Originally published in The Accountant, 30 April 2015

Recent developments in the European Union point to some cracks developing in the foundations of its staunch support for International Financial Reporting Standards (IFRS) over the last decade or so, since they were adopted as the accepted framework of financial reporting for listed entities. Factions within the European Commission are calling for a root and branch review of IFRS citing "widespread concerns" with compatibility between IFRS and EU law, including the "true and fair" concept, which is fundamental to financial reporting.

These developments support the view that regional policy makers are increasingly seeking to exert influence on the International Accounting Standards Board (IASB), a body entrusted with developing and maintaining the framework for financial reporting that strives to be a globally accepted language for financial reporting.

The new head of the European Financial Reporting Advisory Group, Wolf Klinz, has flagged that "in the future we will see differences between the proposal that comes from the IASB and the proposed final standard that will be applied to Europe."

Whilst the IASB does have an obligation to engage with its stakeholders, including those from the EU, its work as a global standard-setter risks being undermined if it is forced to cater to the demands of individual groups.

We have already seen evidence of this with the long-standing saga of convergence with US accounting standards. The IASB has tried to accommodate the needs of US regulators, through a convergence program, to ensure alignment with IFRS. Partial success was achieved through development of some aligned accounting standards, and the acceptance by the US Securities and Exchange Commission (SEC) of IFRS financial reports without modification by some foreign companies.

Yet resistance remains within the US to accept IFRS as the only financial reporting framework for listed companies, with some stakeholders questioning whether it will ever eventuate.

There are valid reasons for a globally consistent and comparable platform for financial reporting. The globalisation of financial markets with an increasing trend for investment in emerging economies is one such reason. Financial reports prepared to internationally acceptable standards is one way investment risk can be reduced when investors are seeking financial information for investment decisions.

Many global corporations continue to adopt growth strategies that include diversification into multiple markets. These global entities and their stakeholders can benefit from a single set of financial reporting standards to measure financial performance across multiple jurisdictions.

Without doubt the IFRS framework is, and will continue to be, a work in progress as it responds to a changing global context. The various projects being progressed by the IASB confirm this. Importantly, in the interests of more widespread acceptance and adoption, the issues of complexity and clutter in IFRS financial reports need to be resolved. Whilst the IASB has a role to play in addressing these issues, others including financial report preparers, auditors and governments also have a part to play in making financial reports meaningful and ensuring their value to users.

Corporate reporting innovations that provide investors with a broad perspective on value creation are the logical next step in the evolution of corporate reporting. Integrated Reporting is one example of how corporate reporting could evolve to provide useful and relevant information to stakeholders.

Whichever direction the evolution of financial reporting takes us, IFRS-based financial reporting will continue to form a critical part of this evolutionary path. Whether it is adoption of or convergence with IFRS, the global reporting community needs to work towards a single set of financial reporting standards.