Financial Reporting is Still a Work in Progress
26 February 2026 | Frankfurt am Main
EFFAS’ mission is to lead investment professionals in the development of their profession. One aspect thereof is to be aware of the latest developments in financial reporting. EFFAS’ Commission on Financial Reporting, chaired by Javier de Frutos, maintains contact with the London-based IASB, responsible for the development of the IFRS accounting and financial reporting standard, and many other stakeholders to stay informed but also to contribute to the discussions regarding financial reporting.
We spoke to Serge Pattyn, a former EFRAG TEG member, now vice-chair of the EFRAG Financial Reporting Board, and one of the EFFAS CFR members, about the how and why of good financial reporting.
What is meant by good financial reporting?
Good financial reporting means that users (analysts, investors…) can take the right decision based on the right financial information. Admittedly, “right” is a subjective concept. Therefore, good financial reporting does not mean that analysts or investors cannot make mistakes. Different users will interpret the same things differently or will be more optimistic than others about the future. But that is another question. The lower limit is good, useful financial information.
And good financial information in essence means?
When talking about good and useful financial information – in our case of course most often based on the IFRS reporting standards – I need to refer to the IFRS Conceptual Framework for Financial Reporting that puts relevance and faithful representation as the two fundamental qualitative characteristics of good financial reporting. Information is relevant if it can make a difference to the decisions made by analysts and investors. Additionally, the information must faithfully represent the substance of what it purports to represent.
I also need to signal the enhancing qualitative characteristics: comparability, verifiability, timeliness and understandability. Comparability is (also) a very important characteristic of useful financial reporting. Users need to be able to compare an entity’s financial statements over time and need to be able to compare different entities’ financial statements with each other.
But financial reporting has been there for decades now. What can still be added to the story?
It is true: financial reporting is not new. The opposite would surprise us. Nevertheless, younger analysts sometimes think that IFRS based reporting is something that was invented only a few years ago. That is a misunderstanding. The accounting profession has been discussing the integration of the different “national” accounting and reporting frameworks for decades.
But 2005 was a turning point when IFRS – as accounting- and reporting framework – became mandatory for listed entities in Europe. A turning point because this guaranteed that all listed entities in Europe from then on spoke the same language in their financial statements. No need to explain that his automatically led to more transparency and more international cooperation. Transparency is so crucial in these kinds of discussions. Therefore, the decision taken by our policy makers was unquestionably the correct one. It was a massive step in the right direction.
That said, the framework that existed then was finished and not finished at the same time. Over the past few years, several new standards were issued with the aim of further improving and expanding the framework. IFRS 15 on Revenue and IFRS 16 on Leases are just two important standards that were issued only a few years ago. Also, the further development of IFRS 9 regarding Financial Instruments needs to be mentioned as well as the forthcoming implementation of IFRS 18 (as of 2027).
Please note also that social developments often emerge in financial reporting. The role and impact of technology have grown tremendously over the past decade. New businesses and products were developed and/or existing business models completely changed. The importance of intangible assets is therefore much bigger now – but how to take that into account in financial reporting? Digital currencies, power purchase agreements, emission rights… as the world was (and still is) changing, the standards needed (and still need) to be updated.
Admittedly some things over the years also raised questions and required attention when things became unclear or when entities did not know how to apply certain requirements.
Thus, for different reasons IFRS based financial reporting remained – and still remains – a work in progress.
“Work in progress” means that there are still projects on the IASB agenda that warrant the analysts’ attention?
Absolutely.
There are several smaller – but that does not mean less interesting for users – projects that the IASB aims to tackle in the coming months. We expect an Exposure Draft (read: a kind of preliminary proposal) on e.g. the amortised cost measurement and some proposals to update the provisions standard IAS 37, to name just two.
Most important for the time being is perhaps, as already mentioned, the forthcoming implementation of IFRS 18 which was issued in April 2024. The new standard on Presentation and Disclosure in Financial Statements will replace IAS 1. IFRS 18 aims to improve comparability and transparency in financial reporting. It mandates a more standardized structure for the statement of profit or loss, introduces new subtotals like operating profit and introduces also enhanced disclosures for what is called Management-defined Performance Measures (MPMs). IFRS 18 will have a significant impact on the look and feel of especially the profit and loss statement. Analysts should be aware that this is coming. For the sake of completeness, IFRS 18 has just been endorsed by the EU (Official Journal of the European Union dated 16 February 2026). So, we’re ready to go.
