The ICAEW has urged the International Accounting Standards Board (IASB) to ‘end the era of convergence’, suggesting instead that all listed companies globally should be able to apply International Financial Reporting Standards (IFRS).
The views are set out in the report The Future of IFRS, which was released at ICAEW’s Financial Reporting Faculty’s IFRS conference in London today (12 December).
According to the Faculty, the last ten years of progress towards the development of global accounting standards has focused on convergence between IASB and the US Financial Accounting Standards Board (FASB). ICAEW argues that despite the lack of agreement between the two bodies in some key areas, the effort should now be called off.
Dr Nigel Sleigh-Johnson, head of the Faculty, elaborated: "All listed companies in major countries currently not part of the ‘IFRS family’ should be given the option of reporting under IFRS, including the United States. Governments should let the market speak. Companies should be permitted to assess for themselves whether the benefits of transition outweigh the costs".
Sleigh-Johnson continued that instead of further convergence efforts, the IASB should now refocus on areas where its standards have been adopted, developing its own requirements in areas such as financial instruments and insurance contracts.
"It is better that the IASB and FASB boards issue separate standards, than deliver unsatisfactory compromise solutions or do nothing at all", Sleigh-Johnson added.
The ICAEW’s report also sets out the case for "thoroughgoing institutional change within the IASB" to safeguard the future of the IFRS project.
Sleigh-Johnson commented "Managing the competing demands of its growing number of stakeholders without embedding operational inefficiencies will be immensely challenging. There is no well-tested model for standard setting on a global scale. It will require a certain amount of organisational experimentation. The IASB needs to demonstrate that it listens and learns as well as leads."