IFRS in the United States: If,When and How

This paper provides an overview of the convergence efforts of the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board. It begins with their 2002 Memorandum of Understanding and traces developments up to the December 2011 announcement by the IASB Chair that convergence has come to a close, and it is now time to incorporate IFRS into the US financial reporting system. The paper then assesses approaches being considered by the SEC for incorporating IFRS into the US financial reporting model. The conclusion calls on the SEC to ‘make a decision’ and set a date for US adoption of IFRS. Otherwise, the SEC effectively will have abandoned its goal of a single set of high quality global accounting standards.     

Convergence with International Financial Reporting Standards: The Case of Indonesia

Accounting professional bodies and governments in over 70 countries have supported the efforts made through the Indian Accounting Standards Board (IASB) in setting global accounting standards by adopting International Financial Reporting Standards (IFRSs) for local financial reporting purposes. However, this has not happened in over 30 other countries due to various reasons. The US standard setters, for example, have decided to eliminate the differences between IFRSs and US Generally Accepted Accounting Principles (US GAAP) first as part of their convergence project with the IASB. Also, some emerging nations have not supported IFRSs due to other reasons. In Indonesia, for example, IFRSs are not permitted for domestic listed companies. The purpose of this paper is to provide an understanding of the possible reasons for non-adoption of IFRSs in Indonesia by highlighting some of the important factors that are likely to influence the accounting environment in that country, taking an ecological perspective.     

Monopoly versus Competition in Setting Accounting Standards

Financial accounting standards are set by organizations granted a significant degree of monopoly power by various governments. While there has been considerable debate on the merits of national (e.g., US Financial Accounting Standards Board (FASB)) versus international (International Accounting Standards Board (IASB)) monopolies, little attention has been paid to the merits of using competing standard‐setting organizations (SSOs) for setting accounting standards. We compare the standard‐setting processes of the FASB/IASB to the processes of four technology‐oriented SSOs to assess the role of competition. We also provide a case study of monopoly and competitive standards in telephony. Both telephony and accounting yield some gains from coordination, and similar arguments are used (under the labels of comparability and consistency of accounting) in debates about granting a monopoly to their respective SSOs. Our results show that a group of volunteers competing with the government‐sanctioned monopoly of International Telecommunications Union transformed the telephone industry. Thanks to this standards competition, we enjoy free video internet calling and massive cost savings. Implications for accounting standard setting are discussed.     

Harmonization and the Conceptual Framework: An International Perspective

The release of CLERP 9 (Commonwealth of Australia, 2002) requires the Financial Reporting Council and the Australian Accounting Standards Board to adopt International Accounting Standards (IAS) en bloc as domestic reporting standards by 1 January 2005. This article considers the current and future role and direction of the conceptual framework (CF) under the CLERP proposals and a potential IAS reporting environment after January 2005. It is argued that Australia, which has been a major innovator on CF issues, may suffer a major setback if the International Accounting Standards Board's CF is adopted in January 2005. Furthermore, while the International Accounting Standards Board (IASB) has been aggressively pursuing a set of global accounting standards, it remains unclear whether the IASB will, or can, develop an internationally relevant and generally accepted CF which can guide the development of a globally compatible set of accounting standards.     

GFC or KFC?: How Standard Setters Were Battered and Fried

The Global Financial Crisis (GFC) has exposed the fragility of both the alleged independence of the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) and their agreement to work together on major projects such as accounting for financial instruments. This paper outlines the events that have dogged the IASB and FASB in their attempts to respond to the GFC and explores the implications of the recent political pressures on accounting standard setting for the likelihood of ultimately achieving one global set of accounting standards.     

On the ‘Disclosure Initiative – Principles of Disclosure’: The EAA Financial Reporting Standards Committee’s View

Abstract

This paper summarises the contents of a comment letter produced by a working group of 12 academics in response to the International Accounting Standards Board (IASB) Discussion Paper on principles of disclosure. The comment letter was submitted by the Financial Reporting Standards Committee (FRSC) of the European Accounting Association (EAA). The work includes reviews of relevant academic literature of areas related to the various questions posed by the IASB in the Discussion Paper, including the ‘disclosure problem’ and the objective of the project, the suggested principles of effective communication, the roles of the primary financial statements and notes, the location of information and the use of performance measures. The paper also discusses the disclosure of accounting policies, the objectives of centralised disclosure, and the New Zealand Accounting Standards Board staff’s approach to disclosure.     

