Accounting News

Tuesday, November 6, 2012
G20 Urges Convergence

Regulators from the G20 are urging the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to make progress on convergence. They see the work by the organizations as not progressing well. the regulators are trying to revive the negotiations between the two organizations.

The goal of the negotiations between the IASB and FASB is to have a  set of standardized accounting rules around the globe. The idea received the support of the leaders of the G20 back in 2009 during the global financial crisis. Many regulators and investors said that the differing accounting rules made is difficult to collect the information they needed to do their jobs. The G20 leaders agreed to a end of 2009 deadline for convergence.

IASB and FASB negotiators met and were unable to meet the 2009 deadline. The continued to work with a more realistic deadline of summer 2011. But this date was still beyond the negotiators abilities so they said summer 2012 was achievable. Now that we have passed the third deadline the negotiations are going poorly and it appears that they are further apart now than they were in the summer. It has reached a point that Stephen Haddrill, chief executive of Britain's accounting regulator, has given up the goal or convergence.

On of the bigger issues is how banks should show their derivatives holds. The IASB would like them to show up on the balance sheet. The FASB believes that they should be shown via the banks footnotes. While this may seem trivial for all but accountants and regulators; it makes a significant difference for many banks. An example would be Deutsche Bank who would have a balance sheet that is 30% smaller under the FASB rules.

Another holdup for convergence is the SEC. They are still debating whether they will adopt the IASB rules. Mary Schapiro has made every indication that she will not be serving the next administration and will let the decision fall to her predecessor. This will likely mean months of study about the issue for whomever takes the office. In my opinion it is a sign of poor leadership at the SEC.

IASB Chairman Hans Hoogervorst has not given up hope. He believes he will be able to get the Americans on board. Much may be decided on who wins today's election and whom they appoint as chairman of the SEC.

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