Isabel Lin CPA, Director at KPMG, specializes in financial instruments accounting. She shares how she helps clients cut through complexity, and the standards they are currently struggling with
What have been the three biggest lessons in your career so far?
Firstly, do what you enjoy. When I started my technical advisory role, I realized that I had found my passion. I became proactive and went the extra mile to do a better job and I have never had the “Monday blues” since then. Secondly, do not simply follow “normal practice.” In financial instruments accounting, when the contractual terms differ, the accounting may differ as well. Instead of looking at the market practice, I need to engage in critical thinking and perform the accounting analysis based on specific contractual terms and standards. Lastly, learn to think from others’ perspectives. Communicating in trainings, presentations, financial statement disclosures, or providing advice is more effective when I put myself in the audience’s shoes.
What do you like most about specializing in financial instruments accounting?
People reach out to us with complicated deals or issues. A transaction may take several contracts with dozens of pages each, and sometimes you need a pretty long timeline diagram or layers of charts to describe a complicated transaction structure. I enjoy helping my clients to sort out complex facts, and showing them how to translate these complex transactions into simple and understandable accounting language for users of financial statements.
What are clients currently most concerned about?
Financial instruments accounting for financial assets and hedge accounting has become more principle-based since International Financial Reporting Standard (IFRS) 9 Financial Instruments replaced International Accounting Standard (IAS) 39. However, many still find the existing debt or equity classification and measurement requirements in IAS 32 Financial Instruments: Presentation complicated, rule-based, counterintuitive and lacking clarity. This also results in diverse accounting outcomes while the International Accounting Standards Board’s Financial Instruments with Characteristics of Equity project is still in progress.
In what ways has your CPA qualification helped you in your career?
The Qualification Programme was a good transition for me when I transferred from the Mainland to Hong Kong as an auditor. The modules, such as business and company law, and taxation, helped me understand the regulatory and legal framework in Hong Kong, and the accounting modules helped me to familiarize myself with IFRSs.
It’s argued that the scope of IFRS 9 should include cryptocurrencies given its growing prevalence. What is your view on this?
Scoping the accounting into IFRS 9 would only be tackling the “first-order” issues associated with cryptocurrencies. There are two other dimensions to consider: Firstly, transactions over cryptocurrencies go beyond “financial instruments turf,” such as investing, lending and trading into employee benefits, barter transactions, etc. IFRS 9 is unlikely to be a one-size-fits-all solution for all those “second-order” issues. Secondly, cryptocurrencies are just a small part of the blockchain universe. There are many other items such as non-fungible tokens, and metaverse-related features like virtual land, which have very different characteristics. Would the financial instruments accounting work for those too? Maybe for the asset holder in some cases but not always, and not for the issuer side.