IFRS adoption is not quite as widespread as you think

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A presenter at the CalCPA’s Accounting and Auditing Conference on April 25, 2017 said IFRS has been adopted by over 120 countries, essentially every country on the planet with the holdout exceptions of:

  • U.S.
  • China
  • Japan
  • India

The inference is the overwhelming majority of the stocks in the world are reported on a consistent basis.

The US is the main stubborn hold out. He suggests China is holding back to see what the US does. Ripple effect is that if the US continues to hold out, China will too. If we adopt, China will too.

There is still the uncomfortable reality that each country chooses which aspects of IFRS to adopt or reject.

Apart from that precisely-consistent-across-the-planet idea, the comment that only a few countries have not adopted and eeeeevryone else is doing it makes it sound like most stocks are reported on IFRS.

I checked.

That isn’t the case.

Like a persistent vampire in a horribly bad horror movie, IFRS just won’t stay dead in the U.S.

Image courtesy of Adobe Stock.

I thought IFRS in the US was dead. In case you didn’t know, I have a fairly strong opinion on the issue.

A presenter at the CalCPA’s Accounting and Auditing Conference on April 25, 2017 had the following comment on IFRS at the end of the presentation:

Death, taxes, cockroaches, and IFRS aren’t going away.

My immediate thought:

Unfortunately, that now seems to be true.

IFRS is baaaack

He perceives the pendulum of discussion on IFRS is swinging back to the topic being on the table.

His comments consistently contained the inference that IFRS is one body of knowledge, consistent in its application in every country across the planet that has adopted the rules.

IFRS adoption likely to stay dead

The SEC Chief Accountant had some comments in a speech today that reduces my worry that IFRS converadoption ™ may resurrect from the dead.

Check out Remarks before the 2014 AICPA National Conference on Current SEC and PCAOB Developments – The SEC Chief Accountant, James Schnurr spoke to the AICPA conference.

I don’t know how to read between the lines of a prepared speech from a senior official. My simplistic reading of the comments suggests that he has been asked to look at the IFRS issue again to see if there is any way to move forward or else close the door completely.

More good stuff for auditors – 12/5

A few links and comments of interest to auditors. The corpse of IFRS is looking more like a vampire. There are little muscle twitches, suggesting it isn’t fully dead.

12/3 – Edith Orenstein at FEI Daily – SEC Chief Accountant Has Fourth Alternative on IFRSThe Chief Accountant is considering a fourth option, following the options of 1) surrendering all standard setting authority to IFRS, 2) giving option to everyone to file with IFRS, and 3) ‘condorsement’, aka convergadoption ™ .

IFRS adoption: Yet another fatal flaw and a heaping dose of ridicule

Apparently it is not yet universally believed that adopting IFRS for the U.S. is a horrible, fatally flawed concept that would harm the U.S. capital markets. I’ll mention yet another catastrophic flaw in the concept after a few jokes at the expense of IFRS.

First, some indication there is still a heartbeat in the otherwise decaying corpse.

I hope there’s still not hope for convergadoption ™

Mentioned before that the New SEC Chief Accountant {is} Weighing Switch to Global Accounting Rules – The new chief accountant is reviewing past work at the SEC on IFRS.

On November 6, the Wall Street Journal reported he hopes in a few months to have “movement” on the issue. Didn’t give a hint what direction he thinks the agency should go.

Professors Paul Miller and Paul Bahnson discuss IFRS at length in their article, IFRS in the U.S.: The opera star has already sung (free registration required).

In the article, they explain that SEC chair Mary Jo White said she thought IFRS adoption might be a good idea in a meeting with the FAF.

A heaping helping of ridicule

We can finally bury IFRS convergadoption ™?

I believe the answer is yes.

At least that is the conclusion I draw from an article by Michelle Quah at The Business Times: Full convergence on accounting standards no longer achievable: IASB

The paragraphs visible in front of the paywall report that Hans Hoogervorst, Chairman of the IASB, said full convergence with the U.S.

…is no longer an achievable project.

IASB moved forward with their IFRS 9 on financial instruments without any agreement with FASB. The boards are going their own ways.

In the meantime, each country around the world can continue to pick and choose which parts of IFRS it wishes to follow.

Description of IFRS in practice – – nation-based, a la carte, & locally tweaked. Now ‘carve-in’. For the public good.

Mentioned in an earlier post that the EU is having second thoughts about IFRS. They want formal authority to pick-and-choose which pieces of new IFRS rules to adopt.

Here’s an article from Reuters supporting the idea that pick-and-choose is the preferred approach: EU seeks to increase influence on global accounting rules.

They are wanting to go from a yes/no approach to accepting IFRS rules in full or skipping an entire rule. The new word is they want to “carve-in”: …

Maybe we can finally bury IFRS convergence

My hopes rose even higher that we can finally lay IFRS convergadoption to rest in a 6’ deep grave, lay a thick slab of concrete on top, and pave that entire section of the new cemetery after I read Francine McKenna’s column at Capital Ideas: Regulation, but only if cost-justified. Convergadoption is my word-of-the-day from Adrienne Gonzalez.

Ms. McKenna discusses the SEC staff report that not only didn’t suggest any way forward for convergence but seems to me like an extended argument against IFRS.

She then described a few things that I can’t see with my vision, like declining support from the big firms and possible concessions to reality from the IASB.

Convergence or Co-whatever-its-called-today with IFRS is Co-drifting-away

The IASB staff have released a report responding to the very lukewarm SEC staff report on IFRS convergence.  Tom Selling at The Accounting Onion characterizes the IASB report as The IASB’s Stages of Grief.

He points out numerous places where there are massive differences between U.S. GAAP and IFRS. A few examples he sees are:

SEC report that doesn’t address when to implement IFRS reads more like a position paper against IFRS

As expected, the SEC staff released a report on IFRS that does not contain a recommendation on whether to adopt IFRS or when to adopt.

The report is called Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers.

I have not read the full 137 page report, and don’t plan to. As I browsed the first 28 pages, what struck me is the large number of observations in the report that are actually fairly major criticisms of IFRS and reasons not to adopt it.

Here’s a small number of examples:

Perhaps IFRS can be postponed to death

The Wall Street Journal reports that the SEC staff will have a report in a few weeks addressing adoption of IFRS for the US. The report won’t have a recommendation on whether or how to make the switch.

The expectation is a final decision has been pushed off until at least 2013.

The article is Delay Seen (Again) for New Rules on Accounting, by Michael Rapoport.

For more detail that will actually tell the story better for us accountants, check out Tom Selling’s post, What the Chief Accountant’s Resignation Means for the Future of IFRS in the U.S., posted two days before the above article from the Wall Street Journal.

Another reason IFRS are a really bad idea

All economies, cultures, and societies operate the same way, right?

I just realized that’s a fundamental underlying concept of IFRS. One set of accounting rules can be applied consistently in all nations regardless of the divergence of legal systems, regulatory structures, ethical frameworks, and general worldviews.

I realized that is yet one more severe conceptual failure in IFRS after reading Global Accounting Rules – An Unfeasible Aim by professors Stella Fearnley and Shyam Sunder. David Albrecht has reprinted their op-ed in his blog post, UK Prof and USA Prof Against Global Accounting Rules.

Here is the key aha! sentence for me: …