In mid-August 2010, the American Institute of CPAs released a video interview with Sir David Tweedie, chair of the International Accounting Standards Board (available on the Journal of Accountancy Web Site, The content of the interview was also summarized by the British Web site AccountancyAge (

The full title of that summary is especially provocative: "Tweedie warns U.S. to adopt standards or lose influence." According to the reporter, Tweedie rebukes America by saying that we will be left out of the standard-setting process if we don't get on board his train right now. He also used this forum to question why U.S. citizens fill four of 15 IASB seats, and he seems to chafe that Securities and Exchange Commission Chair Mary Schapiro sits on the IASB's Monitoring Board. Although Tweedie's manner was characteristically calm and diplomatic, we think his comments completely missed the mark because he, like others who want the U.S. to adopt IFRS, overlooked four major points contrary to his position.


The U.S. has influenced global reporting since the International Accounting Standards Committee was formed in 1973. American firms and individuals played key roles in establishing that body, and U.S. GAAP provided the template for most of its standards. American participation was needed because our prestige and expertise helped bring credibility to the effort. That prestige is still useful because we have the largest, deepest, most-informed, best-regulated, and most liquid capital markets in the world by a great margin.

Also, non-U.S. companies can come to our capital markets with financial statements prepared in accordance with IFRS. As a result, the U.S. should actively participate through IASB membership and the Monitoring Board's oversight. Thus, we are not persuaded by Tweedie's plaint about undue American influence.


Again, like others who have pushed his agenda, Tweedie chides us by suggesting that it's time we signed on with the other 120 countries (or so) that have adopted IFRS. While that number seems impressive, the facts are quite different.

Curiously, even the IASB's Web site disclaims full knowledge of all countries that have adopted, and sends inquirers off to contact specific countries' regulatory authorities on their own. Fortunately, we found a Web site managed by Deloitte that tries to list adopters but ends up asking for assistance with information about others (

Using that data, we determined that more than half the participants in this purportedly vast global movement are countries that most people will be able to find only by consulting Google Earth. More to the point is that it would take some sort of economic magnifying glass to detect their impact on global capital markets.

Here are 69 IFRS-using countries out of Tweedie's 120; we'll let you decide whether you're afraid the U.S. will be left out if it doesn't join them: Abu Dhabi, Anguilla, Antigua and Barbados, Armenia, Aruba, Azerbaijan, Bahamas, Bahrain, Belarus, Bermuda, Botswana, Cayman Islands, Costa Rica, Croatia, Cyprus, Dominica, Dubai, El Salvador, Fiji, Georgia (the country), Ghana, Gibraltar, Grenada, Guyana, Haiti, Iceland, Iraq, Jamaica, Kazakhstan, Kenya, Kuwait, Kyrgyzstan, Laos, Lesotho, Liechtenstein, Luxembourg, Macedonia, Malawi, Maldives, Malta, Mauritius, Mongolia, Montenegro, Morocco, Mozambique, Myanmar, Namibia, Nepal, Netherlands Antilles, Oman, Panama, Papua New Guinea, Qatar, St. Kitts and Nevis, Serbia, Sierra Leone, Slovak Republic, Slovenia, Sri Lanka, Suriname, Swaziland, Tajikistan, Tanzania, Trinidad and Tobago, Uganda, Virgin Islands (British), West Bank and Gaza, Zambia, and Zimbabwe. While joining the IFRS club was certainly a step up for them, it would not be the case for the U.S.

Unfortunately, Tweedie's edited comments, which are consistent with the IASB's usual claims of widespread acceptance, don't acknowledge that virtually all adopters, especially major nations, carve out objectionable standards. As we have cited before, the combined economic output of the full-adopters is approximately equal to the GDP of California and Georgia (the state).

We just don't see that the U.S. would ever be advantaged if it adopted, and we do see many disadvantages if it did.


Tweedie's seems to commit a faux pas by implying that adopting IFRS in place of GAAP would be as simple as changing channels with a remote. This erroneous presumption is not unique, as we have seen it expressed by Tom Jones (see "Mencken was right and so were we," July 19-Aug. 15, 2010, page 16), the four largest firms, and the AICPA, as well as many others who minimize the difficulty in changing. Many also claim that the SEC is saying adoption is inevitable and coming soon. As we read the commissioners, they are thoughtful but, more important, highly skeptical of that move, and we know why.

For emphasis, we'll put our first incontrovertible point in boldface capital letters:

Adopting IFRS Woud Require the U.S. to Adopt the IASB's Political Process.

There is no evidence, much less clear evidence, that the IASB can cope with political pressure to compromise quality and usefulness any better than the Financial Accounting Standards Board, and plenty of reason to suspect it cannot do nearly as well.

Three points are germane. First, the IASB depends on contributions from corporations and auditing firms. Second, it is linked politically to the European Union and the banking and finance industry on the European continent, such that its standards are surely crafted with an eye on those constituents' objections. Third, its large membership and diverse global constituency causes every decision to be carefully constructed to accommodate many interests, thus filling the standards with one compromise after another. As a result, there is no valid reason to think U.S. capital markets would benefit from standards produced by that process.


We've made the following point numerous times before, but we'll make it again because it doesn't appear that Sir David fully comprehends it. Specifically, the U.S. could adopt IFRS and the IASB's process only within the constraints created by our securities laws.

The most binding statute is Sarbanes-Oxley, which empowers the Public Company Accounting Oversight Board to identify the authorized standard-setter and then fund it through a mandatory fee levied on American public companies. Since the SEC first decided in the 1930s to rely on accounting professionals to define reporting standards, it can justify this unique dependence on a private sector body to create public regulations by exercising strong and active oversight. That is, the commission can satisfy Congress only by keeping a watchful eye on the standard-setter and its processes to ensure that it is not faltering in its mission because of its own failings or inappropriate pressure from outside parties.

Therefore, we present a second incontrovertible point:

Adopting IFRS Under Existing U.S. Law Would Require the IASB to Submit to SEC Oversight and Accept Its Funding From the PCAOB.

Of course, the IASB would never make such concessions.

This certain rejection means the SEC could adopt IFRS only by the hard route of persuading a recalcitrant Congress that U.S. interests would be promoted by amending both Sarbanes-Oxley and the Securities Acts that grant the commission authority to establish GAAP for filings by public companies. Those amendments would essentially do away with U.S. control over U.S. accounting practices and turn it over (with no strings attached) to an international body dependent on contributions, mired in an unproductive relationship with the EU, and with many constituents around the world whose political and economic interests are clearly not aligned with those of American investors and our economy. Our unanswered question asks what huge benefits for the American people would justify this immense cost.

We challenge anyone to conjure any situation in which members of Congress could be legitimately convinced that sacrificing this control will produce real advantages for the U.S.


Perhaps we are a bit forward to advise Tweedie and other supporters of adoption, but it's all we can do under the circumstances.

Here is our advice: When it comes to the U.S. adopting IFRS, they can forget about it happening based on facile claims or fabricated vague fears. Adoption should not, and will not, happen because it isn't good for America.

Instead, the IASB must learn to be satisfied with cooperative efforts with FASB, and even that approach may not work out if the SEC realizes it is watering down the tougher standards FASB could produce if it didn't have to bring along a majority of IASB members. That idea leads us to implore our friends at FASB and the SEC to resist the temptation to go along to get along. When you're holding the high cards, maybe even all of them, there's no reason to fold to a weaker hand.

In our view, it's time for Sir David and all others to give up on what is now clearly a quixotic drive to supplant GAAP and FASB with IFRS and the IASB. It just isn't going to happen, regardless of how many threats are made or who makes them.

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