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IASB vice-chairman calls global accounting standards "inevitable"

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Aug 13, 2014

IASB Vice-Chairman Ian Mackintosh gave a speech today at the IFRS Foundation conference in Johannesburg, South Africa, on the achievability of global accounting standards. He discussed the progress the IASB has made and the differences between convergence and adoption.

Mr. Mackintosh opened his speech by reflecting on the lessons learned during the recent global financial crisis; he highlighted the interconnectedness of economies, saying that “[p]ost-crisis, policymakers are all too aware of how every national capital market in the world, even the largest, functions as little more than a satellite of the global financial system.” Mr. Mackintosh noted that one-third of all financial investments are international transactions.

After giving a brief history of the IASC and IASB, Mr. Mackintosh discussed the recent progress toward achieving global accounting standards. He explained that 81 percent of countries surveyed mandate the use of IFRSs for all or most public companies and that most of the remaining countries that have yet to require the use of IFRSs for domestic purposes — including India, Japan, China, and the United States — already allow its use in certain circumstances. Mr. Mackintosh stressed that the IASB’s high-quality standards have been “validated” by more than a decade of use in various economies. He further asserted:

This evidence indicates that global standards are both desirable, achievable and in my view, inevitable. As economic globalisation continues apace, so too will the force of the arguments in favour of IFRS adoption within these remaining jurisdictions. That is why I believe that we should not fret too much about the timing by which we get every jurisdiction onto global standards. To quote Paul Volcker, legendary Chairman of the US Federal Reserve and the first Chairman of our Trustees, “Ultimately, this will get done”.

Mr. Mackintosh went on to discuss the IASB’s convergence efforts with the FASB and examined project successes and failures. He stressed that convergence isn’t the same thing as adoption and that the “structural fault” of convergence is that independent boards have different imperatives — the FASB prioritizes feedback from U.S. constituents, while the IASB weighs feedback from around the world, including the United States — and therefore reach incompatible conclusions. Mr. Mackintosh also warned of the “many dangers of pretending” that converged national standards are a substitute for global standards. He underscored that small differences in accounting requirements can have a substantial effect on reported performance and indicated his view that adoption of IFRSs is essential:

These are the reasons why full convergence can probably never be achieved, and why adoption of IFRS is the only viable approach to achieving global accounting standards. There really is no shortcut to meeting the challenges of economic globalisation, other than by providing a single set of high quality, global accounting standards. That is what IFRS does.

Mr. Mackintosh believes that globalization will occur when countries have enough confidence in the IASB's processes, judgment, and outreach activities. He reiterated his opinion that global standards are achievable and an inevitable consequence of continued economic globalization.

Text of the full speech is available on the IASB's Web site.

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