Does the Control-based Approach to Consolidated Statements Better Reflect Market Value than the Ownership-based Approach?

Motivated by the recent Discussion Paper (DP) issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on how to define reporting entities, this study investigates the value relevance of consolidated statements under the ownership-based approach of U.S. Accounting Research Bulletin No. 51 (ARB 51) and the control-based approach of International Accounting Standard No. 27 (IAS 27). The results show that consolidated financial statements based on a broader definition of control provide more useful accounting information than those based only on majority-ownership control. We also address one concern raised in the DP, namely, whether a reporting entity should use the common control model to include entities that are under common control of an individual investor or family. The results suggest that accounting standard boards should include the common control model in defining the group reporting entity for firms with complex ownership structures.     

Expected-loss-based Accounting for Impairment of Financial Instruments: The FASB and IASB Proposals 2009–2016

The financial and banking crisis of the late 2000s prompted claims that the incurred-loss method for the recognition of credit losses had caused undesirable delay in the recognition of credit-loss impairment. In the wake of the crisis, the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) worked towards the development of expected-loss-based methods of accounting for credit-loss impairment. Their work included an ultimately unsuccessful attempt to develop a converged FASB/IASB standard on credit-loss impairment. The FASB and IASB eventually developed their own separate expected-loss models to be included, respectively, in a 2016 FASB standard and in the IASB’s 2014 final version of IFRS 9 Financial Instruments. The failure to achieve convergence on an issue of such high profile and materiality has generated some controversy, and it is claimed that it will impose significant costs on the preparers and users of the financial statements of banks. This paper examines the various sets of expected-loss-based proposals issued separately or jointly since 2009 by the FASB and the IASB. It describes and compares key features of the different approaches eventually developed by the two standard setters, referring to issues that arose in arriving at practically workable solutions and to issues that may have impeded FASB/IASB convergence. It also provides information indicative of the possible effect of differences between the two approaches.     

国际财务报告准则关于金融工具分类变化预期对我国企业的影响分析

2009年7月,国际会计准则理事会发布征求意见稿<金融工具:分类和计量>,旨在降低金融工具确认和计量原则的复杂性,避免会计准则内在的不一致.并在此基础上修订<国际会计准则第39号--金融工具:确认和计量>(IAS39)中关于分类和计量的有关要求.本文通过手工搜集13家上市银行(剔除中小板上市的宁波银行)2006年至2009年的年报和半年报数据,并按照新倡导的两分类方法进行数据调整,进而比较了不同分类下预期对企业财务信息的影响及两分类下所提供会计信息的质量问题,并根据前文的理论分析和实证结果对金融工具两分类及两分类后的相关问题提出了建议.     

An examination of the perceptions of auditors and chief financial officers regarding principles versus rules based accounting standards

The debate over the adoption of International Financial Reporting Standards (IFRS) by United States issuers, or its convergence with U.S. Generally Accepted Accounting Principles (U.S. GAAP) has been going on for several years now. However, as of this writing, the Securities and Exchange Commission (SEC) has still not taken a definitive position on the issue. This is in part due to issues involving the cost of adoption, independence concerns relating to the IFRS promulgation body, the International Accounting Standards Board (IASB), and the debate over which type of accounting standards is superior for financial reporting: IFRS, which are said to be “principles-based,” or U.S. GAAP, which are said to be “rules-based.” In this paper we examined the views of two stakeholders in the U.S. financial reporting system, auditors in large public accounting firms and Chief Financial Officers in the Fortune 1000. We elicited their perceptions involving ten situations where specific rules are incorporated in U.S. GAAP. We asked if the elimination of the specific rule would be likely to better achieve the “qualitative characteristics of useful financial information” as defined by the Conceptual Framework for Financial Reporting adopted by the Financial Accounting Standards Board (FASB) in 2010 (FASB 2010) and the similar document adopted by the IASB at the same time (IASB 2010). We found that in eight of the ten situations both groups preferred the rules-based accounting regime (the current U.S. GAAP rules) over a principles-based approach.     

