Convergence talks accused of over-ambitious targets

Convergence talks accused of over-ambitious targets

IASB and FASB give "no guarantee" they will resolve all differences over international standards convergence

Medium

Sir David Tweedie

A progress report on international accounting convergence caused rumblings in the accounting world last week, with fears the world’s two chief standard setters were being overambitious in their quest to unite their two accounting codes by June next year.

Some even suggested the quality of international account­ing rules may suffer as the international and US standard setters move towards a June 2011 deadline.

Jeremy Newman, chief executive officer of BDO International, was worried that too much was being compromised by the International Account­ing Standards Board (IASB), headed by Sir David Tweedie, as it attempts to converge its standards with US rules. He fears a rush job may hurt the standards though a lack of thoroughness. “My fear at the moment is that in order for the IASB to say ‘we got there’ it will drop so much stuff that getting there just doesn’t mean a whole lot,” he said.

In a joint statement the IASB and its US counterpart the Financial Accounting Standards Board (FASB) said last week that while they were making good progress on the vast majority of accounting rules, there was “no guarantee” they would resolve “all, or any, of our differences” on its financial instruments project.

The two boards have been working towards a June 2011 deadline, imposed by G20 leaders last year, to converge US and international account­ing rules. However fundamental differences remain on their approach to the measurement of financial instruments.

Nigel Sleigh-Johnson, head of the financial reporting faculty at the ICAEW, said he is worried the quality of international standards may suffer as respondents struggle to keep up with the number of proposals being released this year. “The concern is not that we have to work harder, it is that the risk of damaging the quality of the standards is magnified by having to address so many topics at one time,” he said.

FASB will next month release its full fair value proposal, which would result in all company assets valued at their market price. The IASB released its model in November 2008 incorporating a mixed-measurement approach which allows some bank loan books to be valued at amortized cost.

The US standard setter’s timing has raised questions about its “sense of urgency” to convergence. On key projects such as on financial instruments some suggest progress is needed soon to prevent rushing the standards at the deadline. They say the boards need to work together according to the same timetable, allowing constit­uents the best chance to understand then comment on them.

Newman said that FASB was travelling at a “slightly different pace” than the IASB. “However, those of us who would like to see adoption of a single set of high quality accounting standards will always say progress is going too slow.”

The IASB and FASB will issue a raft of joint reports on prop­osed converged standards in coming months. The IASB plans to release 11 exposure drafts for comment by June. Differences with FASB remain on their divergent treatment of financial instruments and insurance contracts, which, the boards warn, could alter their timetable.

Comment: In our view

Time is running out for the IASB and the issues being debated are matters of principle which cut to the heart of convergence. The US has a fundamental different point of view on some key headline standards. If these differences can’t be resolved, the question remains will the world accept almost-converged accounting rules. Is close enough, enough?

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource