In search of IFRS satnav
You’re hammering up the motorway with a truck load of vital raw materials for your business. Without them your workers are unemployed, your clients will be disappointed and your investors will be confused, not to say apoplectic with rage, over your tardy supply strategy. You’re also on unfamiliar roads and relying on your trusty satnav to get you home. But, instead of a reassuring: “Turn left in 300 yards,” the satnav says: “This could be the right turn, I believe it is, but you may want to think it over a while longer because once we turn, there’s no going back.”
Your colleague in the passenger seat disagrees and says turn the satnav off and go it alone. You look down and realise your fuel levels leave you with no room for error.
Apologies for the meandering intro but that’s more or less the position the US finds itself in over international accounting standards.
For satnav read the “roadmap” the Securities and Exchange Commission laid out yesterday for its route to adopting international accountin standards, or IFRS. For the unexpected electronic indecision read the SEC’s view that adoption will happen no earlier than 2015, but only if certain conditions are met around converging IFRS with US GAAP. For the obstinate passenger read the IFRS detractors in the US and in Europe still trying to throw the project off course. For fuel read the political will that is still required to see the whole IFRS project through.
The SEC has given us a route to IFRS for the US but it has held back from full commitment. In saying that IFRS still has to pass critical tests, there remains room for a change of plan. In saying that the earliest it could be used is 2015 it fails to set a deadline for when it will come in.
The SEC, despite expressing its view that a single set of standards is the right way to go, is still holding back from a full commitment to adoption.
In truth though, despite the tentativeness, this is a move forward. The roadmap had been just a proposal. Now it is the plan. Opponents who have tried to block the progress of IFRS should see this as a setback. But in the SEC’s statement they may still see room to manouvre. Likewise the opposition to the International Accounting Standard’s Board in Europe which worries that IFRS is run by an unaccountable body way beyond the reach of any elected politicians.
And politics is one of the biggest issues for the IASB. It needs US support to ensure its European opponents are isolated. With the US on board they will have a much harder time trying to bring the IASB under political control. After all the US backs an “independent” standard setting body. The agreed roadmap takes a step toward doing that. But it doesn’t make convergence and US adoption a done deal.