Everyone supports a single set of global accounting standards, and there is a big spotlight on the United States and its pending decision process to adopt or incorporate IFRS into its reporting structure. However, there is a lot more to achieving global accounting standards than just adoption of standards.
The United States does not hold the key, as many indicate in their comments to an SEC staff paper (PDF) that proposes one possible method of incorporation of IFRS in the United States. (The paper was released in May; the comment period officially closed July 31.) Respondents point out that ensuring that the principles-based accounting guidance is consistently applied is up to regulatory agencies and others responsible for oversight of the financial reporting in jurisdictions around the world.
“Among other things, differences in language (and translation), culture, reporting cycles, legal and tax systems will unavoidably affect how global accounting standards are interpreted and applied to some degree,” Financial Executives International (FEI) comments point out.
PricewaterhouseCoopers responded with concerns regarding consistent application. Its comments state, “achieving the vision requires both the adoption of IFRS in all significant capital markets and enhanced cooperation and coordination among national regulators, the International Accounting Standards Board (IASB) and its interpretive body, preparers, and auditors in order to facilitate the consistent application of IFRS.”
The American Institute of Certified Public Accountants sounded a similar note in its response, encouraging the Public Company Accounting Oversight Board (PCAOB) to pursue greater harmonization of auditing standards with its international counterpart, the International Auditing and Assurance Standards Board.
Even the IASB itself acknowledges this issue. In April, the IFRS Foundation issued its Trustees’ Strategy Review report (PDF) on its ongoing strategy as a global accounting standard setter, in which they identified steps to help ensure the consistent application of IFRSs. These steps include:
- Provide additional application guidance and examples.
- Work with securities regulators, audit regulators and other standard setters to identify divergence in practice and consider improvement to standard or interpretative guidance.
- Enlist IFRS Foundation to education and content services aimed at promotoing consistent application.
- Indentify jurisdictions where IFRSs are being modified and encourage transparent reporting of divergence.
- Seek assistance from other public authorities to assist in achieving this objective.
So while the world sits and waits for the United States to hurry up and make a decision about incorporation of IFRS, there is still a lot that could be done by other agencies to promote a single set of global accounting standards.