Accounting convergence must not "detour": ICAEW

Efforts to harmonise international and US accounting rules could “detour” off track, one of the UK’s largest accounting bodies has warned.

The ICAEW, believes ongoing differences surrounding the measurement of financial instruments between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) “might send the convergence project on a major detour over the next few months”.

“This is unfortunate, to say the least; agreeing on one set of high-quality global accounting standards is not a nice-to-have but a must-have in today’s increasingly global business environment,” said Nigel Sleigh-Johnson, head of the ICAEW’s financial reporting faculty.

“Whatever happens on the financial instruments side, the next 14 months will be extremely challenging for all constituents if the Boards are to harmonise their standards ahead of the 2011 deadline for the completion of the convergence process. The current programme of work is highly ambitious, some might say too ambitious.”

Sleigh-Johnson’s comments follow a joint IASB-FASB progress report where the two bodies signaled their ongoing disagreement on how to measure financial instruments.

The IASB released a mixed-measurement model in November, which allows banks to use a combination of fair-value and amortised cost to value their financial instruments. In contrast, FASB have proposed a full fair-value model.

Sleigh-Johnson said the financial community needs to “brace” for a deluge of new proposals during the next two months, as the two board.

Further reading:

SEC has failed to provide clarity: ICAEW

ICAEW: global accounting rules needed for financial crisis