With a changing and uncertain business environment, Chief Financial Officers (CFOs) and finance functions must evolve to sit at the heart of decision making within their organizations, according to a series launched today by IFAC (the International Federation of Accountants). The series includes:

• A vision for the CFO and finance function;
• Future-fit accounting roles for the next decade; and
• An evaluation tool to help guide organizations in finance function transformation.

With more demanding customers and societal expectations, achieving long-term value creation and success has never been more challenging for businesses. The CFO and finance function of today and tomorrow needs to provide information and analysis that supports decisions about all aspects of an organization’s business model and value creation. As business partners, they need to communicate how value is created today, how it will be created in the future, and if profitability is sustainable.

“The finance function cannot survive as a support or back-office function and must do more than account for the balance sheet” said Kevin Dancey, IFAC CEO. “As business models evolve and uncertainty increases, CFOs and their finance teams are uniquely situated to provide the information that powers decision-making for long-term value creation.”

To be at the heart of decision making, effective CFOs and finance functions must deliver:

• Actionable insights to support strategic and operational planning and decisions;
• Performance analysis to steer the organization toward achieving objectives, targets, and long-term profitability, as well as to ensure alignment between strategy, planning and delivery;
• Enterprise risk management to manage uncertainty, opportunities, and risks in the context of business objectives and the external environment;
• Effective communication and storytelling on all aspects of an organization’s business model and value creation;
• Trust and confidence in the governance of the organization, and in the quality of data, processes, systems and reporting through adequate control and security; and
• Integrity and professionalism to encourage ethical behavior and decision making throughout an organization to ensure sustainable value creation.

It is incumbent upon various stakeholders – organizations, professional accountancy organizations (PAOs), and individuals – to help prepare future-fit accountants in business.

For organizations, developing a finance function vision will help identify the enablers of change and ensure that the finance function is fit-for-purpose to partner with the business. IFAC's evaluation tool is meant to help boards and management teams identify strengths and areas of improvement for their finance team.

For PAOs, there are three priority areas to develop future-ready accountants in business: engaging accountants in business and their employers, advancing accountancy education, and promoting the value of the accounting profession.

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About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce.

This report provides insight into what it will take to prepare future-ready professional accountants. Capturing conversations from the IFAC Professional Accountants in Business Committee meeting in March 2019, the report focuses on:

• Finance function transformation, with a case study from Prudential Financial, Inc;
• Building data science and analytics capabilities;
• Supporting accountants in professional ethics;
• Effective risk management and internal control; and
• Examining the role of the audit committee.

Enterprise risk management (ERM) needs to be part of the professional accountant mindset and makeup. This report explores the contribution of professional accountants to effective ERM in their roles as chief financial officers (CFO) and within finance functions. To add value, accountants must be seen as risk experts who are outward-looking and provide valuable insights to help organizations manage risk, respond to uncertainty, and achieve their objectives.

This report, capturing conversations and takeaways from the IFAC Professional Accountants in Business Committee meeting in September 2018, provides insight into finance function transformation, including opportunities and challenges facing the profession.

Key topics covered include:

Within five years, 65% of governments will report on an accrual basis, according to a recent report by IFAC (the International Federation of Accountants) and CIPFA (the Chartered Institute of Public Finance and Accountancy). The report was drawn from the International Public Sector Financial Accountability Index, which captures current and future use of public financial reporting bases and frameworks by governments around the world.

The 2018 Index Status Report, which captures information from 150 countries, finds that while 25% of governments currently report on an accrual basis, 65% of governments will report on accrual by the end of 2023. Asia, Africa, and Latin America and the Caribbean will lead the projected increase by the end of 2023.

By providing a comprehensive view of government finances, accrual reporting helps ensure that expenditure of public funds is transparent, public officials are held accountable, and future liabilities are recognized officially and planned for properly.

“Accruals-based accounting and auditable financial statements are essential if governments are to promote trust and transparency, identify and fight corruption, and above all deliver the outcomes their citizens expect and deserve,” said Rob Whiteman, Chief Executive of CIPFA.

Public financial reporting frameworks are developed in various ways, with many using International Public Sector Accounting Standards (IPSAS). IPSAS provide high quality financial reporting guidance for governments and other public bodies around the world, in order to improve their consistency and transparency. 51% of governments that currently report on an accrual basis use IPSAS directly, indirectly or as a reference point. By the end of 2023, nearly three-quarters (73%) of governments that report on accrual will use IPSAS in one of these three ways.

The report also outlines key actions for successful accrual reforms. According to the report, successful implementation of accrual reforms requires coordinated planning and sustained support. Additional recommendations include: frequent and clear communications, a change management program, and coordinated training and capacity building.

“The rapid acceleration of accrual reporting in the public sector, and IPSAS in particular, is a promising sign for citizens across the globe. Professional accountants play a critical role in unlocking the full benefits of accrual accounting and in improving decision making, transparency and accountability throughout the economy,” said Kevin Dancey, IFAC Incoming CEO.

IFAC and CIPFA plan to expand the Index progressively in terms of both coverage and information depth and to provide periodic status reports throughout this crucial uptake period for accrual financial reporting globally.

Media Contacts:
Tony Mirenda
IFAC Head of Communications
tonymirenda@ifac.org
+1 212 286 9344

Letreis Lawrence
CIPFA Corporate Communications Assistant
Letreis.lawrence@cipfa.org
0207543 5787

 
About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce. 

About CIPFA
CIPFA is the professional body for people in public finance. It represents approximately 14,000 members who are public finance leaders and officials in the United Kingdom and overseas, specialising in high quality public financial management and governance for organisations in, and providing support to, government and public services. Its members work throughout the public sector, in national audit agencies, in major accountancy firms, and in other public and private sector bodies where public money needs to be effectively and efficiently managed. As the world’s only professional accountancy body to specialise in public services, CIPFA’s portfolio of qualifications is the foundation for a career in public finance. It also champions high performance in public services, translating its experience and insight into clear advice and practical services. Globally, CIPFA shows the way in public finance by standing up for sound public financial management and good governance. 

What does the future professional accountant look like? If we don’t have a vision in mind, how can professional accountancy organizations (PAOs) be prepared to support these professionals?

This report encompasses insight from the recent Professional Accountancy Organization Development Committee meeting to identify how PAOs can future-ready their operations to support the accountancy profession of the future.

The 2018 IFAC Global SMP Survey found that accountants working in small- and medium-sized practices (SMPs) are embracing technology to better serve clients and attract and retain top talent. The survey received more than 6,000 responses from SMPs, representing 150 countries, about their performance in 2018 and marketplace factors most likely to affect them in the future.

Effective governance involves many individuals throughout an organization, including internal audit and the finance function. IFAC and The Institute of Internal Auditors (IIA) have compiled insights from 11 governance experts to examine how the complementary roles of both functions drive sound governance. 

Interviewees identified several key requirements for effective governance, including:

For finance professionals to be viewed as business partners, they must contribute effectively to enterprise performance management (EPM) beyond traditional financial reporting and financial systems. 

This resource identifies why and how the finance function must evolve to support EPM, including:

• Why EPM is critical to the future of the profession
• How accountants in business and the finance function can drive effective EPM; and 
• The four key enablers of EPM

Developing a vision and roadmap for the finance professional and finance function is a journey requiring an iterative and experimental approach, supported by a development plan that incorporates significant thinking on a variety of topics.

In an iterative workshop, the Professional Accountants in Business Committee explored how to develop a vision for the finance function and provided updates on current initiatives, including: