Friday, August 10, 2012

IASB Chair Confident US Will Embrace IFRS as Convergence Nears Conclusion

While work on the US GAAP-IFRS convergence projects will continue through to mid-2013, noted IASB Chair Hans Hoogervorst in a report to his oversight body, nearly all the substantive decisions on them have been taken by the IASB and FASB. Chairman Hoogervorst also said that, given the critical mass on global accounting standards, he remains confident that it is in the best interest of the United States to embrace IFRS in due course. It is regrettable that this embrace will not happen soon, he said, because this is a pivotal moment in the movement towards global accounting standards and would have been a good time for the SEC make a decision on IFRS.

On convergence, with regard to financial instruments, the IASB Chair said that the Board agreed to make limited modifications to IFRS 9 on classification and measurement. The IASB’s tentative decisions in this area further aligned the classification model in IFRS 9 with the FASB’s tentative approach and addressed some concerns expressed by the insurance community. An Exposure Draft should be issued toward the end of 2012. Similarly, discussions on impairment are largely complete, he noted, with an ED scheduled by the end of 2012. 

On leases, the Chair said that the IASB and FASB have discussed the feedback received during outreach meetings, which revealed strong support from users for lessees to recognize leases on the balance sheet. The Boards have also discussed the appropriate profit and loss profile for lessees and tentatively agreed that there should be two different expense recognition patterns for leases that would depend on the consumption of the underlying asset. The IASB and FASB are targeting the issuance of EDs in the fourth quarter of 2012. 

On revenue recognition, Chairman Hoogervorst believes that the IASB and FASB will end up in a converged position, with a final standard expected to be issued in early 2013.  

On all the projects, the Chairman said that high standards of due process were followed. For its part, the IASB has shown a clear commitment to due process, often going above and beyond the formal requirements, for example in re-exposing the proposals on revenue recognition. The IASB’s due process would be further enhanced by the proposals in the draft Due Process Handbook, which would reinforce the development of evidence-based standard setting.

Finally, as the era of convergence comes to an end, the Chairman updated the oversight trustees on the progress the IASB is making in determining its future agenda. The IASB will revamp its institutional infrastructure to provide for a more inclusive approach to international standard setting, he emphasized, including proposals for setting up an Accounting Standards Forum.