The IASB standard-setting process: Participation and perceptions of financial statement users

The interests of users of financial statements are, in theory, paramount to accounting standard-setters. However, there is a dearth of research into users' participation in, and influence on, the process of setting accounting standards. The enhanced status now accorded to the International Accounting Standards Board (IASB) offers the opportunity to examine these issues in a new regulatory context. This study reports the results of a questionnaire survey of the perceptions of, and participation in, the IASB process of a sample of UK investment management firms. The findings suggest that these firms' participation is not as low as is often inferred from the public record of comment letters. In particular, a considerable number of firms participate through representative report user organisations such as the Investment Management Association. Other findings suggest that the major factor inhibiting investment firms from participating is the cost of lobbying, not complacency that the IASB is ‘on their side’ and will naturally safeguard their interests. Moreover, the respondents consider the accounting profession and the European and US accounting standard-setters to be the dominant interest groups in the IASB standard-setting process.     

A Multi-Issue/Multi-Period Analysis of the Geographic Diversity of IASB Comment Letter Participation

The International Accounting Standards Board (IASB) establishes accounting standards now used in some form in over 100 countries. Diverse geographical participation in International Financial Reporting Standards (IFRS) standard-setting is seen as desirable as it may improve the consistency of IFRS applications, reduce criticism of regional over-influence, and promote the legitimacy of the IASB. This study investigates country participation and the regional and institutional factors that influence the geographic diversity of comment letters (CLs) in the IASB's standard-setting process. Using CLs regarding 57 IASB issues from 2001 through 2008, we find that countries with EU membership, G4+1 membership, donations to the IASB, and larger equity market development are associated with larger numbers of CLs and CL writers. Analysis of a subsample of more developed countries finds some evidence that countries with more historic divergence in accounting standards from IFRS also have more CL writers. In most countries, one of several major stakeholder interest groups, such as professional accountancy bodies, accounting standard-setters, and public accounting firms, send at least half of the CLs. While response levels for most countries vary greatly depending upon the nature or topic of an IASB issue, overall response levels remain low at just over 100 responses per issue and did not increase over time. While geographic diversity and response rates are greater than its predecessor the International Accounting Standards Committee, they are lower than those of many national standard-setters, possibly raising due process and legitimacy issues for the IASB.     

The Changing IASB and AASB Relationship

This article takes the reader inside the changing relationship between the Australian Accounting Standards Board (AASB) and other standard setters, and the International Accounting Standards Board (IASB) in 2012. Critically, it looks at the prospect that relationships between the IASB and domestic standard setters might now change markedly as attempts are made to establish more formal links with domestic and regional groupings of standard setters, a move currently being mooted by the International Financial Reporting Standards (IFRS) Trustees and the IASB. Related to this development, the article looks at a rapidly emerging aspect of standard setting – the rise of regional groupings such as the Asian‐Oceanian Standard‐Setters Group (AOSSG). Such groups are having a direct impact on relationships between domestic standard setters and the IASB.     

An Investigation into the Potential Adoption of International Financial Reporting Standards in the United States: Implications and Implementation

International Financial Reporting Standards (IFRS) have been adopted by most of the G20 countries. Given the broad worldwide acceptance of IFRS and significance of attaining comparability to facilitate free flow of capital, the US standard setter, the Financial Accounting Standards Board (FASB) made a commitment to jointly work with the International Accounting Standards Board (IASB) to explore the possibilities of convergence of US Generally Accepted Accounting Principles (GAAP) with IFRS. In 2007, the US Securities and Exchange Commission (SEC) eliminated the requirement that foreign companies listed on the US stock exchanges reconcile their IFRS‐based financial statements with the US GAAP. In the same year the US SEC issued a concept release to the public requesting comments on a proposal to allow US issuers to prepare financial statements in accordance with IFRS. Following these initiatives by the FASB and SEC, the aim of the present study is to investigate the implications of a potential full adoption of IFRS by the US. The present study details the challenges and benefits of adoption and outlines the steps required for a successful outcome of this process.     

The IASB and FASB convergence process and the need for ‘concept-based’ accounting teaching

The increasing globalization of the U.S. economy drives interest in international accounting standards. In this respect, the convergence process between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) targets the completion of several major projects by 2011. The importance of the projects under consideration as well as the lack of conclusive theoretical solutions around them suggests that the target of a “common set” of accounting standards will be replaced in the short-medium term by a de facto situation of a “slightly different set” of accounting standards. In this paper, we draw on best available practices to make a specific proposal for the introduction of IFRS into the curriculum of institutions of higher learning in the U.S. Our proposal is driven by the idea that accounting education should move from teaching ever temporary rules to emphasize the economic and strategic underpinnings of accounting transactions.     

