Comments on IFRSs by IOSCO leader

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04 Mar 2006

Michel Prada, Chairman of the Technical Committee of IOSCO, delivered the (PDF 56k) at a recent roundtable on global accounting convergence sponsored by the Financial Stability Forum in Paris on 16 February 2006. Mr.

Prada addressed a range of issues, including trends in worldwide accounting and auditing standards, the processes for setting standards, the recent changes to the IASCF Constitution, structural changes within IFAC, "adoption, equivalence, harmonisation, and convergence in relation to IFRSs", the importance of a set of IFRSs for small and medium-sized entities, and the need for a 'standard setting pause' ("some stability over the next 3 years may well be needed for the transition to be really completed and digested by the stakeholders"). Here is an excerpt:

We should thus be satisfied to see that today IFRS are accepted in about 75 jurisdictions, the word 'accepted' meaning either a required or permitted use. But this absolute number does not mean much in terms of financial markets. It is more meaningful to observe that:

  • Out of a worldwide market capitalization totalling over 36 trillions US Dollars at the end of 2005, 11 trillions $ correspond to markets where IFRS are either required or permitted and 17 trillions US $ to markets where US GAAP is the rule; out of the balance, 4 trillions US $ correspond to Japan GAAP;
  • In terms of the largest companies included in the Fortune 500 list, 176 prepare their accounts under US GAAP and 200 under IFRS, 81 under Japanese GAAP.
These data illustrate both the good progress already achieved worldwide by the IFRS, and the strategic importance of achieving a satisfactory arrangement for acceptance of IFRS in the USA and for convergence between Japan GAAP and IFRS.

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