Over the past few weeks, the build up towards the US’s decision to adopt IFRS has intensified. This decision has been a long-time coming and while the US Securities and Exchange Commission (SEC) has said it needs a few more months to finish off its assessment, particularly in this time of financial austerity, there have been some clues cropping up leading us to believe that international accounting standards will be adopted in the country in the not too distant future.
Earlier in the month, the monitoring body of the IFRS Foundation took a much tougher stance on convergence in its strategic review report underpinning that "convergence is not a substitute for adoption of IFRS" in the push towards one set of global accounting standards (See full article here).
This declaration is a poignant one especially because one of the main focuses in the first decade of the International Accounting Standards Board (IASB) was convergence, particularly with US GAAP.
The US decision has a knock-on effect with many other countries around the world choosing to take a wait-and-see approach to IFRS adoption on the back of this, which in turn has meant the IASB’s goal of a global harmony in financial accounting standards is also somewhat delayed.
The Trustees have said that they are confident there will be a positive adoption response from the US, as well as other economic powerhouses such as China, India and Japan, but it also warned that "failure to make such commitments" may result in these countries losing their sovereign right to evaluate future global rules.
It looks like the SEC has taken heed and, in a recent meeting with the IFRS advisory panel, chief accountant James Kroeker alluded to a positive decision from the regulator towards endorsing IFRS in Spring.
The ‘endorsement’ is one of the four discussed approaches for IFRS adoption so far and would see the US formally endorsing new or amended IFRS before they become legally binding.
IASB chairman Hans Hoogervorst also said he is optimistic that international accounting standards will soon be adopted in the US with Japan and India not being far behind.
We all know that a positive decision from the US is of great importance to the global economy and this is reflected in the opinion of the majority of people, but we mustn’t disregard the fact that the transition from very detailed rules-based US GAAP to the broad principles and little guidance of IFRS is no easy task.
Not ‘if’ but ‘when’
The issue it seems is perhaps not if the US will adopt IFRS, but when. The first step after the decision is for the SEC to issue a road-map, but confidence is waning as to how quickly the US is likely to make the transition from GAAP to IFRS, with some saying there may be no hard deadline given.
To me, and I’m sure many others, this would essentially be just as bad as not making a decision at all so I hope that the SEC makes a decision not only based on the needs of US markets and investors but considers the many companies around the world and the global economy that will also benefit from a positive decision and realistic implementation deadlines