Talk turns to international "convergence."
States are apparently resisting the move to a globally-mandated set of accounting rules for fear of ceding authority to foreign regulators. And, since Obama appointees clearly have more urgent work to do, IFRS will probably be back-burnered for now. So the question is: Is IFRS dead? Should it be?
The NASBA news release:
NASHVILLE, Tenn., Feb. 19 /PRNewswire-USNewswire/ -- Moving to convergence with, rather than adoption of, International Financial Reporting Standards (IFRS) is the right path for the Securities and Exchange Commission to be following, the National Association of State Boards of Accountancy has told the SEC. Recognizing the need to have accounting standards that work in a global economy to protect the public, NASBA has recommended that the SEC withdraw its "Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by US Issuers" and instead support the joint efforts of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) to converge standards by 2011.
NASBA first points out in its February 19 letter to the SEC that the FASB is responsible for setting accounting standards in the United States for both U.S. public companies that report to the SEC as well as companies that do not report to the Commission. IFRS (International Financial Reporting Standards) are created by the IASB only for issuers. NASBA Chair Thomas J. Sadler and President David A. Costello observe: "It is not likely that the states would accept the IASB, a non-U.S. organization, as the one to set standards for U.S. non-issuers It would be a daunting, but not impossible, task to establish a credible second standard setter."
Enforceable standards are a central concern of the State Boards of Accountancy, which are charged with not only licensing certified public accountants, but also ensuring the continuing competence of those individuals and firms that they have licensed. "Regulators, the SEC and State Boards included, would be required to become more subjective in their determination as to whether or not standards were appropriately applied in a given situation because IFRS are significantly more flexible and lack the implementation guidance of U.S. Generally Accepted Accounting Standards."
Though theoretically one set of high quality financial reporting standards that is globally applied would be ideal, Chair Sadler and President Costello note countries "that have endorsed IFRS are likely to view the standards set by the IASB as a model set of financial reporting standards with each country deciding whether to use or tailor a given financial reporting standard to its needs." As it is unlikely that a single set of standards can be developed by a non-governmental international organization and accepted by all countries, NASBA supports continuing the work of the FASB: "The joint efforts of the IASB and the FASB to converge standards, to the extent possible, could ultimately result in a form of jurisdictional adoption of IFRS by the FASB, similar to other countries that have maintained their accounting standards boards with the endorsement of use of jurisdictional IFRS."
"It has been repeatedly demonstrated in the U.S. that an effective standard-setting body must be independent of any special interest in membership, funding, governance and mission," the NASBA leaders state in their letter, pointing out that the IASB is dependent on contributions, including significant funding from public accounting firms.
A switch to IFRS would require not only those entering the accounting profession to learn about international standards, but also: "Accountants, owners, managers, directors, investors, bankers and others would have to obtain training in the application of IFRS and non-issuer standards, currently U.S. GAAP."
Download the NASBA letter to the SEC PDF.