Leadership prof ileSue Lloyd

18 December 2015

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A VIEW FROM BOTH SIDES

S ue Lloyd might be a banker at heart, but accounting has figured very prominently

in her working life. The increasing complexities faced by her clients drove Lloyd, an International Accounting Standards Board mem-ber, to seek greater clarity from the underlying rules, eventually push-ing her into becoming a standard setter herself.

“I used to be so frustrated that if I picked up an accounting standard I would feel constrained in my abil-ity to represent its substance,” she recalls on a recent visit here to attend a joint IFRS Conference by the Hong Kong Institute of CPAs and the IFRS Foundation. “I wanted to help draft standards that enabled us to get better information.”

In tandem with a career in investment banking (see Lloyd’s list: Women, work and achieving balance on page 20), Lloyd cut her standard-setting teeth with a stint on the Australian Accounting Standards Board, not far from her native New Zealand. One shock was the different idea of deadlines. “In a bank you’re sort of expected

to get a deal done in a week, while in standard setting, if you get a job done in 10 years, that’s sometimes doing well.”

She persisted, however, and eventually joined IASB in 2002 as a project manager for a consolidation and leases project, leaving two years later to return to banking in the United Kingdom, first with JPMor-gan Chase & Co. and later with the Goldman Sachs Group, Inc.

She was then able to draw on her standard-setting experience in her original profession. “I worked on very structured financial instruments, and so I needed to be able to explain accounting for complicated instruments to clients,” she recalls. “I needed to convince the internal control people and the clients’ auditors that the transaction was OK.”

In 2009, Lloyd rejoined IASB as director of capital markets, with responsibility for the reform of accounting for financial instru-ments, later becoming senior direc-tor of technical activities, leading the development of new standards.

Working as staff was, Lloyd

Sue Lloyd, a former International Accounting Standards Board technical director, is now a member of the board itself. On a visit to Hong Kong, she tells A Plus about her unique perspectives, as well as the insights she has gained from her career in investment bankingPhotography by Juliet Shayne Lui

Between leaving the IASB in 2004 and rejoining in 2009,

Lloyd held various senior positions in

investment banking for JP Morgan and

Goldman Sachs

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Leadership prof ileSue Lloyd

believes, excellent preparation for board membership. “It makes me a more sympathetic board member because I understand what it’s like to be a staff member and be told to go off and do something without the clearest directions. I’ve also got more time to think about the ideas brought to the board by the staff, so that’s quite a nice change in perspective.”

Complex agendaLloyd’s board position – the Trustees of the IFRS Foundation appointed her in May 2013 for an initial five-year term, renewable for a further three years – means she can observe at first hand the increasing complexity of standard setting. “I think the whole organiza-tion is under more pressure because one of the biggest changes we’ve had is the growth of jurisdictions applying International Financial Reporting Standards,” she says. “So we get many more comment letters and much more input.”

The IASB has had to come up with many answers in the past few years, given its hectic agenda. The current work plan, recently

updated, includes analysis of a revised Insurance Contracts stan-dard and the drafting of a Leases standard, as well as work on a host of narrow-scope amendments such as clarifications to IFRS 15 Rev-enue from Contracts with Custom-ers, IFRS 8 Operating Segments, IFRS 2 Share-Based Payment and IAS 1 Presentation of Financial Statements.

One recent major standard with which Lloyd was particu-larly involved is IFRS 9 Financial Instruments, issued in May 2014. The effective date of 1 January 2018 has forced financial institutions to kick off IFRS 9 implementation projects this year, giving them two years to iron out the kinks before another 12 months of running the standard parallel with IAS 39.

In addition, IFRS 9 introduces an expected credit loss model for recognition and measurement of impairment losses of financial assets measured at amortized cost or at fair value through other com-prehensive income. IAS 39 used an incurred loss model under which impairment loss of a financial asset was recognized only after a

Sue Lloyd studied accounting at the University of Auckland but never practised as one professionally. Instead she entered the banking sector, first in her native New Zealand, then Australia, Hong Kong – at NatWest – and in the United Kingdom for JPMorgan Chase & Co. and the Goldman Sachs Group, Inc.

“Having a background in banking helped me a lot, because I’ve got a good start in understanding financial instruments and leasing transactions and the legal environment around them,” she says. “Understanding the economics is always a great starting point when you’re working out how to account for something.”

As well as providing training and a career path, Lloyd credits her former employers with empowering women staff in the traditionally male-dominated world of investment banking. “I got a lot of help when I was at Goldman Sachs in particular, where there’s a focus on trying to help women become more senior.”

Lloyd’s advice to women in the financial sector is to take more risks. “I think women can be inclined to think they can’t do something, rather than think it’s worth the risk that maybe you can,” she says. “You might see an equally capable young guy and young woman, but the man will be more likely to put up his hand and say ‘I’ll give that a go.’”

She believes women often seem to have a greater eye for detail, a trait that can work to their professional advantage. “I think women in accounting can often have more patience and willingness to sit down and really get into the details and understanding things thoroughly.”

