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February 24, 2014

IFRS convergence loses momentum ahead of G20 summit

The meeting of the Group of Twenty’s (G20) finance ministers and central bank governors, held 23 February in Sydney ended without a call for international standard setters to continue ongoing efforts to converge accounting standards.

Under Australia’s G20 host presidency, the finance ministers and central bank governors are expected to meet throughout the year ahead of the G20 leaders’ summit to be held in Brisbane in November when Australia finishes its presidency.

In previous years the statement published after the G20 leaders summits used to include a paragraph which acknowledged the importance of continuing the work on accounting standards convergence.

After the 2013 summit in Saint Petersburg, G20 leaders urged the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) "to complete by the end of 2013 their work on key outstanding projects for achieving a single set of high-quality accounting standards".

A spokesperson of Australia’s Treasury told The Accountant that converging accounting standards for the IASB and FASB remains an important piece of work to undertake.

"However, it will not be included in the G20 communiqué where no material developments have occurred nor major new issues raised," the spokesperson said.

Although not conclusive, the omission on February’s G20 communiqué comes at a time when FASB has announced to put on hold the convergence of insurance accounting standards with the IASB.

Both the IASB and FASB published Exposure Drafts (ED) that closed for comment on 25 October 2013.

Based on constituents’ feedback, among other factors, FASB tentatively decided in February to focus on improving US GAAP on insurance accounting, as an agreement on a converged accounting model does not look achievable in the short term.

Currently accounting practices vary substantially from market to market because there’s no global standard to account for insurance contracts. IFRS 4 issued in March 2004 remains an interim standard that doesn’t specifically tackle insurance issues, notably the valuation of insurance liabilities.

An expert of Standard & Poor’s (S&P) told The Accountant in November 2013 that the proposals of both standard setters were "unlikely to achieve" a fully unified standard.

In its response to the public consultations, S&P stated that both EDs, although "similar, are not the same" and added that there were differences that would impede analysing and comparing insurance companies globally.

"Convergence is an imperative for the boards and we regard as a real disappointment that there isn’t one global standard being proposed. The differences between the two are unfortunate," S&P financial services ratings managing director Rob Jones told The Accountant.

Related links:

The G20 communiqué Sydney 2014

The G20 communiqué Saint Petersburg 2013

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