23 June 2014

IASB/Ian Mackintosh: 'Turning back the clock?'

Mr Mackintosh discussed on the future of financial reporting. First, he began by focusing on

the near-term future, which involves completing the major convergence projects with the FASB. Second, he looked at some of the important projects on the IASB’s new work programme. Third, he talked about how IASB´s priorities are evolving in recognition of the widespread adoption of IFRS. Finally, he responded to some comments that have been recently made in the United States.

Mr Mackintosh mentioned that today, IFRS is mandated for use by more than 100 countries, while most other countries permit the use of IFRS in some shape or form.

Pretty much every international organisation, including the G20, has supported this model and

continues to do so. For that reason, he found it interesting to note that in recent speeches, various members of the FASB have begun to present a vision of international standard-setting that is remarkably similar to the old IASC approach. This is an approach whereby major economies maintain their own accounting standards, using IFRS as the international benchmark and seeking to reduce their differences. The problem is that in this view, differences between accounting standards would persist. As Jim Kroeker, Vice chairman of the FASB recently said: ‘(…) we recognize that one size may not fit all. By that, I mean that we understand that differences in standards will persist because of the legal, regulatory and cultural differences among different jurisdictions.”

Indeed, the 2013 FAF Annual Report states that “Even as we commit ourselves to global convergence, the FASB’s first priority is to improve GAAP for the benefit of all GAAP stakeholders.”

When talking about the divergences between the two boards on leasing, financial instruments and insurance, the FAF deems that “(…) the FASB’s action ( is ) consistent with its mission to first improve GAAP and then converge if possible” (p. 7).

If divergences are more or less accepted as inevitable, it can be no surprise they become the norm rather than the exception. If all IASB constituents were to insist on the primacy of national preferences, obviously the goal of a single set of global standards would come to naught. That was the old IASC approach. The IASB tried it for 25 years and it failed.

Moreover, Mr Mackintosh does not agree with the argument that cultural differences mean that a ‘one size fits all approach’ cannot work. The IASB and staff work incredibly hard to develop principle-based standards that can be adopted by countries around the world, regardless of their stage of economic development and their legal culture. As a result, countries with cultures as diverse as Brazil, Canada, Colombia, Germany, Japan, Korea, Mexico, Nigeria, Turkey and of course the United Kingdom have all adopted IFRS without major issues. Indeed, there is more cultural diversity between the UK and France than between the UK and the US, yet both France and the UK report using IFRS.

Furthermore, more than 500 foreign companies listed in the US already apply IFRS, so the evidence would appear to show that in financial reporting, one size can indeed fit all—if the will is there to make it happen.

Press release

Full speech

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