By my reckoning, there are six new or amended international financial reporting standards (IFRS) and interpretations that companies with December year ends will have to apply for the first time in their 2011 financial statements. While for most companies this new guidance will have little effect on their annual financial statements due to the nature of the changes, it is fairly safe to assume that companies and their auditors will have given the appropriate amount of attention to the new requirements to ensure that they have been correctly addressed.

However, whilst most companies are pretty good at dealing with the here and now – those changes that have come into effect and have to be applied now – what they are less good at is dealing with new guidance that will not be effective for a few years.

The International Accounting Standards Board has been particularly busy in the last twelve months or so which means that there are 15 new publications in issue, including five brand new IFRS, that will come into effect between 2012 and 2015.

It is all too easy, and common, for companies to ignore the potential impact of these new and amended IFRS, but to do so means that they may end up with non-complaint financial statements. There is an important disclosure requirement in IAS 8 which requires companies to provide details about all new IFRS that are in issue, but not effective at the reporting date, so that users are given an idea of the potential impact that these new IFRS will have on the financial statements.

This disclosure is typically poorly done. Many companies simply list the new IFRS, state when they are effective and note that the new requirements are unlikely to have a material effect on their financial statements and leave it at that. In the past, because for many companies the impact of these future changes has been minimal, this level of disclosure has been deemed acceptable.

The requirements of IAS 8 are actually quite onerous and require that companies disclose the title of the new IFRS, its effective date, the nature of the impending change (so even if the new IFRS has little or no impact, it is not enough simply to provide a list) and a discussion of its expected, initial impact.

What companies need to do now, therefore, is recognise the greater significance of these 15 new and amended IFRS and to think more carefully about their potential impact. It is expected that the IAS 8 disclosures will need to be improved this year, and in the next few years, to paint a fuller picture of the potential implications of all of these changes.

For example, any company with a defined benefit pension scheme WILL be affected by IAS 19 (Revised); any company with shares in unquoted companies that are carried at cost WILL be affected by IFRS 9; any company with equity shares designated as available-for-sale WILL be affected by IFRS 9; any group with investments in subsidiaries, associates or joint ventures WILL be affected by IFRS 12.

Companies will need to carefully analyse the impact of all of these changes and the potential impact of other changes, particularly those in IFRS 10, IFRS 11 and IFRS 13.

It is also worth remembering that we expect more new standards later this year, including the completion of IFRS 9, when the guidance for impairment and hedge accounting is finalised, and new standards on revenue recognition and leases. These changes will affect most companies and so next year’s IAS 8 disclosures will need to be even longer and more comprehensive.

Putting these two ideas together leads to a third, combined leadership trait, that leaders should create a learning culture by setting a clear and positive example themselves.

The quality of any leader is reflected in the way that they behave and the standards that they set for themselves. To ask others to take learning seriously requires the leader to show real commitment to their own personal development.

For the open-minded, there is a clear understanding that we never stop learning. Just because a person has reached the heights of being a leader does not mean that he/she knows it all – far from it. Leaders should never think that they are so special that they can stop investing time in their own personal development.

Leaders, as much as anyone, need to keep moving forward with the times, responding to changing circumstances and new challenges as they arise. It is all too easy for leaders to become fixed in their ideas about what has worked for them and/or their organisation in the past and so fail to meet the new demands and challenges that will need to be faced.

To earn the respect and trust of team members means that leaders need to retain, and even improve, their relevant technical competencies and personal and leadership skills. So to be effective, leaders need to embrace learning and show a real commitment to it for their own benefit and for the benefit of those that they purport to lead.

At one level, simply taking part in any learning and development programme sets the right example to a leader’s team. It sends out a clear message that everyone has something to learn and that they should find the time to invest in their own personal development. Leaders should never be the ones who fail to participate in these programmes.

Leaders should positively and demonstrably participate in each element of the programme; highlighting the benefits of being involved and not allowing themselves to be distracted by work-related interruptions. It is not reasonable to expect others to prioritise learning, if the leadership fails to do so.

Leaders should also read widely and encourage others to do the same, to deepen and broaden their knowledge. Investing time in such reading sets an example to others of the importance of learning from experts in their field, from the experiences of other leaders and about how different organisations operate.

Leaders also need to set a clear and positive, personal example about learning from experience. This means setting aside time for personal reflection and asking the key questions; “what went well?” and “what could be done better next time?”. Only when leaders embrace this aspect of learning, not only by doing it but also by demonstrating the benefits, can others justifiably be encouraged to follow their example.

A culture of giving and receiving feedback, openly and honestly, is a sure way of developing the strength of your team. Only in this way can people truly understand how they are perceived and how their behaviours affect other people. With this information, people can look to build on their positive skills and behaviours and to improve where they might have weaknesses. Implementing a feedback culture should begin with the leader being open to receive and act upon feedback from his/her colleagues. Only if leaders are willing to embrace learning through feedback can they realistically expect others to do the same.

