IFRS Will Never Be Adopted in the U.S. If These Two Pointy-Headed Pauls Have Anything to Say About It

I know. What the hell? Isn't IFRS a predetermined given like Avengers 2 and Kardashian divorces?

IFRS is tested on the CPA exam. The SEC already accepts IFRS in certain circumstances. For years we've heard about the Norwalk Agreement, the SEC roadmap, and FASB convergence or adoption or endorsement (or as it's more commonly known "condendoptmenvergence").
 
I've always thought it was unavoidable that IFRS would eventually become the basis for financial statements in the United States. I was completely blindsided about a year ago when I read an article by Paul Miller and Paul Bahnson titled, "The Top 11 Falsehoods About the IASB, IFRS and U.S. Adoption." These two Pauls are hardcore anti-IFRS. In 2011 they were both named in Accounting Today's list of the Top 100 Most Influential People in the accounting profession, and they hate IFRS. If IFRS was Obamacare, these two guys would fuse together to create Rush Limbaugh. 
 
When you read their ideas, it's like the first time you heard about Scientology: you had no idea people thought like this, you're pretty sure it's bullshit, and for some reason you keep watching Tom Cruise movies.
 
And they're not alone. NASBA has officially spoken out against IFRS adoption on several occasions. In October at NASBA's annual meeting the Pauls gave an IFRS-phobic speech titled "It's Time to Jettison the Idea that International Standards Are Coming," and they were preaching to the choir. They're loud. They're proud. They exist. I'm going to expose you to their ideas. You're going to be a better person for it.
 
Here are some of Paul & Paul's main points about IFRS:
 
Point 1 – IFRS sucks
We're confident that most [IFRS] adoption apologists, especially the American Institute of CPAs, the large accounting firms, and the IASB, know that IFRS is seriously flawed.
Is it possible that the AICPA knowingly promoted something that is seriously flawed? Yes. Benjamin Bankes, the mascot for the AICPA's "Feed the Pig" campaign, was seriously flawed. But IFRS adoption seems fundamentally different than a grotesque pig-monster with a massive head wound who scares children and adults into saving more money. Why would the AICPA want us to abandon our flawless U.S. GAAP in exchange for Hans Hoogervorst's turd?
 
The two Pauls shed some light on this quandary:
As we see it, neither IFRS or GAAP is significantly superior to the other.
Now do you understand? Adopting IFRS is just trading one turd for another, and these guys like the smell of the turd we've got.
 
Point 2 – IFRS adoption won't create comparability
Financial statements are not now uniformly prepared under GAAP or IFRS because the are political, obsolete and full of discretionary choices […] International comparability is a pipedream that's like a beauty contestant's hope to rid the world of hunger, war, crime and disease.
It's the two turd argument again; however, these guys do concede the following.
The consistent use of accounting methods … is a necessary but not sufficient condition for comparability.
So basically they're saying that if IFRS all by itself won't result in true comparability, then fuck IFRS.
 
Having a mitt is a necessary but not sufficient condition for playing baseball. By these guys' logic, if a mitt won't catch fly balls all by itself, then to hell with mitts! We've got bigger problems, like un-caught balls.
 
Point 3 – IFRS adoption won't create efficient global markets
It takes a great deal more than common accounting standards to create an efficient global capital market. […] The U.S. has enforcement powers and capabilities that are orders of magnitude stronger than those elsewhere. Without similar credible avenues of recourse everywhere for all foreign and domestic users […] common standards, even good ones, are pointless.
I agree that IFRS is not efficient global capital market pixie dust. There appear to be two ingredients necessary for highly efficient global capital markets: a common set of high quality accounting standards and the ability and willingness to effectively enforce said standards. But apparently, the Pauls don't want one without the other. If they can't have it all now, they don't want any of it.
 
Come to think of it, I'm the same way. I want to learn Spanish, but it's pointless to learn simple nouns if you can't conjugate verbs. So screw you, Rosetta Stone! I'm not waiting till the third CD to hablar Espanol! I need to know what Dora's saying now, otherwise I can't get through the butterfly forest and save the Ice Princess from the monkey soldiers.
 
Miller and Bahnson might have a point if it were impossible for other jurisdictions to create "credible avenues of recourse." Personally, I think it's not just possible; it's likely. The Pauls, however, think that everyone outside the United States is a regulatory pygmy1.
 
Point 4 – SOX prohibits the adoption of IFRS
Sarbanes-Oxley explicitly requires the [SEC] to designate, oversee and fund only one private standard-setting body. […] The IASB will clearly not submit to commission oversight or depend solely on U.S. funding.
This is crap because accounting standards are like geometry. Non-Euclidean geometry can throw a great nerd party, but Euclidean geometry is clearly the one true geometry. Similarly, I believe there is One True GAAP2. But since Deprecitus3, the Greek god of accounting, hasn't bestowed the One True GAAP upon us on a goat-skin scroll, it's up to us mortals to discover the One True GAAP on our own.
 
The One True GAAP doesn't submit to us. We submit to it, otherwise we end up with standards that are "political, obsolete and full of discretionary choices." In theory, the ideal accounting standards would be formed from the feedback of it's stakeholders, none of whom – businesses or countries – would have undue influence over the standard-setting process. Looks to me like the IASB may be positioned best to make that happen.
 
That and SOX can be changed.
 
Point 5 – Principles-based accounting sucks
Our rules-based system is essential for providing a clear legal basis for going after offenders.
I actually agree with them on that one, and so does Deprecitus, the Greek god of accounting.
 
Clearly these guys are full of it. You're free to go watch a Tom Cruise movie.
 
1 And they're right regarding the regulators of the mountains of New Guinea.
2 As an American, I’m supposed to say that U.S. GAAP is the One True GAAP and that U.S. GAAP will eventually take over IFRS. Manifest destiny, bitches!
3 Pronounced "dih-PREE-shit-tus"
 
 

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