RegulationAccounting StandardsUS convergence must be kept under ‘close review’

US convergence must be kept under ‘close review’

Senior ICAEW figure casts doubt on the drive towards universal accounting standards

Efforts to harmonise international and US accounting rules should be kept
under “close review”, according to a senior member of the UK’s largest
accounting body.

Questions remain about the International Accounting Standards Board’s
convergence strategy, according to Dr Nigel Sleigh-Johnson, head of financial
reporting at the ICAEW.

He said the process should be monitored moving forward. “I think the next
step is to look closely at what can be achieved. It is not something that has
been debated in any useful way,” he said. “It is something that needs to be kept
closely under review.”

The ICAEW’s comments add to international concerns about the convergence
strategy.

Sleigh-Johnson would not be drawn on his personal opinion of convergence
efforts except to say: “It is too early to make substantive judgments. There are
concerns about some of the changes that have been made to IFRS.”

The latest remarks follow comments in July by Paul Boyle, Financial Reporting
Council chairman, who said it was not clear “that convergence between IFRS and
US GAAP is the best strategy for improving IFRS”.

At a global level, criticism has focused on differences between the IASB’s
and the US’ fair value proposals. There remains a significant gap between the
organisations’ models put forward in the wake of the international financial
crisis.

The issue represents a potential stumbling block as the two standards setters
attempt to converge US and international accounting rules.

In Washington, the Financial Accounting Standards Board has been working on
an option which would see almost all assets measured at fair value. In London
the IASB has put forward a mixed model which would see some assets valued at
amortised cost.

The issue centres on how to treat bank loans. In FASB’s view they should be
measured on fair value.

The IASB believes it should be valued at amortised cost. In a submission to
the IASB, the Basel Committee on Banking Supervision “strongly encouraged” the
two organisations to harmonise their fair value proposals, while the World Bank
said it would prefer the pair to put forward “joint proposals”.

The Federation of European Accountants said it was “highly unfortunate” that
both organizations seem to be moving at different speeds and in different
directions; while the British Bankers Association, said it was regrettable that
“the world’s two pre-eminent accounting standard setters appear to be
fundamentally diverging on such an important issue”.

“That said, if the choice is between the IASB setting out an appropriate
course alone or adopting a sub-optimal joint standard we would support the
former,” Paul Chisnall, BBA’s executive director, said in a submission to the
IASB.

IN OUR VIEW

On one front the IASB is pressured to fast track its fair value standard,
on another it is asked to take a considered approach. A cynical person may
question the likelihood of US convergence.

Related Articles

IASB overhauls insurance accounting with issuance of IFRS 17

Accounting Standards IASB overhauls insurance accounting with issuance of IFRS 17

7m Alia Shoaib, Reporter
Treasury Select Committee report released on Making Tax Digital

Accounting Standards Treasury Select Committee report released on Making Tax Digital

11m Stephanie Wix, Writer
New Year Honours of 2017

Accounting Standards New Year Honours of 2017

11m Stephanie Wix, Writer
Former CFO joins IASB board

Accounting Standards Former CFO joins IASB board

1y Stephanie Wix, Writer
Record fine for Deloitte and audit partner over Aero misconduct

Accounting Standards Record fine for Deloitte and audit partner over Aero misconduct

1y Stephanie Wix, Writer
'Clear' tax avoidance guidance for advisers issued by institutes

Accounting Standards 'Clear' tax avoidance guidance for advisers issued by institutes

1y Stephanie Wix, Writer
Eight landmarks in the history of accountancy

Accounting Standards Eight landmarks in the history of accountancy

1y Acccountancy Age
MEP calls for IASB pay cuts

Accounting Standards MEP calls for IASB pay cuts

1y Richard Crump, Writer