So as a leader how committed are you to your own learning and development? Do you have a personal development plan that you are actively and demonstrably working towards achieving?

If you truly believe in the importance of people in your organisation, of developing their skills to make the most of their talents and to fulfil their ambitions, then your actions need to be consistent with your beliefs and words.

“Leaders are more powerful role models when they learn than when they teach” Rosabeth Moss Kanter

If I was an accountant involved in the preparation of accounts under UK GAAP, whether as an auditor or preparer, or if I was a user of such accounts, I would feel pretty disheartened by the recent news from the ASB that they are going to re-issue the exposure draft of the Financial Reporting Standard for Medium-sized Entities (FRSME).

I have been involved for most of my working life in training and consulting on UK GAAP and IFRS. Many good things have happened in that time to both international and UK financial reporting guidance, but also a number of developments have taken place which have done little to enhance the reputation of the accounting profession. In my opinion, the (draft) FRSME runs the risk of falling into the latter category.

The (draft) FRSME is based on the international standard, IFRS for SMEs, which was issued by the IASB in 2009 to offer a simplified approach to financial reporting based on IFRS. As a fan of the IFRS for SMEs I had high hopes for the FRSME.

The ASB’s approach was to adapt the IFRS for SMEs to reflect current UK legal requirements and to allow subsidiaries some exemptions from unnecessary disclosures, but to largely retain the IFRS’s ethos.

The resultant (draft) FRSME offered similar potential benefits to the IFRS. It is more concise than current UK GAAP (less than 400 pages), it simplifies existing accounting in a number of cases and significantly reduces disclosure requirements. What’s more, the intention is that, when issued, it would only be updated on a three year cycle.

While some of the changes the ASB has made to the IFRS for SMEs seem understandable, I think a golden opportunity has been missed to follow the lead of IFRS and abolish extraordinary items and to require all companies to prepare a statement of cash flows. It is after all becoming increasingly apparent that users really want to know how well a business manages its cash flows and yet still some companies are given exemptions.

An interesting, apparent inconsistency has arisen as the (draft) FRSME, unlike the IFRS, only allows ‘negative goodwill’ to be recognised in profit or loss when realised, but maintains the IFRS principle of recognising unrealised gains on the revaluation of investment properties in profit or loss each year.

Another change introduced is to include a presumption that the useful life of goodwill for amortisation purposes should be 5 years, whereas in the IFRS for SMEs the presumption is 10 years, in UK GAAP it is 20 years and in full IFRS no amortisation is charged at all. How confusing is that for users?

Some confusion also exists with regard to the form and presentation of the primary statements. The (draft) FRSME, being based on IFRS, uses international terminology and offers significant flexibility that UK Company Law does not. In response to questions being raised about this, the ASB stated that the primary statements must comply with both the (draft) FRSME and Company Law, without any real guidance as to how to achieve this. Following a recent ASB meeting, it has been announced that the presentational requirements on the (draft) FRSME will be removed and that the requirements set out in the Company Law will remain in place.

In the past few months, the ASB has met and discussed the responses and has (tentatively) agreed to make a number of further changes.

The most significant change in my opinion, has been the (tentative) decision to make the (draft) FRSME available to publicly accountable entities – a significant change from the scope of the IFRS for SMEs. As a consequence, an additional section on accounting for financial instruments by financial institutions will be added.

The ASB also appears to be considering permitting accounting options that are permitted by current FRS, although not allowed by the IFRS for SMEs nor by the current (draft) FRSME. These options may include the revaluation of property, plant and equipment and the capitalisation of borrowing costs and intangible assets.

If the scope of the (draft) FRSME changes and more accounting options are allowed, then it begs the question, “what exactly is the FRSME?’. It’s not full IFRS, it’s not IFRS for SMEs and it’s not UK GAAP. Instead it appears to be a new invention, a hybrid.

I am normally very supportive of the ASB, but on this occasion I feel it is losing sight of the original aim that financial statements should be prepared under a consistent, globally aligned, framework and that this is not helped by the reluctance of the EU to simply allow the IFRS for SMEs to be used by non-publicly accountable entities.

The work on the future of UK GAAP has been going on for a number of years now and I, along with many others, would have hoped that the ASB had had enough time to address these issues before issuing the (draft) FRSME without having to issue a revised draft a few months later.

All of this has pushed the implementation date back to 2014, possibly even later due to the re-exposure, and this is without considering the potential effect of significant international developments in relation to revenue recognition, financial instruments and leases.

None of this uncertainty is good for preparers, auditors or users. We have been dealing with an unsatisfactory UK GAAP for too long now while waiting for this IFRS compatible standard to be introduced. Many people that I meet and talk to on training courses seem frustrated by the continuous delays and confusion about what is happening and simply want to know that we will soon have high quality guidance in place which meets the needs of users and preparers.