A collective sigh of relief can be heard emanating (cautiously) from the financial reporting community.

 The first IFRS reporting season is well underway and a recent series of interviews by KPMG on the experiences of users, preparers, auditors, standard setters and regulators suggests that IFRS adoption is going well.

Looking forward, while there is an optimism that IFRS could be the basis for comparable, globally-accepted standards, many can see dangers lurking ahead.

A key danger is differing interpretations leading to different 'varieties' of IFRS. One leading CFO commented that 'we could have European IFRS and US IFRS and its on a knife edge which way it will go'.

A potential source of differing interpretations is the securities regulators, to whom the focus now shifts as they begin to receive the first IFRS filings.

'Notably, the Securities and Exchange Commission will spend the summer of 2006 reviewing the "faithfulness and consistency" of foreign private issuer's 2005 IFRS financial statements and reconciliations.'

Regulators are rightly looking to IFRS to deliver improved consistency and comparability. But it's early days. In practice, the next few months will determine whether individual regulators are able to avoid second guessing the good faith judgement of management in applying IFRS.

Preparers and auditors must be willing to exercise such judgment without asking for an interpretation (or rule) for every scenario – a challenge that our interviewees expressed a willingness to embrace.

Unfortunately, there are signs individual regulators (and national standards setters) are already finding it difficult to resist issuing interpretations of IFRS.

The difficulty of maintaining a single variety of IFRS will grow as US GAAP and IFRS contain an ever increasing number of converged standards. Should we realistically expect the US emerging issues task force or the SEC to avoid interpreting a converged US standard without consulting IFRIC?

The IASB and IFRIC also must help if they are to remain the only bodies that set (and interpret) IFRS.

The challenge for the regulators is to have sufficient confidence in this process to allow time for the standards to mature as a single variety.

David Littleford is a partner in KPMG LLP