The US Securities and Exchange Commission
(SEC) could say ‘no’ to converging with IFRS on 21 December, as
Europe’s non-endorsement of IFRS 9 fans US uncertainties about the
International Accounting Standards Board (IASB), according to an
IFRS expert.

Ernst & Young Global IFRS leader Ruth
Picker warned that the US shift to IFRS and a move to one global
standard is at a crucial tipping point that could see a possible
reversion to national GAAP across the globe.

“The US is watching what is happening in
Europe, this non-endorsement of IFRS 9 is another thing that they
could point at to say ‘this world isn’t for us’,” Picker said.

“They could use what has happened in Europe to
say, ‘we’re not going to go with IFRS’. I don’t think it will be
that negative but it will be going through people’s minds.”

Earlier this month, SEC chief accountant James
Kroeker said the US regulator would give a clearer picture of its
proposed roadmap for the adoption of IFRS by US public companies by
21 December.

Picker said pressure has been building for the
past six months as a stand-off ferments between Europeans unhappy
at increasing US influence over the IASB and US uncertainty about
the board’s political independence.

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The IASB released its updated standard on
financial instruments on 12 November, the first part in an urgent
three step project to overhaul controversial accounting rules for
financial instruments.

But following the publication, the EC said it
would not fast-track the endorsement of the standard despite being
one of the key proponents of the IASB’s move to fast-track key
parts of the project.

Wider tension

The EC’s decision to defer
endorsement of IFRS 9 is seen to be indicative of wider tensions
between Europe, the US and IASB.

“It has become a catch-22. Somehow the circuit
needs to be broken,” Picker said. “We think it is now a crunch
point. The non-endorsement of IFRS 9 is an indication that the EC
is unhappy with the influence of the US,” she says.

Picker suggests something definitive needs to
be done to prevent a retreat to national standards.

“Whether it is the G20 coming out again and
saying we do not want a retreat to national standards, whether it
is the US coming out and saying we will commit to IFRS, whether it
is the Third Bloc of IFRS adopters [Asia-Pacific countries] saying
‘stop fighting and get with the story’. There needs to be a
circuit-breaker in this negative cycle,” she said.

Picker says US inaction on when to adopt IFRS
is ruffling European feathers.

“The US is asking what’s in [IFRS] for us.
From their point of view there is no rush, no hurry, no need [to
adopt IFRS],” she added.

“That’s understandable from a purely US
perspective. But what they do not understand is that their inaction
and lack of commitment is causing the Europeans to ask why the US
has such a large say in the development of IFRS, for example
through seats on the IASB, trustee positions and a seat on the
monitoring board of the IASB.”

Picker wants to see the US commit to a
adoption process rather than going through what she sees could be a
process of endless convergence.

“[The US] needs to convert and let go of US
GAAP, at least for multinational listed companies, like all the
rest of us let go of our national GAAPs, and they are not close to
letting go,” Picker said.

“You can’t endlessly converge because you will
continue to have new things arising. It is fine up to a point in
time, but there has to be a point where they say, ‘okay we are in
with you now’.”

See Profession
applauds IFRS 9 as EC postpones endorsement  for further
reports on reactions to the release of IFRS 9