IASB Vice Chairman Suggests Adopting IFRS Is the Only Solution to Convergence Failure

By | 3 years ago

You know, I have to give it to these guys, they are nothing if not persistent. They are like that lady who is always calling me to talk about my credit card interest rates; no matter how many times I cuss her out, hang up on her, threaten to report her to the pretend federal bureau that battles telemarketers, she keeps calling. Once I even harassed her with the Chris Hanson To Catch a Predator soundboard and she didn't even disconnect. That's dedication!

At a speech in South Africa, IASB Vice Chairman Ian Mackintosh made it known that he's not really worried about convergence failures, as this whole IFRS thing is going to happen. Maybe not today, maybe not tomorrow, maybe not in our lifetime but it's going to happen:

As I have already said, global adoption of IFRS is not yet complete. However, the quality of IFRS has been validated by more than a decade of use by both advanced and developing economies. And IFRS is already used extensively by the remaining jurisdictions that have not yet mandated its use.

This evidence indicates that global standards are both desirable, achievable and in my view, inevitable . As economic globalisation continues apace, so too will the force of the arguments in favour of IFRS adoption within these remaining jurisdictions. That is why I believe that we should not fret too much about the timing by which we get every jurisdiction onto global standards. To quote Paul Volcker, legendary Chairman of the US Federal Reserve and the first Chairman of our Trustees, “Ultimately, this will get done”

TL;DR: ADOPT OR DIE, LOSERS!

He reminds us — the ignorant, unwashed masses — that convergence and adoption aren't the same thing, therefore failures in convergence don't mean adoption is off the table:

It’s not altogether surprising that this happens when you have two boards with different imperatives – one prioritising the feedback from their national constituents and the other striving to understand and carefully balance feedback from around the world, including the US. Where that feedback is consistent, then convergence follows. Where it is not, then convergence generally fails, as in the Financial Instruments project. This was the structural fault with the old IASC approach to international standard – setting, and it is the same structural fault that exists with convergence today. Independent boards with different imperatives considering finely – bala nced questions of judgement have a nasty habit of reaching different, and often incompatible conclusions.

So you see, guys, it's just a miscommunication.

Moreover, there are many dangers in pretending that converged national standards can serve as a substitute for global standards. The devil is always in the detail. Small differences in accounting requirements can have a substantial effect on reported per formance . We should not expect investors and other users of financial statements to have to understand differences buried in thousands of pages of accounting literature in order to compare the financial performance of, say, Ford, Hyundai, SAIC, Toyota and Volkswagen.

These are the reasons why full convergence can probably never be achieved, and why adoption of IFRS is the only viable approach to achieving global accounting standards. There really is no shortcut to meeting the challenges of economic globalisation, other than by providing a single set of high quality, global accounting standards. That is what IFRS does.

It's good to know that convergence is the problem! Someone alert FASB so we can just get this over with already.

Tags