A number of approaches, one of which holistic

I became suspicious in my very first read of the Endorsement Criteria Assessment [1] on page 11 when I read the term ‘holistic approach’. What is a holistic approach, I thought, as I reached for my Oxford English Dictionary? Holism is a term used in medicine, psychology and philosophy, which as far as I could see, has no relevance to international accounting standards.

And then I read the whole sentence and my suspicions were confirmed. I had to read the paragraph three times to get some sense out of it. Here is part of it:

“1.8 A holistic approach has been taken to the assessment of whether a standard is not contrary to the principle that both the individual and consolidated financial statements must give a true and fair view…”

I understand, at last, that the United Kingdom Endorsement Board want to assess IFRS 17 as a whole and not just as the sum of its parts in relation to a true a fair view. Even today I don’t know how they did it, nor did I discover what their holistic approach really is.

This made me wonder how many different approaches the board would take to assess IFRS. I struck gold two pages later when I read their second approach: an exceptions-based approach.  I am not sure what an exception-based approach to anything is, but it no longer matters. 

I had to count the number of approaches the UK Endorsement Board could invent.  Believe it or not, there are 21! Here are but a few.

My favourite is The Green Book approach [2] well known in HM Treasury circles and clearly precious for assessing international accounting standards.

Do not mix up the VFA with the FVA or you might become confused.  (Variable Fee Approach (VFA) Fair value approach (FVA))

If you don’t know what the initials CSM stand for, it represents Contractual Service Margin, as in CSM allocation approach.  And if you don’t know what that is either, it is a much used term for experts working in profit recognition in annuities. Peers’ approaches surprised me, as did more prescriptive approach which both mean nothing to me.

And finally there were many generic references to the different approaches the board had to take on their long ‘approach journey’, all eleven of them. They had for instance a few ‘new approaches’. Here are the other ten:  consistent, practical, appropriate, retrospective, detailed, single, correct, applicable, different and the double adjective plural of ‘different practical approaches’.

I approached reading this report with dread, thinking I would pass a tedious hour, but no, what fun I had. I recommend it as a light read, even when you reach the final ‘approach’ on page 182 for the 219th time. Do not bother reading the last page; you risk boredom from the lack of repetition of ‘approach’.

[1] IFRS 17 Insurance Contracts, Endorsement Criteria Assessment issued by the United Kingdom Endorsement Board, May 2022.

[2] The Green Book is guidance issued by HM Treasury on how to appraise policies, programmes and projects.  

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