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You give IFRS lectures and help clients with their IFRS related-issues. What are the most difficult areas for accountants?
S. M.: I have received thousands of e-mails and messages from all around the world from my readers and indeed, a few areas keep coming up repetitively. Before Covid-19, financial instruments, revenue recognition and leases put the big burden on the shoulders of many companies and the reason for that was that IASB redesigned the standards in exactly those three areas. However, after Covid-19 started, accountants try to figure out how to reflect the impacts of the pandemics on their business in the financial statements. Should they test all of their assets for impairment? How should they incorporate the effects of Covid-19 into their expected credit loss calculation, since it requires forward looking information? These days, when the world is still in chaos, it is very challenging to rely on any sort of predictions of economic future, but we have to play with the cards that we have in our hands.
You’ve created very useful resource for studying IFRS, which is very popular among accountants and even students. How did the idea occur?
S. M.: I worked as an accounting consultant, tutor and audit assistant for a couple of years before I decided to move on with my life and set up a family. My son was born in 2007 and while I enjoyed my new motherly role very much, after two years I simply felt the need to come back to my beloved numbers and accounting. One evening I looked over my husband’s shoulder what he was watching and I was amazed. He watched a tutorial about programming and I loved it. It was presented in a very entertaining illustrative way that even I, a complete programming newbie, understood. This was the main inspiration for my videos, so I started to develop something similar for accountants, along with being a mom. At first it started as a hobby, and frankly speaking, the first videos were very clumsy, but everyone improves when puts enough work and effort to her intentions. I kept consistently producing articles, videos and other resources and my website gradually grew over time to more than 100 000 visitors per month. What started as a hobby turned to a full-time business for which I am very grateful. The support and reactions I receive from my followers keep me going and give me the reassurance that my works helps.
Recently IASB discussed the future of goodwill in consolidated financial statement. So far, IASB prefers the goodwill impairment model. What do you think? Shoud we give a chance to the amortization model?
S. M.: The situation with goodwill rules reminds me one old proverb: “The road to hell is paved with good intentions”. In the beginning, I completely understood why IASB abandoned the concept of goodwill amortization and introduced annual impairment testing instead. Yes, it is true that it’s impossible to predict goodwill’s useful life and as a result, straight-line amortization of goodwill over some given period is just a theoretical reflection of goodwill’s consumption in the profit or loss and has little to do with the reality. However, I am a very pragmatic person and the practice suggests that the annual impairment tests are costly, challenging to do, involving significant judgements and estimates and the quality of information provided by annual impairment testing is at least questionable (as the practice shows) — none of these things are appreciated by accountants. So here, we are left to assess the balance between the practicality of the requirements in terms of its cost and effort on one side and the improvement of quality of information in the financial statements on the other side. So far, I am more in favor of coming back to amortization, due to practical reasons and costs savings. Also, it is hard to say, after few years of creating a business combination, how much of that goodwill can still be attributed to the synergies expected at the acquisition date and how much of it was created on the way after the business combination as a result of actually working together as one group.
