Dr. Tom Scott comments on adopting of IFRS in the US

Monday, November 3, 2014

Board ready to go it alone on some standards

by Gundi Jeffrey, The Bottom Line August 2014 Vol. 30 No. 9
Reprinted in part with permission

Given the size and distinctiveness of the U.S. economy, as well as the fact that U.S. financial reporting standard-setting is complicated, with the FASB and SEC both playing roles, the full adoption of IFRS in the United States is unlikely in the forseeable future.

Thomas Scott, Director, School of Accounting and Finance
The International Accounting Standards Board appears to be going its own way on at least one of its major convergence projects with the U.S. Financial Accounting Standards Boards - financial instruments - after several joint attempts were soundly rebuffed by U.S. users, preparers and investors, according a recent speech by Ian Mackintosh.

The vice-chair of the IASP also made it clear in a June 23 address to the IFRS Foundation Conference in London that un-converged leasing and and insurance standards are sure to follow, and an IASP-alone exposure draft on the conceptual framework is scheduled for later this year. Mackintosh also expressed his frustration that the FASB seems to be advocating returning to previously failed models of international co-operation in the setting of accounting standards.

At lease one observer echoed Mackintosh's outlook. "Given the size and distinctiveness of the U.S. economy, as well as the fact that U.S. financial reporting standard-setting is complicated, with the FASB and Securities and Exchange Commission both playing roles, the full adoption of IFRS in the United States is unlikely in the forseeable future," said Thomas Scott of the University of Waterloo, Ont. "In this regard, the U.S. is an important outlier, but not an outlier whose example will be followed by others. Accordingly, most countries will continue to support the IASP, and a policy of collaboration between the IASB and FASB - with as much harmonization as manageable - is likely to persist indefinitely."

Mackintosh said he expected IFRS 9 Financial Instruments to be relesased in July, representing "the final piece in our response to the financial crisis." The standard differs in key respects from U.S. GAAP, and Mackintosh lamented that, "despite our best efforts, we were unable to reach agreement with the FASB on impairment. We consulted the Financial Stability Board (FSB)and other about whether to go back to the drawing boards with the FASB in a final attempt to achieve convergence. However, it was decided that doing so would add several years to the project and the advice from the FSB and others was that it was more important to get the standard issued."

For the full article, go to: thebottomlinenews.ca