Efforts between the Financial Accounting Standards Board and the International Accounting Standards Board at converging U.S. GAAP with International Financial Reporting Standards are starting to generate a backlash on the other side of the Atlantic.
As the convergence effort grinds on with now monthly meetings between FASB and the IASB, fundamental differences remain over many issues, including how to account for soured bank loans, whether at fair value, as FASB prefers, or on an amortized cost basis, as the IASB has proposed.
In an illuminating update on how the outlook seems to be evolving in Europe on the convergence process, U.K.-based Accountancy Age described several recent developments, including a speech last month by Adair Turner, head of the Financial Services Authority, before the Institute of Chartered Accountants of England and Wales. Turner contrasted the two boards approaches and fretted that the IASB might be complicating its existing standards by trying to converge with U.S. standards. The Basel Committee on Banking Supervision also advised FASB last month not to overhaul its bank accounting standards for the sake of convergence.
Even outside Europe, other governments want more of a say in shaping IFRS. Japan recently began allowing companies to voluntarily use IFRS, but it has pressed the IASB to make changes in how banks can value bonds they do not plan to sell, according to a Reuters article. Japan currently only has one seat on the board, as opposed to four U.S. seats and five European seats. It hopes to band together with other Asian countries and Australia to give countries in the Eastern Hemisphere more clout on the board.
Nevertheless, FASB and the IASB have redoubled their efforts since November to meet the goal of converging on most major outstanding issues by June 2011. Its up to the SEC to decide on whether to approve the proposed IFRS roadmap, and that decision is expected soon.