In a speech given on 10 March 2011 to the US Chamber of Commerce Event, 'The Future of Financial Reporting: Convergence or Not?' in Washington, DC, U.S., Sir David Tweedie, Chairman of the International Accounting Standards Board (IASB), painted an optimistic picture on the state of International Financial Reporting Standards (IFRSs), considering the United States still does not formally accept IFRS for its domestic companies. "We all know that there cannot be a global system without US acceptance of IFRS."
Today, more than 100 countries either require or permit the use of IFRSs for listed companies in their domestic markets. This includes, among the Group of 20 (G20) members, Australia, Brazil, Canada, the 27 member states of the European Union, Korea and Mexico. However, China, India and Japan have yet to make a formal and full commitment to domestic adoption of IFRSs. "Their work towards adopting IFRS in their countries has been, in part, predicated on the implicit understanding that a truly global accounting standard must include the United States. They are therefore closely watching the SEC’s decision," says Tweedie.
According to Tweedie, delaying the adoption of IFRS imposes unnecessary costs and risks on US companies. Already US-based multinationals need to maintain multiple sets of accounting books, filing statements prepared in accordance with US GAAP with the SEC while reporting under IFRS or national standards for their international subsidiaries.
"The IASB believes that a June 2011 completion target remains our goal. Successful completion by June 2011 will provide an earlier stable platform of standards for those countries that have already committed themselves to adopting IFRSs this year and next," says Tweedie.
The IASB is in the final stretch on the convergence work with the FASB. The standard-setters have completed work in the areas of business combinations, share-based payment, pensions, fair value measurement, aspects of financial statement presentation, consolidation and derecognition, among others.
From the 10 major projects that were originally identified as the joint programme in the 2006 Memorandum of Understanding, the IASB and the FASB now have only three major projects remaining to be completed—revenue recognition, leasing and financial instruments. The boards are also working jointly on a new standard for insurance contracts.
Tweedie says that by adopting a globally accepted set of standards, all companies—large and small—are able to attract capital from a larger pool of investors, driving down the cost of capital and facilitating cross-border mergers and acquisitions activity and strategic investments.
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