IFRS Foundation Chief Calls for New Push on Convergence

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By David R. Jones

Sept. 10 — Adoption of international financial reporting standards worldwide continues to accelerate despite continued disappointing progress in the U.S., IFRS Foundation Chairman Michel Prada said Sept. 9.

In a speech to the Eurofi Financial Forum 2015 in Luxembourg, Prada cited the rapid advance of IFRS globally over the past 15 years, with 116 of the 140 nations that the foundation has studied—80 percent of them—now requiring all or most publicly listed companies to use IFRS.

Close Alignment

Prada pointed to recent adoption of accounting standards in China and India that are closely aligned with IFRS at the event hosted by Eurofi, a nonprofit think tank based in Paris that assesses financial services.

Most of the remaining countries that have yet to require IFRS already permit its voluntary use, Prada noted.

Slow U.S. Progress

Still, “we all know that there has been less progress in the United States than we had hoped,” Prada said.

This slow advancement in America, though, doesn't mean that IFRS proponents should turn away from the U.S., the world's biggest capital market, Prada said.

The U.S. Securities and Exchange Commission has long supported the foundation's work, he pointed out, and oversees the IFRS-compliant financial statements of almost 500 foreign companies listed in the U.S., making the SEC one of the world's largest IFRS overseers.

Ongoing Cooperation

Prada emphasized the importance of continued cooperation on standards convergence between the International Accounting Standards Board, the foundation's standard-setting arm, on one hand and the SEC and the U.S. standards-setter, the Financial Accounting Standards Board, on the other.

Companies in Europe and elsewhere are best served, Prada said, by minimizing the differences between IFRS and U.S. generally accepted accounting principles.

“We should continue working together to prevent further differences from emerging,” Prada said.

SEC's Stein: Unrealistic Expectations?

In contrast to Prada's upbeat assessment of the opportunities for IFRS adoption worldwide, SEC Commissioner Kara Stein warned that the push toward globally standardized accounting practices could prove unrealistic and impractical.

In a speech at a meeting in London of the Institute of Chartered Accountants in England and Wales on the same day Prada spoke, Stein said the drive toward convergence “often feels like we are searching for the Holy Grail.”

Doubts about Convergence

Stein called the process of reaching convergence on local accounting standards to eliminate differences, where possible, an important and productive process.

“But I question whether it has, at all times, truly contributed to improved quality,” Stein told meeting participants.

Her speech follows a Bloomberg BNA assessment last month that found it unlikely the SEC would issue a proposal this year on optional, supplementary use of international accounting standards by U.S. public companies.

To contact the reporter on this story: David R. Jones in London at correspondents@bna.com

To contact the editor responsible for this story: Steven Marcy at smarcy@bna.com

Prada's speech is available at http://www.ifrs.org/Alerts/Conference/Documents/2015/Michel%20Prada%20speech%20Eurofi-Sept%202015-FINAL.pdf