A longer endorsement process for IFRS in the European Union could lead to more variations between IFRS as adopted by the International Accounting Standards Board (IASB) and IFRS as adopted by the EU, Stig Enevoldsen, the European Financial Reporting Advisory Group Technical Experts Group (EFRAG TEG) chairman, has warned.
At present, the only difference between the standards is a segment of IFRS 39 – Financial Instruments.
Enevoldsen, who was speaking at PricewaterhouseCoopers’ Meet the Experts event in London this month, said temporary carve-outs could create confusion and uncertainty for preparers, users and auditors, and perhaps mean more costly implementation.
EC regulation dictates that the IFRS it has voted to endorse is to be used, whereas IFRS that has not been endorsed is not to be used. The EC can stop endorsement by not putting new standards and interpretations to a vote, Enevoldsen said.
There are a number of international standards and interpretations that have been issued but not yet been voted on by the EC. Two were issued in 2006: IFRS 8 – Segments, and International Financial Reporting Interpretations Committee 12.
Enevoldsen said that IFRS 8 and another standard yet to be endorsed, IAS 23 – Borrowing Costs, are both adopted from US GAAP. He echoed the sentiments of other speakers at the event by suggesting a European reluctance to accept “alien” standards. However, EFRAG is hopeful that IFRS 8 will be endorsed by the end of the year.
Enevoldsen painted a picture of a global accounting profession in which the IASB is being pressured by the European Union on one side and the US on the other, with the US Securities and Exchange Commission doing the interpretations.
“It’s a matter of politics now,” he warned. “It’s in the hands of politicians, which is worrying if what you want is a single set of global standards.”