Former Fed Chair Volcker and SEC Chief Accountant See IFRS Convergence Ahead

In remarks at the recent AICPA-IASC seminar on IFRS, former Fed Chair Paul Volcker extolled the benefits for US companies of one set of global financial accounting standards, while at the same time deploring the hubristic view that US GAAP is the superior accounting standard. After the scandals at Enron, WorldCom and Global Crossing that view is no longer sustainable, said Mr. Volcker. With one global standard, he noted, US companies would not have to recompute their numbers for other countries. More broadly, the global financial system demands one set of financial accounting standards. In reaching this result, he advised the US not to be supine, but rather to engage in a give and take that gets the best results.

SEC Chief Accountant James Kroeker said that IFRS-US GAAP convergence must continue with or without the SEC’s finalization of the roadmap. Regarding the question of leniency for first time adopters of IFRS, the chief accountant said that leniency would be extended in areas of uncertainty as practices under a new standard evolve. But the SEC will not be inclined to be lenient with issuers that simply get it wrong in the early years of IFRS adoption.

Countering criticism that the litigious environment in the US works against the adoption of principles-based accounting standards, the chief accountant posited that, in his view, it would be easier to defend against the allegation of violation of a principles-based standard than the violation of a specific rule. More broadly, he observed that the crisis has highlighted the role of financial reporting and the importance of financial accounting. The SEC is also cognizant of FASB and its priorities, he noted, adding that the SEC places fair value accounting of financial instruments as a top priority, with revenue recognition next in line.

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