Despite dispute on the technicalities of some of the standards, agreements were reached and the project continues to gather momentum.
However, it is becoming clear that there are a growing number of opponents to the project. Although most people in the profession see convergence as a positive step and, indeed, an inevitable one, there is serious concern over its timing.
Doubts have been raised about the board’s ability to handle this hugely complicated project, while also dealing with the immense task of producing the international financial reporting standards (IFRS) throughout the European Union in time for 2005.
For European companies that have the unenviable task of complying with IFRS – with many of the standards yet to see daylight – there is also the worry of preparing for any changes forced upon them by the convergence project.
Any delays that affect the IASB’s timetable because of the project with the US Financial Accounting Standards Board will have a knock-on effect for companies preparing for IFRS.
This is why the ICAEW voiced its concerns to the IASB over the project, when it responded to the draft rule on the treatment of non-current assets and discontinued operations.
‘We are still keen on convergence, but the IASB has a huge workload in preparing for IFRS in 2005 and has fallen behind timetable,’ said Nigel Sleigh-Johnson, head of financial reporting at the ICAEW, in the reply.
In its response the institute also challenged the IASB’s underlying approach to the development of the standard, saying that it had not considered the merits of relevant GAAP other than the US standard. It added that the exposure draft was unlikely to improve the quality or reliability of financial reporting and the board should work with other national standards setters to identify a more appropriate global solution to the issues in the standard.
The ICAEW’s Sleigh-Johnson argued there was a window of six months to get ready for IFRS and it had to be the immediate priority. Afterwards there would be plenty of time to look at convergence, he added.
Although yet to submit a response to the exposure draft, ICAS has expressed empathy with the ICAEW’s position. ‘If the IASB is getting bogged down in the convergence process then it needs to shift its priorities,’ says David Wood, deputy director of accounting and auditing at ICAS.
IAS specialists in Big Four firms also echo these worries. ‘If completing the standards in time means slowing down on convergence, that’s what needs to be done,’ says Mark Vaessen, head of KPMG’s IAS advisory ser-vices group.
How the IASB will take this criticism is uncertain. It has a tradition of sticking to its guns on issues it feels strongly about, as opponents of its share options scheme discovered.
It will not want to appear apathetic about the issue in front of FASB and risk a more serious derailment of the project. FASB chairman Robert Herz has gone on record as being very keen on the project and, as a former IASB member, he is the best hope for convergence to not just mean taking on more US-style, rules-based standards.
Herz, however, has also stated that the success of IFRS in 2005 is vital in convincing his fellow board members that convergence is a worthy project.
‘A successful introduction of IFRS would give the Europeans a better hand in the convergence discussions, and a better chance of compromise,’ says ICAS’s Wood.
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