Academics from Oxford University in the
UK and Duke University in the US have teamed up for what they say
is the first major survey about corporate financial reporting and
IFRS. The findings include a majority of respondents saying the
costs of switching to IFRS at the moment outweigh the benefits.
Carolyn Canham reports.

There is clear support for the International Accounting
Standards Board’s (IASB) mission of creating international
accounting standards among the preparer community, while at the
same time feelings are mixed about the board’s operating and due
process, according to a report published this month.

Assessing the IASB: Results of a Business Survey about
International Financial Reporting Standards and IASB’s Operations,
Accountability, and Responsiveness to Stakeholders
reports
findings from a survey of 749 financial executives of companies
listed on the major stock exchanges of the US, Germany, France and
the UK. Standard setting

The report is authored by Walter Mattli, a professor of
international political economy and a fellow of St. John’s College
at Oxford University, and Tim Büthe, assistant professor of
political science and associate director of the Center for European
Studies at Duke University in North Carolina. It forms part of a
larger study, the International Standards Project, which the
academics jointly direct.

The survey respondents overwhelmingly expected financial
reporting standards to be increasingly set at the international
level, and a clear majority approved of this trend. More than one
third, however, questioned whether truly global accounting rules
and practices are achievable given the differences in legal
environments and business cultures across countries.

There were some concerns from both sides of the Atlantic over
the IASB’s standard-setting process, however, US respondents were
more favourable than their European counterparts (see
table). A clear majority of respondents said the quality
and effectiveness of IFRS is high. However, a majority also said
the complexity and cost of implementation of IFRS was high and
almost 60 percent said the cost of switching to IFRS at the moment
outweighs the benefits.

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Notably, considerably more US respondents said US GAAP was very
complex (97 percent) compared with IFRS (64 percent).

Despite a large proportion of respondents being affected by
IFRS, they were unlikely to participate in IASB consultations. The
percentage of respondents who never gave input into a new or
revised international standard was 28 percent in the US and 40
percent in Europe. In both locations only 4 percent always gave
input. The perception that comments would have no effect on the
final standards was the most common cause for inaction according to
77 percent of US respondents and 89 percent of European
respondents.

Another popular argument was that international standards have
no material impact on the firm’s ability to raise capital.

Overwhelming majorities said early involvement in the
standard-setting process is key, and more than half the respondents
said that by the time they hear a new standard is being developed,
it is too late to influence the process effectively. Fifty-six
percent of US firms and 67 percent of European firms said they know
about draft international standards by the time the exposure draft
is open for comment and 78 percent of US and 84 percent of European
firms typically learn of a new standard before it is adopted in its
final form.

Virtually all European respondents reported being familiar or
very familiar with IFRS. More than 60 percent of US respondents
reported comparable levels of familiarity, even though only 18
percent presently use the standards for any part of their financial
reporting.

There was no consensus on the comparability of US and
international standards. Both US and European firms were almost
evenly split on whether or not the two sets of standards are
largely identical; about a third agreed, a third disagreed and a
third had no opinion.

A slight majority of US respondents welcomed the introduction of
IFRS; 53 percent of US respondents said the Securities and Exchange
Commission should allow both foreign and domestic registrants to
file IFRS-based financial statements without reconciliation to US
GAAP.

Fair value accounting