Also important are the post-implementation reviews (PiRs).
The objective of a PiR is to assess whether the effects of applying the new requirements on users of financial statements, preparers, auditors and regulators are as intended when the new requirements were developed; in other words, whether a new standard (or major amendment) is living up to the expectations.
No need to explain that this is always an excellent opportunity for analysts to have their voices heard. The PiR of IFRS 16 Leases is e.g. in progress. The IASB is currently discussing stakeholder feedback on the Request for Information that was published in June 2025. As we all know, IFRS 16 developed a single lessee accounting model that meant that (most) leases now appear on the balance sheet. The question now being discussed is whether the new model and/or the new information is living up to the expectations and/or whether there are still shortcomings that need to be amended.
Note also that the IASB plans to initiate later this year the PiR of the hedge accounting requirements in IFRS 9. In some way that is rather strange as they have just published (as an Exposure Draft) the new RMA model (December 2025) whereby RMA stands for Risk Mitigation Accounting (previously known as dynamic risk management). The new RMA model is to complete IFRS 9.
But having said that, perhaps the most important project for users is momentarily the statement of cash flows project. No need to explain how important this statement is though it is also true that there are major concerns with the statement. Comparability and presentation are often an issue and undoubtedly users would like to see more streamlining to make sure that statements of cash flow become indeed comparable. There is some way to go but we will need the input from analysts and investors here so that steps can be taken to improve the statement.
Let me finally also signal the Equity method project. The aim there is to improve the understandability of the standard. The IASB is proposing to re-order the requirements in IAS 28 in a more logical and consistent way.
So, there is still a lot happening. Are users and analysts always aware of this continuous process?
That is a very fair question. The answer is probably no. But that is also where EFFAS has a prominent role to play. If the mission is to lead investment professionals in the development of their profession, then we need to keep them well informed about the way the accounting- and reporting standards are evolving.
But we also need to convince the analysts to raise their voices more when things in financial reporting are not working the way they should be.
To give one example. Something we keep repeating with the CFR is the standard IAS 8 on segment reporting where the way in which companies can decide on their operating segments is far too non-committal. Therefore, the information that analysts get through the segment reporting is often quite useless. Users want more strict considerations to be considered before adding businesses together into one reportable operating segment.
But it's a double-edged sword, is it not?
Absolutely. Analysts and investors should know that they will misread certain things and will not come to the right conclusions if they do not know the language that the companies are speaking in their financial statements.
Hence, analysts and investors need to know and understand the standards. I would dare to say not entirely – because that is almost impossible – but at least to some extent. And that is an effort they must make themselves, but EFFAS is happy to help with that.
About the EFFAS Commission on Financial Reporting
The EFFAS Commission on Financial Reporting (CFR) provides analysts’ views on the definition of International Financial Reporting Standards (IFRS) to international accounting standards setters. Its members work closely with the International Accounting Standard Board (IASB) through the Global Analysts’ group and the European Financial Reporting Advisory Group (EFRAG) through the Users’ Panel. EFRAG provides advice to the European Commission on issues related to the implantation in Europe of IFRS.
The Commission work focuses on providing analysts’ opinion on consultation papers prepared by the IASB and participating in the harmonization process with international accounting standard setters.
About EFFAS
EFFAS is a not-for-profit organisation set up in 1962 with 15 national member associations in Europe, representing more than 18,000 financial analysts, asset managers, pension fund managers, corporate finance specialists, risk managers, treasurers among many other professional profiles from the investment profession. EFFAS is a leading certification body with over 27,000 certificate holders worldwide, offering prestigious designations such as the Certified European Financial Analyst by EFFAS, the EFFAS Certified ESG Analyst® (CESGA), and the EFFAS Climate Risk Analyst® (ECRA).
For any further information, please contact:
Álvaro Wagener Díez | Marketing & Communications Manager
E-mail: a.wagener@effas.com | Phone Number: +49 69 98959519
