And that is certainly how it looked when the US regulatory body, the Securities and Exchange Commission, issued the first progress report on its workplan which may, or may not, lead to IFRS becoming the financial reporting norm for the largest US companies, and the US, as a result, joining the rest of the world in the use of one financial reporting language. The SEC had promised to publish the report by the end of October and, keeping the tension high to the end, released it on the last working day of the month.
Indeed on the day before, at the SEC's New York office, the Monitoring Board which oversees the work of the IASB had met. And SEC Chairman Mary Schapiro had joked afterwards that the SEC could hold the report out for longer and put it up on the website on Halloween night. Instead it appeared on the website at the same time that IASB Chairman, Sir David Tweedie, and FASB interim Chair, Leslie Seidman, were speaking at the annual Deloitte IFRS Summit, also held in New York. So for two days activity and discussion was intense. The progress report shows, as such reports should, that progress has been made. But there is nothing in the report to suggest which way the final argument may go. It is a sober consideration of the efforts which have been made to evaluate the IFRS process and all of its possible consequences.
That may disappoint those who wanted a more significant boost to the movement towards global harmony. But they should hearken to the wise words of the SEC's Chief Accountant, Jim Kroeker. I chatted to him after the Monitoring Board meeting and he was dampening down speculation about the nature of the progress report's conclusions. But he made a significant remark. "If we had seen anything fatal we would have said so", he said. "But we didn't". So no one should be downcast at the downbeat nature of the report.
But there are still significant problems ahead. One is the funding of the IASB. Again, in conversation, Mary Schapiro made it plain that one of the most important issues in maintaining and safeguarding the independence of the IASB was to ensure that it was properly funded. The SEC progress report points out that the IASB is currently running a sizeable deficit and that its funding is haphazard. The report makes the point that: "Not all jurisdictions that have incorporated IFRS in some form as part of their financial reporting system contribute to the IFRS Foundation. In fact, based on the Staff's initial research, it appears that less than 25% of these countries contribute; in other words, three out of four countries reported by the IFRS Foundation as permitting or requiring some form of IFRS provide no monetary funding". And the progress report goes on to comment that: "Conversely, the two national jurisdictions with the largest contributions in 2009 were the United States (£1.85 million) and Japan (£1.74 million), neither of which have formally incorporated IFRS into the financial reporting system for their domestic reporting issuers". Then, says the report: "In fact, voluntary contributions from the United States, principally from large US companies, have been the largest country-specific source of funds to the IFRS Foundation. During 2009, 2008, and 2007, payments from US-based contributors accounted for 17%, 22%, and 26 %".
No wonder that Schapiro was making the point that the IASB needed a stable source of funding and at present, she said: "we don't have that". "There needs to be sufficient funding that is stable over the long run", she said, "to ensure the IASB's independence".
Curiously enough it is the EU which has reduced its contribution. Perhaps it should listen to the relevant EU Commissioner for Internal Market and Services. Like Mary Schapiro, Michel Barnier is a member of the Monitoring Board, and at the meeting the day before the progress report's publication he made the point that ensuring the stable funding of the Board was a major objective and that the Board's independence should never be undermined. And then he went on to stress his thanks to Sir David Tweedie for all his work. Maybe the cheque is in the post.
Elsewhere all was sweetness and light. Both Tweedie and Seidman made it plain that there was the resolve to sort out a slimmed down agenda of essential work which should be completed by the middle of 2011. And at the Monitoring Board meeting Tweedie stressed that: "There had been vast improvements because of the convergence programme", and found his words echoed by Mary Schapiro who said that: "The convergence process is also a process which has got both the IASB and FASB to produce higher quality standards".
There is a long way to go before the SEC allows the US to join with much of the rest of the world and use IFRS. But the progress report is a hopeful sign. The SEC promises to report back with a decision sometime next year. Schapiro suggested it would be later rather than sooner in the year. And with the Halloween precedent no one is betting, as she again joked, against a New Year's Eve announcement at the end of next year.
Robert Bruce
November 2010
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