Profession split over value of convergence project

INVESTORS AND PREPARERS of accounts are split over whether any benefits have been gleaned from the ten-year convergence project between the IASB and US counterpart FASB.

The two boards have publicly stated that they will no longer work together on joint initiatives in the same way, seemingly bringing to an end the project to converge US and international accounting standards.

A straw poll of delegates today at Ernst & Young’s Financial Reporting Outlook conference in central London found the audience split over whether the efforts to embed IFRS in the US had been a waste of time.

Asked whether “dancing with the Americans” had been beneficial to investors and preparers of accounts, 48% said it had, while 52% said it had been a wasted exercise.

“There are many in Europe fed up with the time spent on convergence with America,” Ruth Picker, E&Y’s global leader of IFRS Services, told delegates.

IASB board member Stephen Cooper said there had been a “fundamental disagreement” over the approach to refining the impairment rules governing the way banks provision for losses on bad loans.

FASB has decided to pursue a current expected credit loss model that recognises losses up front and distance itself from the IASB’s three bucket approach, an approach Cooper said will lead to “shorter-term lending” and reduce “banks’ willingness to lend to higher-risk customers”.

Divisions between the two boards were exposed earlier this year when IASB chairman Hans Hoogervorst labelled the unravelling project as “deeply embarrassing”.

“If this is going to unravel, I find it for us as standard setters … but also for you, I think it is deeply embarrassing that in three efforts, in which we have looked at ten alternatives, in which we have left no stone unturned, we are still not able to come up with an answer after three years. I would find that unacceptable,” Hoogervorst had said during a joint IASB/FASB meeting in the summer.

However, Cooper told delegates there was “no question” of a divorce between the two accounting bodies and that FASB’s involvement had been “beneficial”.

But others seemed happier that the IASB would be spending less time working directly with FASB. Referring to plans to create a new 12-member advisory group of national standards setters and regional bodies, Picker said it is “right that convergence is dead” and that the new arrangement would see FASB as one member among many rather than enjoying a “unique bi-lateral arrangement”.

Cooper would not be drawn on who would make up the 12-member advisory panel but said it would be “unlikely that we would say no to FASB if they should ask to join”.