contact point in the region and serves as a regional research hub, supporting the IASB’s technical projects. We are very proud to have an office in Tokyo, one of the great cities of the world.

Let me finally say a few words about the future.

The future


The passion and intensity of discussions about accounting topics that I was struck by in my early days is still there. Much of that passion is now centred around wider corporate reporting and sustainability. I admit that 10 years ago I did not see that one coming. But in the last five years, it gradually became obvious to me that questions around sustainability, and intangibles in a broader sense, demanded more of our attention.

Many countries, including the Japanese government, have set a policy goal of zero emissions by 2050. There is a lot of focus on climate and sustainability also in the business community. Investors increasingly want and need non-financial, or rather pre-financial, information that might affect the financial performance of a company in the longer term.

This is one of the reasons why the IASB has been working on an update of the Management Commentary Practice Statement that I mentioned earlier. Our exposure draft—to be published in the spring of next year—will provide guidance on how to include information on sustainability and intangibles in the management commentary to the financial statements.

We often receive questions about IFRS Standards in relation to climate change and sustainability. The reality is that the word ‘climate’ is not mentioned in our literature. However, because our Standards are principle-based, companies may still need to consider climate-related matters when preparing their financial statements.

A year ago, IASB member Nick Anderson wrote an article aimed at the investor community, which explained how existing requirements in IFRS Standards address matters relating to climate-change risks and other emerging risks. It did not add to or change the requirements in the Standards. Feedback from stakeholders was that they found the article informative. They wanted more information on the topic.

That is why we have recently published educational material on the effects of climate-related matters on financial statements aimed at companies applying IFRS Standards. The material highlights that companies must consider the effect of climate-related matters on their financial statements when applying the Standards—if those matters are material to the financial statements seen as a whole. The educational material complements Nick’s article and adds references to specific paragraphs in IFRS Standards. I encourage you to look it up on our website.

Separate, but complimentary, to the IASB’s work on these matters, the Trustees of the IFRS Foundation are currently consulting on sustainability reporting. They are seeking feedback on whether the Foundation should play a role in the development of sustainability reporting standards. There is worldwide demand for consolidation of the multitude of existing sustainability frameworks and standards, and many would like the IFRS Foundation to play a role in this. I encourage you to engage with their consultation, which is very important to the future of sustainability reporting and the IFRS Foundation.


There is one topic I cannot avoid mentioning when speaking to a Japanese audience. That is goodwill. During all my trips to Japan this topic has been discussed intensively. This is understandable, because the treatment of goodwill is one of the most difficult issues in accounting. Opinions are very divided, but we probably all agree that a completely satisfactory solution does not exist.

You may be aware that the IASB is currently consulting on possible ways to help investors to hold companies to account for acquisitions—and on goodwill accounting. Among our suggested improvements is better disclosures about acquisitions. What are the company’s objectives for the acquisition? And how is the acquisition performing against those objectives?

We have looked at the question of how to account for goodwill and the impairment test. By a narrow majority, the IASB has suggested to retain the impairment-only approach, but this is very much still a discussion in progress. Our colleagues in the United States are leaning towards a reintroduction of amortisation and in Japan this is also the majority view. We are still seeking comments and are particularly interested in any new evidence that can help inform this long-running and important debate. You have until the end of the year to share your views with us and I am sure we will hear a lot from our Japanese stakeholders.

Agenda Consultation

The last thing I want to mention is the IASB’s upcoming Agenda Consultation. This is a consultation we undertake every five years to determine our priorities for the next five-year period. While it will be for my successor Andreas Barckow and his team to deliver on the next five-year plan, I urge you to share your views with us—like you’ve done so many times before—and provide the thoughtful input we’ve come to rely on.


I would like to take this opportunity to thank the JICPA and all our Japanese friends and stakeholders for all the great exchanges of views and contributions to helping us deliver on our mission. I will make sure to pass on the message to Andreas Barckow that he should also make sure he visits Japan on a regular basis. Thank you very much for your attention and stay well.