US adoption of IFRS remains “highly uncertain”, trustee warns

US adoption of global accounting rules is “highly uncertain” and could
threaten the survival of the International Accounting Standards Board, a leading
board member has warned.

Tommaso Padoa-Schioppa, newly appointed chairman of the IASB trustee group,
has signaled his intention to review the organisation, due in part to
uncertainty surrounding US adoption of international accounting standards.

Speaking at the boards’ trustee meeting in Washington DC earlier this month,
Padoa-Schioppa said the IASB’s US convergence program may end in disappointment.

“The aspiration of having global standards depends very much on the adoption
of global standards by the United States and this is highly uncertain and may
still give us a big disappointment in a year or so from now,” he said.

The US accounting standard setter, the Financial Accounting Standards Board
(FASB), is in the midst of harmonising its accounting rules with international
standards set by the IASB. The two boards have been working feverishly to
converge their divergent financial instruments rules by an imposed June 2011
deadline, but have so far failed to find common ground on key concepts.

Meanwhile, the US Securities and Exchanges Commission (SEC) is also reviewing
the impact of adopting international standards. Some domestic US corporations
have opposed the switch, citing high convergence costs.

Padoa-Schioppa also cited European meddling as another threat, and expressed
fears EU ministers might refuse to endorse standards or withhold funding.

“The EU has a number of ways which it may make its point…they may adopt or
not adopt the standards. The validation process is in their hands and we know of
four standards still before the EU,” he said.

“They have largely centralised the financing of the organisation so there are
means of pressure that are real.”

The EU continues to postpone the adoption of accounting standard IFRS 9. The
rule, borne out of the financial crisis, was overhauled by the IASB under
pressure from Europe last year. Since its release, however, while nations like
Australia, Brazil, Japan, New Zealand and South Africa have adopted the
standard, in Europe, it has stalled.

The IASB’s funding also remains an ongoing issue. Revenues dropped last year
due in part to poor foreign exchange rates but also because some US private
contributors themselves faced financial difficulties.

“In a worst case scenario [these challenges] could be a real threat to the
survival of the organisation as it was originally conceived,” Padoa-Schioppa

His review will centre around the scope, process, governance and financing of
the IASB.

He said the organisation had enjoyed great success since its creation however
it needed to change to survive the next ten years.

“It is indeed the time to have a broad ranging and deep review of the
fundamental challenges and issues and potential changes that may be needed,” he

The review will run parallel to a review by the Monitoring Board – the IASB’s
supreme oversight body whose members include US Securities and Exchanges
Commission chairman Mary Schapiro and EU Internal Markets Commissioner Michel

He has been a vocal critic of the IASB’s governance. In April, Barnier told
the board that concerns “remain in Europe about the IASB’s governance”.

“There is still weak accountability…and the IASB still [displays] reluctance
to acknowledge the effects of its standards on financial stability,” he said at
the time.

Padoa-Schioppa said there remained “nostalgics” in Europe who believe
accounting rules should still be made by public bodies.

Europe handed over its accounting standard setting powers to the IASB in

Further reading:

IASB concerns voiced at global meeting

reaffirms support for convergence

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