IFRS Developments in the USA and EU,and Some Implications for Australia

There have been several developments recently, both in the United States (US) and the European Union (EU), which will have consequences in Australia. The two major developments in the US are the decision by the Securities and Exchange Commission (SEC) to drop the reconciliation requirement for foreign registrants that adopt International Financial Reporting Standards (IFRS) and the serious consideration that the SEC is currently giving to allow US publicly traded companies to adopt IFRS. The developments in the EU involve its ever‐lengthening endorsement process and the increasing pressure being brought on the International Accounting Standards Board (IASB) and its oversight body, the International Accounting Standards Committee Foundation (IASCF) trustees, to alter their composition and the character of their operations. At the same time, there has been the FASB's appeal to the EU to accept IFRS without any endorsement process. The developments in the US have been lauded by the IASB and in Europe. They represent an impressive vote of confidence in the IASB and in the efforts being made by national standard setters and securities market regulators around the world. The US has already taken a long stride towards joining the more than 110 countries and other jurisdictions that have committed themselves to allow or require the use of IFRS for some or all reporting entities.     

Why is there inconsistency in accounting for liabilities in IFRS? An analysis of recognition,measurement, estimation and conservatism

We report that International Financial Reporting Standards (IFRS) are inconsistent with respect to the recognition and measurement of liabilities, both in the conceptual framework for financial reporting and in accounting standards themselves. We demonstrate that this arises in part because the International Accounting Standards Board (IASB) does not make a conceptual distinction between the process of measurement, which requires a currently observable measurement attribute, and the process of estimation, which is inherently subjective. The IASB employs only the logic and language of measurement, while actually requiring entities to report both measurements and estimates in financial statements. Our contribution is to identify and interpret this conceptual conflict, to demonstrate that this has particular relevance to accounting for liabilities, and to draw implications for accounting research and policy with respect to recognition, measurement and conservatism.     

Articulation,Profit or Loss and OCI in the IASB Conceptual Framework: Different Shades of Clean (or Dirty) Surplus

Abstract

The 2015 International Accounting Standards Board (IASB) Conceptual Framework Exposure Draft (2015 IASB CF ED) proposes a mixed valuation and transactions approach to income determination. Nevertheless, it does not clearly choose between single or dual concepts of profit, which renders the 2015 IASB CF ED’s financial accounting model somewhat incoherent. The 2015 IASB CF ED proposes a rebuttable presumption that profit or loss should be all-inclusive. Only the IASB can rebut this presumption, but the 2015 IASB CF ED provides no clear conceptual basis on which to rebut this presumption. In spite of considering dual measurement, the IASB believes that it is neither possible, nor necessary, to distinguish between profit or loss and other comprehensive income (OCI) on a conceptual basis. This paper suggests that the 2015 IASB CF ED’s approach to measurement can be improved by introducing a deprival value measurement rule in cases where fair value and historical cost are not appropriate. Furthermore, it argues that under dual measurement it is both necessary and possible to make a conceptual distinction between the realised items of income and expense in profit or loss and those recognised by accretion in OCI.     

Implications for the Conceptual Framework Arising From Accounting for Financial Instruments

This article describes some of the issues faced by standard setters in developing guidance on accounting for financial instruments and the implications these issues have for the conceptual framework (CF). The objective is to outline issues, not necessarily to resolve them, and to consider the implications they have for further developing the conceptual framework.
Given the current trend of harmonization and convergence of accounting practice towards international standards, it seems reasonable to assume that any policy implications will be most relevant to the CF inherited by the International Accounting Standards Board (IASB). ¹ Unless otherwise stated, references will be made to International Accounting Standards (IAS).     

Bewertung der Fair Value-Bilanzierung von Versicherungsverträgen anhand der IASB-Zielsetzungen

The International Accounting Standards Board (IASB) published the Exposure Draft ?Insurance Contracts“ in July 2010. This standard draft is the basis for the final IFRS for accounting of insurance contracts and will replace the currently valid interim standard IFRS 4. In its Discussion Paper from May 2007 the IASB proposed the valuation of insurance liabilities based on a Current Exit Value. However, in the Exposure Draft the board changed his opinion (not at least due to the visible consequences of the last financial crisis) and follows an approach based on so called fulfillment cash flows. This new approach is different in many details and aims at creating a greater objectivity. Goal of this article is firstly to introduce the target valuation model and to judge it based on criteria developed in the paper. Furthermore, alternatives that could be applied in a final standard shall be shown.