During 2012, the progress of financial reporting convergence continued to slow, particularly following the publication of an equivocal Securities and Exchange Commission (SEC) staff report in July.
To further complicate the outlook for 2013, The Telegraph recently reported that the European Commission also plans to undertake a review of international financial standards
“There are legitimate questions which need to be addressed, in particular whether the application of IFRS in the crisis resulted in overstated profits and imprudent distributions. The Commission services will carry out an assessment of the IAS regulation starting early in 2013... and, if necessary, to propose complementary remediating measures,” wrote Olivier Guersen in reply to a group of institutional investors who had raised the issue with the commission.
Hostility to the global convergence project has persisted on both sides of the Atlantic, but because of its economic might, the reluctance of the US authorities to embrace IFRS fully has long been seen as the biggest obstacle. The prevailing attitude that the US just isn’t into IFRS has been comprehensively documented by GoingConern.com, drawing on critical commentaries by IFRS deniers Paul Miller and Paul Bahnson in their October speech to a US accounting conference, It’s time to jettison the idea that international standards are coming.
With anti-IFRS feeling gathering momentum, the SEC has been dragging its feet on making a definitive decision since 2011, and the July staff report effectively postponed the decision again.
Expressing his frustration with the SEC at in remarks at the AICAP conference in Washington DC last month, International Accounting Standards Board chairman Hans Hoogervorst commented: “ Self-imposed deadlines frequently slip, as we standard setters know all too well.”
The question of “when” the changeover from US GAAP will take place has changed to “whether”, commented Anne Rosivach on our US sister site AccountingWEB.com.
The ICAEW added its own somewhat pessimistic outlook in December with a report on The Future of IFRS. The institute’s financial reporting faculty head Nigel Sleigh-Johnson noted the growing danger of the coalition of countries supporting IFRS falling apart. Rather than moving inexorably towards a single set of accounting standards, he wrote, “We could return to a world of highly fragmented national standards and national standard-setting.”
“It is better that the IASB and FASB boards issue separate standards than deliver unsatisfactory compromise solutions or do nothing at all,” he added.
At the December AICPA conference, FASB chairman Leslie Seidman did not rule out IFRS adoption in some form. The current model doing the rounds in Washington is a “condorsement” approach suggested last year by SEC deputy chief accountant Paul Beswick. Under his model, the US FASB could continue to review and adjust the standards for use by US companies, roughly parallel to the technical endorsement mechanism managed by the the European Financial Reporting Advisors Group (EFRAG).
Beswick said the SEC’s decision on IFRS may be the “single most important accounting determination” since the SEC turned to the private sector for help devising accounting standards in the 1930s. He urged accountants to “stay tuned” for the big decision - but don’t hold your breath.
