Concerns about quality, process and the roles of national regulators spurs calls for a new approach.
About a year ago, the accounting world was lumbered with the lexical atrocity “condorsement.” The word described the SEC’s proposal to bring IASB and FASB standards in line, while giving national standards-setters like FASB veto authority.
This convergence-and-endorsement model lost many of its fans abroad during the Eurozone crisis last summer and appears to be no longer in the cards. Leslie Seidman and Hans Hoogervorst, chairs of FASB and the IASB, respectively, publicly stated in December that the convergence model the two standards-setters have pursued since December is not sufficient, and that another approach is needed.
Fitch Ratings, in a recent report, “Accounting and Financial Reporting – 2012 Global Outlook”, says opinion in the US and the slow pace of the convergence projects – which are nearly all running behind schedule – leads it to expect a partial incorporation but only in a “prolonged, cautious and incremental way.”
Even that may be optimistic. A growing concern for US standards setters is the process for, and quality of, the standards being produced by the IASB. That body meets behind closed doors to hammer out decisions, rather than making broad use of testimony in public meetings. This, FASB members worry, can facilitate political pressures that could sacrifice quality. The European banking crisis has heightened these concerns.
Fitch, in its report, argues that a renewed emphasis on issuing converged, “high quality” accounting standards and the need to re-expose updated proposals for comments has significantly slowed the completion of many accounting projects jointly initiated by FASB and the IASB. The major priority projects initially scheduled for a June 2011 completion are still at various stages of completion in 2012 and some will likely extend into 2013, according to the ratings firm.