IASB/Hoogervorst: Current SEC and PCAOB developments

04 December 2012

Hans Hoogervorst, Chairman of the IASB, gave a speech on current SEC and PCAOB developments. He said he found it hard to imagine IFRS without a leadership role for the United States and the SEC.

When the IASB and the FASB signed the Norwalk Agreement in 2002, IFRS was considered by many to be a bilateral project between Europe and the US. Today, the standard-setting environment looks different. Many emerging economies driving global growth are supporting IFRS. Understandably, they want a seat at the table of accounting standard-setting. 

The IASB has expected that the US would become a permanent participant in the development, application and enforcement of a single set of global standards. In 2007, a comment letter by the FAF and the FASB to the SEC said it all: “Investors would be better served if all US public companies used accounting standards promulgated by a single global standard setter as the basis for preparing their financial report. This would be best accomplished by moving U.S. public companies to an improved version of IFRS.”  

In Mr Hoogervorst´s speech to AICPA last year, he recognised that it would not be an easy task for the SEC to make up its mind about adoption of IFRS. He was not so naïve to expect wholesale adoption of IFRS for all companies from day one. But there was a reasonable expectation around the world that the SEC would plot a course towards IFRS.

The SEC’s intention to make a decision, originally planned for 2011, was postponed again in 2012. Self-imposed deadlines frequently slip, as standard-setters know too well. He also recognises that the enormous pressures of Dodd Frank and the elections were not a perfect background for the SEC to make up its mind. 

Five years ago, a standstill in the United States would have had very serious consequences for the IASB. The risk was that without the US on board, Europe would go its own way and Asia would develop its own regional standards. Today, such talk has gone. For the many countries the cost of transition to IFRS is behind them. There is no appetite to undo this work and revert to national or regional standards. IFRS already has a global impact and that will not change. So there is no longer any risk of IFRS disintegrating as a result of a standstill in the United States.

Nevertheless, there is much concern about strong and continued US leadership in IASB's work and processes if the US is not going to come on board in some shape or form.

Mr Hoogervorst believes the United States should remain an important participant in IASB's activities. But obviously, US influence will be commensurate with its commitment to IFRS. To give just one example: it will make a huge difference whether the FASB will be in a position to endorse IFRS, instead of being a national standard-setter without a role towards IFRS.

Indeed, the status quo harbours a big risk of slipping back. The uncertainty about where the SEC is going to land is not a helpful backdrop for IASB's work on the remaining convergence projects. Already, on some issues it is getting increasingly hard to find common solutions. Mr Hoogervorst asked: “If we cannot achieve converged outcomes within a convergence programme, then how will we maintain convergence once the programme has ended?” The risk of increasing divergence will be enormous. What a waste that would be.

After a decade of progress, after tireless and sometimes painful work by the boards to bring about convergence between IFRS and US GAAP, after two years of analysis and report writing, many people around the world expect a clearer perspective of this country’s intentions with IFRS.

Full speech


© IASB - International Accounting Standards Board