IASB Vice-Chairman warns against 'turning back the clock'

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23 Jun 2014

IASB Vice-Chairman, Ian Mackintosh gave a speech today at the IFRS Conference in London titled 'Turning back the clock?'. He gave an overview over the current and new work programme and then commented on a vision of international standard-setting that would allow differences between accounting standards to persist.

His comments on the work programme were focussed on the 'current projects' that involve completing the major convergence projects with the FASB and the 'new projects' that are IASB only projects. Mr Mackintosh pointed out that only two convergence projects remain which were both "approaching completion". He stressed that the IASB expects to issue a final version of IFRS 9 Financial Instruments next month although "despite our best efforts, we were unable to reach agreement with the FASB on impairment". On lease accounting he admitted that the IASB is aware that the changes would not be without cost to preparers and had therefore already made some pragmatic decisions to help keep costs to a minimum. Among the current projects he also commented on insurance accounting even though that project was not one of the original convergence projects. He stated that bringing the diversity in insurance accounting back into line would certainly cause controversy. Among the new IASB only projects Mr Mackintosh commented on the review of the Conceptual Framework where the IASB expects to publish an Exposure Draft of the new Conceptual Framework later this year and the project on financial disclosures.

Mr Mackintosh then turned to the fact that the spread of IFRSs around the world has led to a change of priorities for the IASB as the goal was no longer to simply increase the number of IFRS users but to deepen the collaboration with IFRS jurisdictions around the world and to encourage consistency in the application and implementation of the standards. In this context he also commented on remarks made recently by members of the FASB that one size (of accounting standards) may not fit all and that legal, regulatory and cultural differences among different jurisdictions would make divergences inevitable. Mr Mackintosh turned against these statements and pointed out that "between 1973 and 1998, nine of the largest economies, including the United States, worked together to minimise divergence between their respective national accounting standards, using International Accounting Standards as the benchmark" and "failed miserably". He stated: "If all IASB constituents were to insist on the primacy of national preferences, obviously the goal of a single set of global standards would come to naught". He also believed that the argument behind these comments by FASB members were not valid:

I do not buy the argument that cultural differences mean that a 'one size fits all approach' cannot work. Our Board and staff work incredibly hard to develop principle-based standards that can be adopted by countries around the world, regardless of their stage of economic development and their legal culture. As a result, countries with cultures as diverse as Brazil, Canada, Colombia, Germany, Japan, Korea, Mexico, Nigeria, Turkey and of course the United Kingdom have all adopted IFRS without major issues. Indeed, there is more cultural diversity between the UK and France than between the UK and the US, yet both France and the UK report using IFRS. Furthermore, more than 500 foreign companies listed in the US already apply IFRS, so the evidence would appear to show that in financial reporting, one size can indeed fit all—if the will is there to make it happen.

Please click for access to the full text of Mr Mackintosh's speech on the IASB website.

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