Noting that the momentum for IFRS to become the global language of accounting standards has become unstoppable, IASB Chair Hans Hoogervorst found the case for US adoption of IFRS compelling. In remarks at a recent IFRS Foundation/AICPA seminar, he noted that the world has moved to IFRSs at an astonishing pace. The European Union has adopted IFRS. In the Americas, almost all of Latin America and Canada are going to be fully on board. In Asia-Oceania, Australia, New Zealand, Korea, Hong Kong and Singapore are or will be full adopters. In Europe, countries outside the EU, such as Turkey and Russia, are also full adopters.
The IASB Chair said that the US should find comfort in the fact that if it should adopt IFRS the SEC will remain in full control of enforcement. He assured that there is absolutely no danger of importing different enforcement standards from abroad into the United States. Indeed, it is much more likely that international standards of IFRS enforcement will benefit from the SEC’s rich experience and active participation.
He added that it would be reasonable to provide a relatively long transitional period, particularly for smaller publicly traded companies. An option to allow early adoption of IFRS also seems sensible for those companies that can already see substantial net benefits of doing so.
Convergence has brought IFRS and US GAAP much closer together, said the Chair, and there is already a lot of IFRS knowledge in the United States. The SEC has built-up a substantial IFRS competence while overseeing the financial statements of a growing number of US-listed foreign private issuers. Many large preparers already have IFRS expertise within their organizations through international subsidiaries.
Referencing the SEC staff paper, the IASB Chair noted that FASB and the SEC will continue to have ultimate responsibility for accounting standards regardless of
whether the United States moves forward with IFRS. He pointed out that participation in any international agreement, whether it is the World Trade Organization or IFRS standards, requires negotiation and cooperation. He assured that the United States will continue to have a great deal of input in the standard-setting process. The knowledge
base within FASB is too valuable to the IASB to be excluded, he said.
The SEC also intends to adopt similar endorsement mechanisms to those used elsewhere in the world. Such endorsement mechanisms provide an important circuit-breaker if the IASB produced a standard with fundamental problems for the United States. An endorsement process would also ensure that FASB continues to play a prominent role. It is important that the IASB and FASB, along with other standard-setting bodies, continue to work in close co-operation once the convergence project has ended.
In addition to the role of FASB, the United States will continue to have a great
deal of influence within the IASB. Currently, four out of the fifteen board members are American, he noted, and they play a significant role.