Over the past two years, there has been a lot of activity around implementing a single set of high quality, globally accepted accounting standards. In April 2008, for example, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) renewed their commitment to converging US GAAP and IFRS.
As a result, they issued a timetable of milestones to be reached in 2011 in 11 accounting areas. This timescale is one supported by both the Financial Crisis Advisory Group (an international group of standard-setting bodies coordinating responses to the financial crisis) and the G20, which has set a mid-2011 deadline for convergence. The US is a member of the G20 and has in effect committed to meeting this deadline, putting pressure on the US Securities and Exchange Commission (SEC) to adopt IFRS.
However, in interviews during January’s World Economic Forum in Davos (where Sarkozy called for global accounting standards) top executives from three of the Big Four accounting firms warned that discussions over a roadmap to move US companies to international standards were reaching a crucial point.
They went on to voice concerns that the process may become subject to political influence and interference and that it may get severely delayed. Indeed, Bob Moritz, US chairman at PricewaterhouseCoopers, said that the original date of 2014 for one set of rules could be pushed back to 2020, partly due to the fact that many CEOs remain unconvinced about moving to one set of rules and partly due to their understandable focus on moving out of the financial crisis.
Moving to one set of high quality standards is a long-time goal of multinational companies, which want to cut red tape. It would also make it easier for international investors to compare companies from different countries and would increase transparency in financial reporting.
However, even supporters of the process are concerned with the current roadmap, and especially about the lack of a firm decision on any date.
In the roadmap, the SEC stated that a final decision on whether to mandate IFRS would not be made until 2011, which is too vague for many large filers. The roadmap calls for large accelerated filers to adopt IFRS for the year ending 31 December 2014. Since these filers will have to present current year results plus two years of historical, comparative data, they will actually need to adopt IFRS in 2012 in order to comply.
But most companies will not commit funds or resources to adopting IFRS until the SEC tells them to. This would mean that conversion, if it goes ahead, would have to happen in a year, which seems over-optimistic in the extreme.
The FASB and the IASB plan to hold monthly meetings in order to complete convergence by June 2011. In the end though, whatever the standard setters decide, it is SEC Chair, Mary Schapiro who will decide whether the US signs up for global accounting convergence and under what conditions. She has recently said that she remains committed to the goal of a global set of high-quality accounting standards.
Only time will tell.
As a result, they issued a timetable of milestones to be reached in 2011 in 11 accounting areas. This timescale is one supported by both the Financial Crisis Advisory Group (an international group of standard-setting bodies coordinating responses to the financial crisis) and the G20, which has set a mid-2011 deadline for convergence. The US is a member of the G20 and has in effect committed to meeting this deadline, putting pressure on the US Securities and Exchange Commission (SEC) to adopt IFRS.
However, in interviews during January’s World Economic Forum in Davos (where Sarkozy called for global accounting standards) top executives from three of the Big Four accounting firms warned that discussions over a roadmap to move US companies to international standards were reaching a crucial point.
They went on to voice concerns that the process may become subject to political influence and interference and that it may get severely delayed. Indeed, Bob Moritz, US chairman at PricewaterhouseCoopers, said that the original date of 2014 for one set of rules could be pushed back to 2020, partly due to the fact that many CEOs remain unconvinced about moving to one set of rules and partly due to their understandable focus on moving out of the financial crisis.
Moving to one set of high quality standards is a long-time goal of multinational companies, which want to cut red tape. It would also make it easier for international investors to compare companies from different countries and would increase transparency in financial reporting.
However, even supporters of the process are concerned with the current roadmap, and especially about the lack of a firm decision on any date.
In the roadmap, the SEC stated that a final decision on whether to mandate IFRS would not be made until 2011, which is too vague for many large filers. The roadmap calls for large accelerated filers to adopt IFRS for the year ending 31 December 2014. Since these filers will have to present current year results plus two years of historical, comparative data, they will actually need to adopt IFRS in 2012 in order to comply.
But most companies will not commit funds or resources to adopting IFRS until the SEC tells them to. This would mean that conversion, if it goes ahead, would have to happen in a year, which seems over-optimistic in the extreme.
The FASB and the IASB plan to hold monthly meetings in order to complete convergence by June 2011. In the end though, whatever the standard setters decide, it is SEC Chair, Mary Schapiro who will decide whether the US signs up for global accounting convergence and under what conditions. She has recently said that she remains committed to the goal of a global set of high-quality accounting standards.
Only time will tell.
In the point of view of accountants, who will benefit most? The accountants of GAAP or of IFRS?
I think the current IFRS accountants will have an edge over the current GAAP accountants once the standard are converged.
Posted by: Junior Accountant | 22 February 2010 at 05:22
I believe it is really a positive but critical process. Unifying the standards will create harmony and will also improve Balance of Payments for the USA, due to the fact that it will be easier for foreigners to understand US companies' Financial Statements. IFRS tend to be more shareholder freindly so i believe it will work positive for US stock market as well as will boost investments.
Unifying has always removed barriers to trade so adopting IFRS will surely help US.
Posted by: Arsalan Sarfaraz | 20 February 2010 at 11:02