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ICAEW: Focus on current IFRSs, not convergence

INTERNATIONAL STANDARD SETTER the IASB has been told to focus on quality rather than convergence, ten years after the project to converge global accounting standards was first conceived.

Nigel Sleigh-Johnson, head of the ICAEW’s Financial Reporting Faculty, has urged the IASB to focus its resources on making existing IFRSs “as high-quality as possible”.

Today marks the tenth anniversary of the birth of reporting convergence at a joint meeting between the IASB and US counterpart FASB. But the task of drawing US and international accounting standards closer together has proven harder than many expected.

“Several key projects are yet to be concluded, significantly behind the original timetable, and an SEC decision on the use of IFRS by US companies remains outstanding,” Sleigh-Johnson said.

However, he believes supporters of a global set of accounting standards “should not lose heart”.

“This is a long-term project. And while the two boards’ work is not yet completed, it is important to recall the significant successes: US GAAP and IFRS are now much more closely aligned, and the forthcoming standard on revenue recognition – a key aspect of financial reporting for all businesses – is likely to prove the most significant success of the convergence process.”

The financial instruments standard has been one of the main bugbears of the convergence project; the two boards have not yet been able to agree a joint approach, despite the investment of considerable time and effort.

Other wide-reaching standards that loomed large on the convergence agenda but are still not complete include lease accounting – still highly controversial, with two models running concurrently – on which a new consultation document is expected later this year.

“I’m not suggesting the IASB should slam the door shut on convergence efforts; there are still some key projects that must be completed, and the US will undoubtedly continue to have a significant influence on the development of international standards in the future, due to its market size and standard-setting experience,” Sleigh-Johnson said.

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