ACCA - The global body for professional accountants


US progress to date on convergence on a single set of global accounting standards has been slow and stuttering. Ramona Dzinkowski reads the runes between the lines

This article was first published in the November/December 2013 International edition of Accounting and Business magazine.

The question of if, when and how the US might adopt International Financial Reporting Standards (IFRS) has been the subject of ongoing speculation. With the final joint projects of the Financial Accounting Standards Board and the International Accounting Standards Board coming to a close, we again have to wonder: will the US ever get on board with IFRS?

In July 2012, the much anticipated final report of the US financial regulator the Securities and Exchange Commission (SEC) on the adoption of IFRS in the US provided few clues to this mystery. Fifteen months later, and with the convergence alliance of the two standard-setters coming to an end, the SEC remains officially silent on the subject.

A recent speech by Paul Beswick, chief accountant at the SEC, underscores the fact that the SEC is being very careful not to let any cats out of the bag with respect to possible IFRS adoption.

Noting that the US has a vested interest in IFRS, he stressed that his remarks ‘are not intended to forecast what the Office of the Chief Accountant might recommend to the commission or what the commission might be thinking in terms of next steps for IFRS for domestic issuers’.

Despite this disclaimer, there is a hint that IFRS may not be on the SEC agenda any time soon. Beswick went on to say: ‘The consideration of IFRS for domestic issuers is a complex issue. There are also several recent and future anticipated changes at the commission level.’

And this is where reading between the lines tells the story.

Beswick’s first remark echoes the conclusion of the July 2012 final report that claims: ‘Additional analysis and consideration of this threshold policy question [whether IFRS is in the best interests of the US] is necessary before any decision by the commission concerning the incorporation of IFRS into the financial reporting system for US issuers can occur.’ Since that time no additional analysis has been forthcoming – or at least none that is in the public domain – and although the SEC participates as a contributor to several IFRS working groups, the work-plan appears to have ground to a halt.

Second, the ‘recent and future anticipated changes’ may well reflect the appointment of Mary Jo White as chairman of the SEC on 10 April.

Observers suggest that given her background as a state prosecutor focusing on complex securities and financial institutions fraud, she is more likely to hone in on the enforcement of securities law rather than the adoption of a new accounting standard.

Finally, we have the view from someone who has had the inside track into IFRS/US GAAP convergence since the beginning and who suggests that the end of convergence now could mean a widening divide later.

Bob Herz, the American behind the IASB/FASB convergence programme and former FASB chairman during the Sir David Tweedie era at the IASB, wrote in a recent article for Compliance Week: ‘The end of formal joint projects with IASB may also lessen pressure from certain quarters for FASB to arrive at converged solutions with IASB.

No doubt many in the US would welcome such an outcome, believing that FASB should focus on improving US GAAP without any commitment or pressure to continue to pursue convergence between our accounting standards and IFRS.

‘Others favouring continued convergence and movement toward a single set of global standards, however, may be concerned that, in the absence of a systematic programme to achieve these goals, divergence between US GAAP and IFRS is likely to grow over time.’

In other words, the path towards convergence between IFRS and US GAAP will continue to be a long and winding road.

As for the outright adoption of IFRS by the US any time soon – well, that’s not such a mystery any more.

Ramona Dzinkowski is an economist and business journalist

Last updated: 5 Nov 2013