The goal of global accounting standards will be achieved at some point, an International Accounting Standards Board (IASB) official said Wednesday in South Africa.
Ian Mackintosh, vice-chairman of the IASB, called global accounting standards “desirable, achievable, and … inevitable” in a speech in Johannesburg.
Although more than 100 countries have adopted IFRS, some large countries, including the US, remain undecided. Standards in individual countries “add cost, complexity, and translation risk to companies and investors operating in today’s global marketplace,” Mackintosh said.
“As economic globalisation continues apace, so too will the force of the arguments in favour of IFRS adoption within these remaining jurisdictions,” Mackintosh said. “That is why I believe that we should not fret too much about the timing by which we get every jurisdiction onto global standards.”
Mackintosh’s comments differ from recent comments attributed to IASB Chairman Hans Hoogervorst. The Business Times in Singapore reported that Hoogervorst said that full convergence with US accounting standards is unachievable.
In the US, there have been signs recently that the Securities and Exchange Commission (SEC) is at least considering whether to give US public companies an option to use IFRS for financial reporting. During a speech in May, SEC Chairman Mary Jo White said that considering whether to further incorporate IFRS into the US financial reporting system is a priority for her, adding that she hoped to be able to say more in the near future.
White also said in a brief statement in January that she was “gratified” by the announcement that the US Financial Accounting Standards Board’s (FASB’s) parent organisation, the Financial Accounting Foundation, would pay up to $3 million to the IFRS Foundation to help fund the work of the IASB on convergence projects it is completing with FASB.
Before that January announcement, there had been little word from the SEC on IFRS since a staff report issued in July 2012 provided an analysis of the pros and cons of domestic IFRS adoption but did not include an action plan or recommendation for the SEC commissioners.
The American Institute of CPAs (AICPA) favours one global set of accounting standards and urged the SEC in 2012 to allow US public companies the option to adopt IFRS. In a statement in 2012, AICPA President and CEO Barry Melancon, CPA, CGMA, said an adoption option would provide a level of consistency in the treatment of US companies and foreign private issuers (which the SEC allows to use IFRS for financial reporting). Melancon said an adoption option would facilitate the comparison of US companies that elect IFRS with their non-US competitors that use IFRS.
In May, the IASB and FASB released a historic, converged revenue recognition standard. However, they have had difficulty achieving convergence on two projects: leases, in which the boards are moving forward with different approaches, and financial instruments.
Mackintosh acknowledged the success in the revenue recognition standard but also the struggles regarding other projects.
“At the same time, we have also seen failures in convergence in other important areas, such as in the financial instruments project,” he said. “In various aspects of this project, including the netting of derivatives, loan-loss provisioning, and in the classification and measurement of financial instruments, we have seen the boards sit around the table and reach a converged outcome, only to see that agreement melt away.”
He predicts a different outcome regarding the adoption of IFRS around the world.
“IFRS has become the de facto global language of business, and over time, the IFRS map of the world will be complete,” Mackintosh said.