Accounting Observer > Public Blog - A Funny Thing Happened On The Way To Convergence

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A Funny Thing Happened On The Way To Convergence

Location: Blogs AAO Weblog (Public)
Posted by: Jack Ciesielski	7/25/2006 6:24 AM
The driver of the convergence bus decided to put it into neutral for a while. The International Accounting Standards Board released a bombshell yesterday that's gone pretty much unnoticed in the US press. (Though the Financial Times picked it up.) The IASB is declaring a moratorium on the effective date of any new International Financial Reporting Standards (IFRS) or major modifications of existing standards until after January 1, 2009. The only other mention I could find in the world press was this from the Irish Examiner, who said the "Institute of Chartered Accountants in Ireland (ICAI) has welcomed the announcement by the International Accounting Standards Board (IASB) that it will suspend the introduction of new accounting standards until 2009." That's not what the IASB said: they said there'd be no new standards effective until 2009. They didn't say they wouldn't issue new standards until 2009. Keep your hopes in check, guys. The idea behind the moratorium: give folks in the European Unionsome time to catch their breath. The transition to IFRS has been difficult in many countries, and this will give them a chance to evaluate their situations in less of a panic mode. Furthermore, the IASB will slow down some of its work with the FASB on a joint conceptual framework project. And some of the comments of Sir David Tweedie in the Financial Times article, indicate the delay might also calm down some constituents "inflamed" by a February announcement of the IASB and the FASB to speed up "writing joint standards in 11 areas by 2008 and to examine existing standards in 10 other areas." It's not a bad idea, and in fact it synchronizes well with the SEC's own convergence plans. (Recall that there's currently a requirement for a foreign company to reconcile the accounting used in its financial statements to US GAAP-based accounting. By 2009, the SEC wants to eliminate that requirement if IASB standards are used by a foreign company - provided the Commission is satisfied with the IASB standards in place by that time.) The danger is that, rather than use the time to get on board with the IASB standards, companies will use the time to try and exploit politics to further avoid the standards or roll them back. And delays might become a serial habit, with or without political interference. Keep tuned. (For the next few years.)

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