Lloyd says she used that advantage in her own career. “That meant I could be such an important member of a team that you couldn’t get away without working with me, and I think being indispensable in a particular specialized area can be a really good basis for development, even if you don’t want to be a ‘details person’ forever.”

Balancing work with family and leisure is vital, says the London-based Lloyd, who travels frequently as part of the IASB’s global outreach programmes. “No matter how busy you are, I think you need to have solid blocks of time where you’re not thinking about work,” she advises. “Just forget about a problem for a while, and often you’ll find you are more effective if you’ve had a break and come back to an issue with a fresh mind.”

Lloyd's list: Women, work, and achieving balance

“ I think the whole organization is under more pressure because one of the biggest changes we’ve had is the growth of jurisdictions applying International Financial Reporting Standards.”

20 December 2015

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loss trigger event occurred. “The biggest criticism we faced

in the aftermath of the financial crisis was a concern that people had felt that losses were expected but they were unable to recognize them in the financial statements because they felt that they couldn’t point to the triggers,” says Lloyd. “We hope now that information can be provided to investors as things change and they will get it on a timely basis.”

“I think the move to the expected credit loss model is one big change in the way people think about how to work out what

loan losses mean using forward-looking information,” says Lloyd. “Even a standard loan product is more complicated than it used to be, because we’re asking people to take into account the effects of future macro-economic events.”

People skillsLloyd expects rapid and wide-spread changes in standards to taper off. “Things like Revenue and Leases affect loads of people, as does Financial Instruments,” she notes. “I think we’ve done well in finishing them, and with those we’re close to finishing, and

we probably need to give people a breather in terms of big changes.”

However, the IASB is unlikely to see a pause in its intense stake-holder consultation programme, which included Lloyd’s participa-tion in the IFRS Conference in October, jointly presented by the Institute and the IFRS Foundation. “I’ve got more time to do outreach activities and talk to people,” says Lloyd of her board member-ship. “That’s probably the biggest change for me.”

In Hong Kong, Lloyd spent much of her time talking about IFRS 9. “We listened to questions

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Leadership prof ileSue Lloyd

Lloyd is a former member of the Australian Accounting Standards Board

22 December 2015

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that were coming up, what sort of system challenges that stakehold-ers face, and we try to make sure they’ve got the answers that they need, and also to encourage them not to delay application because there’s quite a lot they need to do.”

She stresses that the board has worked “very hard to improve our communications” and that includes explaining in greater depth the rationale for standards. “There’s a lot more work now,” she says. “One [example] is effects analysis, so whenever we finish a final standard, we now need to produce information that explains how we took into consideration the effects of what we were doing on financial statements.”

For the IASB technical team, that means being able to switch from deploying very technical lan-guage for an accounting standard to explaining it in simple terms for those unfamiliar with the detail. “It is aimed at politicians, inves-tors and other people for whom you need to use different language, and that requires a new way of thinking to what we’ve done in the past.”

Improving the board’s com-munications also means greater personal contact with stakehold-ers. “I think it’s really important just to meet people you know you’ve talked to a lot on the phone or heard of but never actually met face-to-face so you can establish more of a relationship with them,” says Lloyd.

No amount of draft documents can replace personal contact, Lloyd adds. “Writing doesn’t have the same effect as actually being in

front of people and showing that you’re human, and we’re not in an ivory tower and not listening to what people are thinking.”

Local strengths Despite the globalization of standard setting, Lloyd believes that national standard setting bodies will remain vital. “They are really important to us because we have limited resources so we need help,” she says. “Their role has obviously changed, but some of them still do standard setting for domestic purposes.”

National standard setters, she adds, are very effective in terms of being able to identify particular circumstances in their jurisdictions that can affect global standards. “They help us with our outreach directly by going out and explain-ing our proposal and helping us get feedback,” says Lloyd. “It’s another way of extending our reach.”

Regional standard-setting groups are also key allies. “It’s also important having feedback through bodies such as the Asian-Oceanian

Standard-Setters Group which the Institute chairs. AOSSG is a great conduit in the region and is a centralized source of information,” she says. “They’ve got good ideas and smart people and we need all of the good ideas we can get.”

Lloyd acknowledges that no amount of communication can make an unpopular change more acceptable to preparers of financial statements. “I think what we need to be careful about is not going out there and creating an impression that just because something’s not popular we’ll be convinced not to do it,” she says. “To be honest, you see a lot of people trying to cut corners and present things in a way that maybe they shouldn’t.”

One important new role for stan-dard setters is change management, she observes. “It’s about what I call winning hearts and minds: we need to convince people that what we ask them to do is a good thing to do, and to get them to see our perspective on why we want to do it.”

Lloyd says she will continue to apply the problem-solving skills that she acquired in banking to her role in standard setting. “At the end of the day we want to make sure we’ve undersztood things properly and we’ve understood arguments for and against and considered them,” she says.

“But sometimes we’re going to do things that nobody’s going to ask us for other than investors. Preparers aren’t going to say, ‘we want you to make us put leases on the balance sheet.’ I think sometimes people get con-fused by that.”

“ What we need to be careful about is not going out there and creating an impres-sion that just be-cause something’s not popular we’ll be convinced not to do it.”

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