The convergence of accounting standards has become a hot topic for
regulators, standard-setters, investors and industry professionals alike.
The European Parliament has been drawn into the debate, after the contentious
segmental reporting standard, IFRS 8, raised the ire of shareholders, leading to
a provisional halt on the adoption of the standard by the European Commission.
This is despite the adoption of IFRS 8 by the International Accounting
Chairwoman of the Committee of Economic and Monetary Affairs of the European
Parliament, Pervenche Berès, has also taken an interest in the issue, along with
the Financial Reporting Council’s chief executive, Paul Boyle.
Boyle recently suggested the possibility of a halt to the IASB’s convergence
project and questioned whether two international standards could co-exisit.
The following Q&A constitutes Berès’ thoughts on the subject:
What are your views on the Convergence Project, in which the IASB has
made plans to converge with US standards?
Some degree of convergence with US standards may be necessary but convergence
cannot be an end in itself. IASB cannot and should not have convergence of IFRS
with US GAAP as a main objective.
The main objective for the IASB must be to develop international accounting
standards that throughout the world and by all stakeholders, in particular the
jurisdictions requiring companies to apply IFRS are recognised as being superior
and of high quality. IASB should set standards that prepares and users would
prefer to use. Standards that standard setters worldwide would wish to move
I think as Paul Boyle, head of the FRC in the UK, recently said at a
conference in South Africa that the benefits of one accounting language may not
outweigh the costs of getting to one language. Moreover, IASB’s focus on
convergence consumes the resources that could or should be used to improve
Do you have any comments to make on the manner in which IFRS 8 has
been adopted by the IASB?
I am aware that IASB consulted widely. Nevertheless, it seemed that the
main reason for IASB to change its approach to segment reporting was to ensure
convergence of accounting standards. But as I said, convergence cannot be an end
in itself. IASB should set standards that prepares and users would prefer to
use, in particular those from jurisdictions requiring companies to use IFRS.
Moreover, in the consultation there were a number of investors and others
that questioned whether it would be appropriate to move to the so-called
management approach. But these concerns seemed to be disregarded because IASB
seems to see convergence as an end in itself.
Do you view the manner in which the IASB has embarked on converging
with US standards, to be in the best interests of Europe? Please state why.
As I said a certain degree of convergence may be necessary. But the
IASB should be very particular when choosing areas where convergence should be
sought. Moreover, before setting up any special relations with individual
standard setters the IASB should consult, in particular the IASB should ensure
that its main customers – jurisdictions that require companies to apply IFRS –
also see the need for convergence.
Moreover, there is fundamental difference in approach. US GAAP are
rules-based and IFRS principle-based. To my mind, such a fundamental difference
sets limits to how far you can go towards creating one accounting language. And
again I am not certain that market players need one language.
I can see that market players may need fewer accounting languages than there
are faced with now. But as far as I can tell, the process is underway. Many
jurisdictions voluntary seek convergence with IFRS. This is good. But
convergence is a national choice. And should we end in a situation where there
are two accounting languages being applied I am certain that market players,
auditors, and accountants, etc, can cope.
Do you believe that the IASB pays enough attention to European
standards – or perhaps a disproportionate amount of time and effort spent on
converging with the US?
First of all: European accounting standards do not exist. But I do
think that the IASB should pay more attention concerns of jurisdictions that
require companies to apply IFRS. Moreover, many jurisdictions across the world
are moving towards IFRS. IASB should also pay more attention to those
Yet it seems that the IASB only has eyes for FASB. It does seem rather odd.
Do you believe it is entirely necessary for a single set of
accounting rules to be applied, or do you think there could be some merit in two
sets of accounting standards co-existing and working in the markets, as they
For now there are, I think, at least more than 40 accounting languages.
There is a merit in having significantly fewer accounting languages. There could
be a merit in having two accounting languages being applied. And I am sure they
could co-exist. Especially if the two applied accounting languages are
underpinned by mutual recognition as agreed in the recent EU – US summit.
Do you think that the IASB, with its Convergence Project, could be in
danger of undermining its position as the international standard-setter and
perhaps its own efforts towards principled-based accounting standards?
If the IASB sees convergence between principle-based IFRS and
rules-based US GAAP as an end in itself, then I do think the IASB could
undermine its position.
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