Treasurers may find clues to timetable, approach in SEC research on early adopters.
Japan announced that it would not mandate adoption of IFRS until 2015 and would reinstate the US GAAP option to give its economy “time to recover” from the effects of the Tsunami. This masks deeper misgivings about the international accounting standards, and not just among the Japanese, according to individuals familiar with the situation. Treasury should keep a close eye on how the adoption process unfolds—if at all.
Responses to the Securities and Exchange Commission’s “Condorsement” paper illustrate some of the concerns. The paper, currently open for comments, envisions a strong IFRS that fashions rules, with national standards-setters “endorsing” the rules before regulators enforce them. Critics of this approach say it this makes entities like the Financial Accounting Standards Board little more than a rubber stamp because it will be hard to veto a completed rule that has been gained political backing.
If such an endorsement process was put in place, it would be doubly important for national standards-setters to intervene early in the rule writing, so their voices were heard before the endorsement stage.
However, governance and other issues at the IASB – concerns that it is subject to political pressures, makes rules behind closed doors, and that it has yet to prove itself capable of completing the projects it undertakes – give rise to fears that it will not look kindly on undue influence from one country, even from the one with the largest capital markets in the world.
So how can treasurers plan? One important signal about the adoption process’s course and prospects will be the SEC report, still being drafted, on the experiences of IFRS early adopters. If these countries have encountered significant stumbling blocks, or have tailored IFRS so much that their versions are no longer comparable to the IASB originals, the US may take Japan’s lead, and treasury can continue to use its well-worn US GAAP.