A series of recent statements first stunned us, then left us quizzical, and eventually motivated us to write this commentary.

In May, Securities and Exchange Commission Chair Mary Jo White suggested to the Financial Accounting Foundation's trustees that adopting international standards in the U.S. might be a good idea.

On one hand, she agreed that the Financial Accounting Standards Board should be setting standards for the United States; on the other, she resurrected the commission's ambiguous, even enigmatic, position that, "We will continue to study the issue," specifically "the issue of further incorporation of IFRS into the domestic capital markets." Really?

In August, Ian Mackintosh, vice chair of the International Accounting Standards Board, claimed in Johannesburg that, "Global standards are both [sic] desirable, achievable and, in my view, inevitable," and then revealed in the next sentence his conceit that he really means IFRS when he says "global standards."

In an obvious slam against the United States, he said that convergence won't work with "one [board] prioritizing the feedback from their national constituents and the other [board] striving to understand and carefully balance feedback from around the world..." He meant that only selfish protection of American interests prevents the IASB from becoming the U.S.'s standard-setter. Really?

Also in August, IASB Chair Hans Hoogervorst spoke in Singapore, disagreeing with Mackintosh by saying that convergence isn't achievable but echoing his complaint that America rejected it for misguided and self-serving reasons.

Hoogervorst's attitude is evident in these words: "It's a pity. Convergence would have allowed the U.S. to make the ultimate jump to IFRS. But nobody can force it to do so; if it wants to stick with U.S. GAAP, that's its choice. But IFRS moves on -- we have a large part of the world to take care of." Really?

These quotes show that these people who should know better simply aren't confronting the reality that the misdirected quest to replace FASB with the IASB is rightfully over, done, finished and dead.

We sent a clear message to them in the April and May versions of The Spirit of Accounting. Perhaps they've forgotten what we said or never saw it in the first place.

Well, we're sending it again this month and we ask any reader who knows these individuals to please forward this column to them.



We urge you to get a solid grasp of this point: The real issue is not which set of standards to use but which body (FASB or the IASB) will do the better job of helping the SEC promote the efficiency of U.S. capital markets.

That question demands a more complete analysis than thinking it might be helpful if IFRS could be used in the United States.

To begin, you don't have either the authority or power to accept IFRS. In fact, all you have is one vote and a position of leadership to help you persuade other commissioners to designate the IASB as the standard-setter for SEC filings, which is an entirely different matter. If you tried, you would have to answer to members of Congress who would surely criticize a move to vest standard-setting power in an international board beyond your control or sway.

In clear language, there are no good reasons for replacing FASB, which the commission has so much influence over and which responds quickly and willingly to your requests for assistance. We just cannot comprehend how you would think a multinational board with multiple constituents, competing political interests, and diverse kinds of cultures, economies, and capital markets would be even the least bit interested in or capable of addressing the SEC's urgent needs, much less act as promptly and effectively as FASB does.

As we explain momentarily, there's no way the IASB could ever suitably help the SEC fulfill its statutory responsibility for protecting and strengthening U.S. capital markets.

Another pertinent point is that the commission's jurisdiction includes only public companies. Thus, you would create a huge puzzle with no solution if you tried to make the IASB your standard-setter without concurrence from every other designating authority in the U.S. that currently relies on GAAP.

It's our fear that your persistent interest in IFRS means you have somehow embraced the absolutely flawed -- repeat: absolutely flawed -- presumption that uniform accounting standards will produce comparable financial statements.

If you have adopted this premise on your own, you need to understand that uniform but incomplete and faulty standards will always produce uninformative and otherwise non-comparable statements. On the other hand, if your advisors still cling to that erroneous idea, we think you should listen to someone else.

In fewer words, a global standard-setting system won't work. And even if it could, there's no reason to conclude that the IASB is the right answer just because it exists.

Summing up, we urge you to unambiguously put your full influence behind FASB to help it create better standards. If it succeeds, the IASB will also benefit from that success, just like it has in the past. That outcome, we think, is the best possible.



We know how much you poured into your efforts to win the SEC's designation. However, we think you wanted it so much that you didn't think through what achieving it would mean. Of course, what matters is not that you made this misjudgment but what you will learn from it. Will you become wiser or remain whiners?

Specifically, we believe it's imprudent for you to dismiss your rejection by U.S. authorities as a self-centered whim. Rather, your aspiration was unfulfilled because your board couldn't possibly have met the responsibilities of being America's standard-setter, even if your enthusiasm and emotion were telling you that you could.

You seem to have believed that being designated would give you free rein to do what you wanted, treating the American constituency like all your others. In fact, just the opposite would be true.

Perhaps you've overlooked the fact that our law would require you to work closely with the SEC to implement Section 13(b) of the Securities Acts. Instead of operating without fetters, your every action would be carried out under the SEC's close oversight, including member appointments. You obviously could not do that without giving all your other constituents short shrift and raising their ire.

In addition, accepting your funding mostly from the U.S. wouldn't go over well with the 130 other countries you're always boasting about. Also note that the SEC would constantly scrutinize how you spent the money.

Further, you didn't seem to understand that the commission would be only one of many constituencies in the United States that you would have to serve by doing such things as operating the Emerging Issues Task Force and resolving issues for non-public and not-for-profit entities as well.

We also think you, like the SEC chair, don't fully comprehend that uniform standards won't automatically lead to that comparability you always claim will exist if only the U.S. would adopt IFRS. In other words, your fundamental premise for taking over is fatally flawed.

We'll cut to the chase: Your designation as the U.S. standard-setter should not and will not happen soon, not in your lifetime, not in this century, and perhaps never.

Our May 2014 column ("FAF's 'gift' to the IASB: It's time to finally reject IFRS and the IASB for the U.S.") speculated that it might take at least 200 years for the world to be ready to fulfill your vision because it can come to fruition only when everyone has the same kind of free-market economies, implements effective regulation, and embraces the same ethical and political values of truth-telling at all costs. Based on what has happened just in the last six months, we think the world is actually farther away from that blissful state than it was then.

For now, we urge you to first acknowledge that your dream didn't come true and that this outcome is a good thing.

Next, roll up your sleeves and get busy doing the job that you can do and need to do, which is to radically improve financial reporting everywhere else in the world. Work with FASB as you can, learn from it when that's appropriate, and share your ideas with it on how it might do things better.

Despite our stern words, we're behind you and encourage you to accomplish these tasks as only you can. Just leave the U.S. alone to do things our way.



As we were planning this column, we kept thinking of an inelegant sports phrase that (tastefully modified) proclaims, "The opera isn't over until the leading lady sings." Our thought is that those who won't give up on replacing FASB with the IASB just haven't realized that their opera is over.

In fact, the star in this production has sung the finale. She answered her curtain calls and retreated to her dressing room. She removed her makeup and changed into street clothes. She exited through the stage door and signed autographs for her fans. A taxi took her to her favorite restaurant where she's finishing her chocolate mousse before heading home.

To SEC Chair White, the IASB managers and members, and to any others who are holding onto the ephemeral dream of IFRS in the United States: It's over and done! Forget about it. Pick up the pieces and just pursue what you were created to achieve, namely improving capital market efficiency in your respective bailiwicks.

If you do your part and FASB its part, the world is bound to be a better place, and that should be a job well done.

Paul B. W. Miller is an emeritus professor at the University of Colorado at Colorado Springs and Paul R. Bahnson is a professor at Boise State University. The authors' views are not necessarily those of their institutions or Accounting Today. Reach them at paulandpaul@qfr.biz.

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