PracticeAuditConvergence back on track

Convergence back on track

The FRC reasserted its original stance of backing convergence between IFRS and US GAAP last week, saying that convergence would provide significant cost savings for non-US issuers

When Financial Reporting
Council
boss Paul Boyle suggested earlier this year that a ‘rethink’ on
convergence between IFRS and US GAAP might be in order, standard setters on both
sides of the Atlantic couldn’t have been very happy.

Converging US GAAP and IFRS has always held the promise of broadening and
deepening global capital markets. But it is a difficult goal to reach and any
opposition from an important regulator could have been a major obstacle.

At the time Boyle was catalysed by the intense unhappiness over a segmental
reporting standard which was adopted verbatim from the US, and kicked up a stink
among UK NGOs and investor groups.

There will be much relief, then, at the US Financial Accounting Standards
Board ­ and international counterpart the IASB ­ that whatever doubts Boyle may
have had earlier this year have been quelled.

Last week the FRC reasserted its original stance of backing convergence, by
writing a letter in support of the US Securities and Exchange Commission who
earlier proposed to eliminate the US GAAP-IFRS reconciliation requirement for
non-US companies using IFRS.

In the document the FRC outlined that convergence would provide significant
cost savings for non-US issuers. The UK regulator also made clear that it sees
IFRS, as issued by the IASB, as a ‘high quality set of accounting standards
which is capable of ensuring adequate disclosure for the protection of investors
ad the promotion of fair, orderly and efficient markets’.

It is a far cry from concerns the FRC had just a few months ago, when Boyle
said the benefits of one accounting language might not outweigh the costs of
time and money invested when there were other pressing issues to focus on, such
as improving existing standards.

He also suggested that the relationship between the FASB and IASB may have
become a little too cosy.

Those fears now seem to have been placed firmly in the past. The convergence
bandwagon keeps rolling on.

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