Much-needed convergence to a single set of international accounting standards is still on the cards, but the process has been slowed by the global financial crisis
The International Accounting Standards Board (IASB), the global accounting standard-setter, has reiterated its commitment to pursuing convergence on accounting rules with its US counterpart FASB.
A recent report in the UK’s Financial Times suggested that the IASB was softening its stance on accounting convergence, a move that could have been a setback for the pro-XBRL lobby. But in a letter to the newspaper, Gerrit Zalm, chairman of the trustees at IASC Foundation, the IASB’s governing body, refuted the suggestions.
‘I was surprised to read…your assertion that a constitutional emphasis on adoption of International Financial Reporting Standards (IFRS) represents a weakening of the trustees’ support for the ongoing work to converge global accounting standards. Nothing could be further from the truth,’ Zalm wrote. ‘The trustees of the IASC Foundation strongly support the work plan the IASB has established with the US Financial Accounting Standards Board, which will reduce the differences between – and improve – IFRS and US standards.’
Bill Lutz, a professor of English at Rutgers University in New Jersey and author of the SEC’s Plain English handbook, is also skeptical of the suggestion that a move to convergence is softening. ‘We need one set of accounting regulations for XBRL – that has to be the aim, and it’s inevitable,’ he notes. ‘If the US were to stay out of it, it would find itself at a serious disadvantage.’
The IASB, which sets accounting standards for most of the world outside the US, was nominated by a group of 20 nations to oversee the development of a single high-quality accounting standard by mid-2011. But the financial crisis has slowed convergence, Lutz concedes.
‘The core issue here is political,’ he explains. ‘There was concern in Congress that moving to IFRS signaled a loss of sovereignty and this has been exacerbated by the financial crisis when countries made political moves on accounting.’
The Financial Times article also quoted Atsushi Saito, chief executive of the Tokyo Stock Exchange, as saying that Japanese companies do not want IFRS, which are sometimes described as principles-based, to draw any closer to US standards, which are sometimes described as rules-based.
It’s a contention Lutz vehemently disputes. ‘It is the biggest and most meaningless cliché that IFRS is principles-based and GAAP is rules-based,’ he says. ‘They are both a mixture.’
