The International Financial Reporting Standards Foundation and the International Accounting Standards Board are reaching out to Islamic countries to elicit their support for IFRS, with a working group dedicated to making sure the standards don’t conflict with Sharia law.

On Tuesday, IFRS Foundation chairman Michel Prada delivered a speech at the 8th Annual Forum of the Gulf Cooperation Council Accounting and Auditing Organization in Riyadh, Saudi Arabia, in which he described the effort.

“Appropriate consideration of topics such as Sharia transactions is important if IFRS is to be capable of being applied on a globally consistent basis,” he told the attendees.

In 2011, the IFRS Foundation Trustees introduced an Emerging Economies Consultative Group whose goal was to enhance the participation of emerging economies in developing IFRS. The group holds two meetings a year and is chaired by the IASB’s director of international activities, Wayne Upton. In addition, a Working Group on Sharia-compliant instruments and transactions is chaired by IASB vice-chairman Ian Mackintosh. Saudi Arabia is represented on both the Emerging Economies Consultative Group and the Sharia-compliant Working Group, while the Gulf Cooperation Council’s Accounting and Auditing Committee also participates in the Working Group.

The IASB and its parent organization, the IFRS Foundation, have been moving toward more of a multilateral form of standard-setting in the past year, bringing in about a dozen different national and regional standard-setters to participate in a consultative group known as the Accounting Standards Advisory Forum. While there aren’t any standard-setters explicitly from the Middle East on the ASAF, Prada’s visit signaled the IFRS Foundation’s interest in gaining more support for IFRS in that part of the world.

He noted that more than 100 countries now require the use of IFRS, while many more have plans to adopt IFRS in the coming years. He was accompanied at the conference by Paul Pacter, a former member of the IASB from the U.S., who discussed the progress of IFRS in different parts of the world. However, Prada acknowledged that support for IFRS in the U.S. was proceeding slowly.

“In the United States, progress has been slower than many of us would have wished,” said Prada. “However, it is not entirely surprising that the world’s largest national economy has taken its time in deciding how to proceed with IFRS. The SEC already permits non-U.S. companies trading in U.S. markets to report using IFRS as issued by the IASB. Almost 500 companies do so, and those companies have a combined market capitalization exceeding $5 trillion. At the same time, U.S. investors hold over $6 trillion of foreign debt and equity securities. A majority of those securities originate in IFRS jurisdictions. These figures show that the IFRS footprint in the U.S. is already very large, and will only continue to grow. Furthermore, the factors that led to the U.S. considering adoption of IFRS have not gone away. That is why I believe that the U.S. will ultimately come on board with IFRS, although it will most likely take longer than we had hoped.

"The trustees and the IASB will continue to engage constructively with our friends in the United States and continue to support them in their deliberations regarding their future commitment to global standards," he added. "It is therefore important, in such an environment, that G20 leaders, ministers of finance and the Financial Stability Board maintain their support for the medium-term objective of a single set of high-quality accounting standards as part of a strategy to foster economic growth in a globalized world.”

The U.S. isn’t alone in holding back support, he admitted. “While most parts of the world have now completed their transition to IFRS, including more than two-thirds of the G20 members, there remain some important jurisdictions that have yet to complete their own transitional plans,” said Prada.

He noted that Japan permits certain Japanese companies to voluntarily use IFRS, and more than 30 Japanese companies have already adopted IFRS or announced plans to do so, while the Japanese Financial Services Authority has recently expanded the number of companies eligible to adopt IFRS from 621 to more than 4,000 companies. China has introduced accounting standards that are similar to IFRS, but not identical, while India is expected to follow a similar path in 2015.

In Saudi Arabia, banks and insurance companies have been required to report using IFRS as issued by the IASB for some time, Prada pointed out, while the Kingdom’s IFRS convergence plan for other entities is underway.