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IFRS - Convergence or Adoption?

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We asked candidates for our Top 100 Most Influential People in Accounting the following question:

"What do you think of the current attempts to create a single set of global accounting standards (whether through convergence or the adoption of IFRS world-wide)? Should they be pursued differently -- or at all?"

Their responses reflected a wide range of opinion, and represent the opinions on nearly every side of the debate. All the candidate responses are presented below.


The time for a uniform set of global accounting standards is upon us. We work in a global economy, so agreement on an international standard is paramount. Full convergence on rules will take time -- especially as the economic factors continue to shift (like regulating derivatives), but there needs to be general agreement on the guiding principles in the meantime.

-- Mark Albrecht, CEO, XCM Solutions

Convergence of accounting standards toward a common set of high-quality accounting principles is in the public's best interest and would provide a more uniform language for financial reporting. Crowe supports the Financial Accounting Standards Board's and International Accounting Standards Board's joint efforts to improve GAAP and achieve convergence. The rapid pace of change and proliferation of complex standards may create challenges for some stakeholders, including some in the financial statement preparer community. Adequate time to react to changes and new standards, and an intensive effort to inform all stakeholders of these changes, will need to be provided, especially with a view toward global implementation. Local variations in application of common concepts that reflect economic and environmental differences may also be expected.

I personally believe that achieving a single set of high-quality global accounting standards is a very important goal. However, I also believe that we are a fair distance away from achieving that objective. Some of the momentum around IFRS has downplayed a few real challenges associated with uniform adoption of IFRS. Unfortunately, many countries have adopted IFRS with exceptions -- not fully adopting the standard IFRS model. This trend illustrates the much more active involvement of European governments in accounting standard-setting, compared to in the U.S., making it a troublesome aspect of global IFRS adoption today. I also believe that many have underestimated the degree to which the "concepts-based" IFRS standards will migrate toward the "rules-based" structure that exists in GAAP today. In fact, the SEC issued comment letters that speak to uncertainties of this transition. We have "rules-based" standards in the U.S. today largely because of our financial reporting environment, and a change to IFRS will not necessarily change that dynamic.

-- Charles Allen, CEO, Crowe Horwath LLP

The concept of a single set of global accounting standards, considering our global economy and the prevalence of cross-border transactions, makes great sense. However, the burden and cost of implementation during the current economy is a large hurdle for some companies. In the long term, I believe a single set of global accounting standards will be very positive.

-- Jordan Amin, Chair, National CPA Financial Literacy Commission, AICPA

The concept is good. But there are a couple real-world issues to resolve. The first is that many countries that have already adopted, or are expected to soon adopt, International Financial Reporting Standards have "country modifications" -- if this is prevalent, we do not really have common standards. A second issue is that standards must be relevant and useable -- currently, there is a legitimate question as to whether one set of standards can meet all needs of public companies, private companies, etc. and that must be resolved.

-- Rick Anderson, Chairman and CEO, Moss Adams

The proposed convergence between U.S. GAAP and IFRS is one of the most critical and controversial issues to affect accounting in the United States.

More than 100 countries currently use IFRS, a number that is set to rise to around 150 countries over the next five years. As multinational businesses continue to grow and expand, a thorough knowledge of IFRS is now essential for internationally active, growing businesses.

Convergence efforts have been in place for nearly six years. After the initial SEC "roadmap" was issued by then-SEC Chairman Christopher Cox, the administration changed and Mary Schapiro stepped in as chairwoman. Shortly thereafter, the global economic and credit crisis hit, consuming the SEC's time and focus. In addition, as U.S. FASB and the IASB continue to work towards convergence, some plead, "Let's just let this process work," which causes the progression to slow even more.

But the movement has been gaining steam with a new ruling from the SEC, recent actions on the part of the AICPA and growing support from companies that do business abroad.

There seems to be worldwide consensus surrounding the need for one global set of high-quality accounting standards and that IFRS is currently best positioned to fulfill that need. However, there is much to be gained from U.S. GAAP and, as such, the convergence of U.S. GAAP and IFRS may very well best serve the needs of the global community.

For companies that do business overseas, or those with global aspirations, the use of converged IFRS represents an opportunity to speak the same financial language as their global counterparts. It will represent a substantial opportunity to seamlessly use and provide financial information around the world. For acquisition of capital, it makes it easier for everyone involved without having to use two sets of languages.

-- C.E. Andrews, President, RSM McGladrey

There is no doubt that global markets need a single set of global standards. Without one, investors will be unable to fully assess investment options that are now globally available. Having such a standard would also increase the accessibility of cross-border capital. For multinational firms, they would have one set of financials for reporting purposes that would be acceptable around the world.

These points have come more to the forefront during the recent economic meltdown. We have indeed reached the point where global businesses, financial and capital markets are interrelated. Without a single set of standards, we will become like the Biblical Tower of Babel.

-- August Aquila, President and CEO, Aquila Global Advisors

As part of the natural progression of economic globalization, it stands to reason that agreed-upon global standards are in order. So, yes, they should be pursued, agreed upon, and established. This would dramatically decrease all kinds of risks, from legal contingencies to fraud, and make international business more efficient. Right now, it's as if we have national railroads with different-gauge tracks in each country. At best, it's terribly inefficient; at worst, it simply doesn't work. I acknowledge that the IFRS are controversial: As proposed, they are more principle-driven than our rule-driven U.S. GAAP accounting, and thus more open to interpretation. But I think that interpretation and flexibility are necessary. The differences in the cultures and business practices of each nation have to be considered and that requires flexibility. I think that convergence will likely be the best vehicle for migration and eventual international adoption because it will allow the standards to evolve as they are practiced.

-- Andy Armanino, CEO and managing partner, Armanino McKenna

The creation of a single set of high-quality standards will benefit U.S. financial markets and public companies. At CPA2Biz we are committed to helping provide the accounting profession with information and tools related to this convergence through our Web site, IFRS.com

-- Erik Asgeirsson, CEO, CPA2Biz

The process is too much and too fast, especially considering the state of our economy, legal system vs. global, and the need to assure the U.S. public of due process and independence in accounting standards promulgation. The process of accounting standards convergence must slow down and acquire the broad support of the U.S. public, financial statement users, preparers, practitioners and regulators.

-- Billy Atkinson, Chairman, NASBA

I think that the political, cultural and governance challenges associated with getting global adoption of a uniform set of high-quality accounting and financial reporting standards accomplished are far more difficult to deal with than the technical accounting issues, and will likely prevent the achievement of that goal. Still the convergence goal should be pursued to the extent feasible, and any remaining differences should be identified so that financial statement users can better consider the impact of such differences.

-- Robert Attmore, Chairman, GASB

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