God forbid I go so far as to say this whole convergence thing is a conspiracy but it’s starting to reek like a bad Saturday morning cartoon plot. First the evil leaders start scamming for world domination, then they form shady alliances in darkened lairs and eventually the population gets sold into slavery until the hero comes and drops the villains in a vat of acid. Or something like that. If global financial “reform” were a Saturday morning cartoon, we’d be horribly overrun with villains and in desperate need of a hero.
Since it’s real life, all we can do is watch.
A spokesman for IASB said the two boards are expected to issue their first joint quarterly progress report very soon. A spokesman for FASB said the various project updates posted by the two boards demonstrates “quite a bit of progress” in recent months.
“We remain committed to working with IASB,” said spokesman Chris Klimek. “(We) appreciate the SEC’s leadership and additional guidance on this important matter, and like everyone, we will be studying the work plan carefully in the days ahead and discussing what it means for us.”
It’s cool! There’s a plan for convergence and here it goes: the SEC waits around for the FASB and IASB to figure out how to convert GAAP statement to IFRS without costing American companies billions ($35 million/year x companies converting = well you get it). Eventually, they might just figure this out. In the meantime, kick back and don’t get too worked up over it, the two bodies are still battling it out because of the same cultural barriers that have always stood in the way of a true marriage of FASB/IASB positions.
As Number Insights pointed out in 2007 (see how long we’ve been trying to do this? And what do we have to show for it?), a single set of principles might not be the bad part of this entire plan. GAAP is notoriously constrictive but principles-based accounting requires qualified accountants and I’m not sure our accountants are quite ready either, ignoring the costs associated. And a world without FASB? I can’t imagine it.
It doesn’t look like I’ll have to any time soon.
GAAP has to fail. It's become to detailed and perscriptive. Look at the early statements compared to the later statements. Each company's unique circumstances don't allow for such a cookbook approach for everything which is why the standards are getting longer and longer and there are more and more of them. Until these new standards were released, companies, auditors and other professionals had to use judgement on these matters. The GAAP cookbook approach has worked for a while, but they've gotten out of control over the last 10 or so years and are now too much for one CPA to reasonably be expected to know and understand.
IFRS does allow more judgement and, in my opinion, is now the superior set of standards. This is why many companies that have investigated the differences in standards have also been pushing for the change.
Many at the SEC are old timers that don't understand IFRS and that leads to hesitation on convergence; they don't want to be seen as resisting it outright and thus will not get in it's way directly, but it comes as no suprise to me that they're not really helping move it along.
I think more judgment in accounting is an excellent idea, I just don't believe that our accounting programs (and therefore accounting students) are prepared for that when they come out of school. Or even groomed for that in their careers.
If I were confident in that aspect, I'd be behind the transition, but not for the sake of some weird obsession with globalization of standards.