It wasn’t said with love or hope. When International Accounting Standards Board chairman Hans Hoogervorst told audiences at a recent accounting conference that “there is one country sandwiched between Mexico and Canada that has yet to commit” to International Financial Reporting Standards (IFRS), he was ostensibly giving up.
One could hear the door closing on convergence even further when Mr. Hoogervorst’s US counterpart, Financial Accounting Standards Board chairman Leslie Seidman, said the US hadn’t committed because IFRS wasn’t clear. “The bottom line is that our stakeholders will demand clarity from somebody,” Ms. Seidman reportedly said.
Things deteriorated from there, with Ms. Seidman saying she’s not apologizing for the “demanding culture” of the US and didn’t expect others to aspire to that level of demand (i.e., the rest of the world is filled with slackers), nor did she expect them to accept it (i.e., this is how we do it and we’re not changing). Mr. Hoogervorst countered that when the convergence project began in 2002 it was just between the US and Europe. Now that other parts of the world are driving growth, it’s more than just Europe (i.e., the US is not so powerful anymore and you’re surrounded). He also said that with the 2002 Norwalk Agreement coming to a close, the IASB is looking to engage with those other parts of the world (i.e., we’re moving on and we don’t care if you’re in or out; resistance will become futile eventually).
The exchange is a revealing look at the slow deterioration of the IASB and FASB’s attempt to harmonize IFRS and the Generally Accepted Accounting Practices. As recently as October, the IASB seemed willing to continue the process. At that time, the IASB was responding to July Securities and Exchange Commission Staff report that mostly poured cold water on convergence.
In its response, the IASB agreed with many SEC viewpoints, but did not like the phased-in approach to implementing IFRS that the SEC prefers, calling it costly and impractical. The phase-in approach or “condorsement” was proposed in 2011 and supported by a number of SEC staff and comment letters from companies. The idea was that the US would adopt the standards over a 5-7 year period.
The reality is that it’s looking like the US will never adopt it.