The International Accounting Standards Board is headed toward a more multilateral approach in the formation of International Financial Reporting Standards, as the U.S. appears increasingly unlikely to throw its support behind IFRS this year.

For the past decade, the IASB and the Financial Accounting Standards Board in the U.S. have been carrying on talks to converge IFRS with U.S. GAAP. Despite progress in producing a number of converged standards, they have been unable to complete work on several of their top-priority projects of recent years, including financial instruments, leasing and insurance contracts.

At their most recent joint meeting last week, new fissures emerged between the two boards over the impairment standards for loan losses in the financial instruments project (see FASB Splits with IASB on Impairment Standards). IASB chairman Hans Hoogervorst voiced his frustration at signs of the disagreement only a month after the two boards finally found common ground on how to treat loan losses.

The divide emerged less than a week after the Securities and Exchange Commission issued its long-awaited final staff report on the Work Plan for IFRS, describing many of the shortcomings of the international standards (see SEC Releases Staff Report on IFRS Work Plan). The report seemed to cast doubt on the prospect of the SEC commissioners voting to approve the use of IFRS by U.S. companies this year.

Both boards are under pressure to meet a directive by the G-20 to agree to a set of globally accepted accounting standards by mid-2013. The prospects of that happening appear to be zero at this point. Meanwhile, the 10-year memorandum of understanding that the two boards signed a decade ago, known as the Norwalk Agreement, will expire this year, as will the term of a U.S. member of the IASB, Paul Pacter.

The IASB is sending signals that unless the SEC makes some definitive statement committing to IFRS, it is likely to lose what has been regarded as “most favored nation” status in negotiating over standards with the IASB. Already, other countries are pushing to lessen the influence of the U.S. in the standard-setting process, arguing that the U.S. should not have that kind of leverage when it has held off support so far for a clear commitment to IFRS and timeline for implementation.

Near the end of the term of the previous SEC chairman, Christopher Cox, the SEC had proposed a roadmap that would have seen the U.S. transitioning into IFRS. But his successor, Mary Schapiro, has indicated that she won’t be rushed into approving IFRS. Instead, the SEC assigned its staff to devise a Work Plan for IFRS, with the end result being a series of reports, culminating with the one issued this month that described the pros and cons of the standards.

Schapiro sits on the Monitoring Board of government regulators overseeing the IASB and its parent organization, the IFRS Foundation, and she too has voiced support for the concept of globally accepted accounting standards. But Schapiro inherited the fallout from the financial crisis and has needed to focus the attention of the SEC on rulemaking in response to the crisis and the many rules and reports it was tasked with producing under the Dodd-Frank Wall Street Reform and Consumer Protection Act. A recent report from Davis Polk & Wardwell estimated that the SEC has so far finalized only 123 of the 398 rulemaking requirements, or about 30.9 percent, mandated under the Dodd-Frank Act in the two years since its passage. The gaps in regulation exposed bv the financial crisis and scandals like the Madoff Ponzi scheme have necessarily been more of a priority for the SEC than IFRS.

It is unclear whether Schapiro will remain chair of the SEC after the election, although her five-year term officially does not expire until 2014. She reportedly has only confirmed that she will remain through this fall. Her successor may be more disposed toward supporting IFRS, but given the continued opposition of many U.S. companies toward IFRS, and the high cost estimated for the transition, according to the SEC staff report, it’s far from certain that the rest of the SEC commissioners would vote in favor of IFRS.

The IASB would like the U.S. to at least use the endorsement approach to IFRS employed in Europe, in which FASB would incorporate the converged standards one at a time into U.S. GAAP. Fundamental differences would remain in areas such as the LIFO inventory method, which is not permitted under IFRS. The U.S. might even need to “carve out” exceptions to IFRS, as the European Commission did in some cases. But the IASB considers carve-outs to be the “nuclear option” for IFRS and strongly discourages their use.

The future path of IFRS in the U.S. remains unclear. While over 170 foreign companies whose stocks trade in the U.S. are able to file their financial statements in IFRS with the SEC without reconciling them with U.S. GAAP, thanks to a rule change in 2007, it is unlikely at this point that the SEC will agree to allow U.S. companies to do the same this year.

The long, arduous process of harmonizing IFRS and U.S. GAAP is continuing for now, but other countries are pushing the IASB to adopt a more multilateral approach, with greater involvement by Asian countries like China and India. U.S presence on the Monitoring Board may even be diminished, as another regulator from the Americas could take the place of the SEC. The priorities of the IASB are likely to shift toward other countries’ wish lists for standards in areas such as foreign currency exchange and agriculture, and those priorities are not likely to match up with U.S. demands.