Analysing the Harmonisation Agenda

It was in February 2010, that the FASB started making is clear that the ‘grand objective’ of transforming or migrating US GAAP across to IFRS, was falling behind the envisaged time table.

It seemed that part of the urgency and momentum injected by the G20 meetings last year in creating a better global regulatory framework, had been lost for whatever reason and that the more steady and languid pace we had been used to ever since the Norwalk Agreement came into being in September 2002, was the course d’ jour again. In other words, the normal order in the world of international accounting regulation had been re-established.

The FASB also made it apparent that harmonisation in itself was not the major objective and driver as had originally been understood by practitioners and other interested parties.

However, the convergence agenda is partly being driven by concerns the SEC (Securities and Exchange Commission) have around:

• Common control transactions
• Recapitalisation transactions
• Reorganisations and
• acquisitions of minority interests

The SEC also feels that IFRS provides little guidance in certain industries such as:

• Utilities
• Insurance
• Extractive activities and
• Investment companies

We agree that the course towards international harmonisation, for the sake of capital market participants, maintaining liquidity and confidence in the systems and regulatory framework around that system should be a measured and deliberated affair.

The thrust of the SEC’s concerns were voiced by the Chairman Mary L. Schapiro’s words:
“Incorporating IFRS into our financial reporting system would involve a significant undertaking. We must carefully consider and deliberate whether such a change is in the best interest of U.S. investors and markets.”

The themes revolve around whether is serves the interests of US organisations to change to reporting on and IFRS basis, the transition arrangements and timeframes involved for both practitioners and users of the resultant Financial Information.

As all the relevant information the SEC requires to satisfy its custodial and regulatory duties was not available at the meeting in February 2010, Ms Shapiro was reluctant to comment of the feasibility of the originally envisaged road map (Norwalk Agreement) to harmonisation.

Therefore, we await further developments in order to judge the feasibility and eventual time line of the international harmonisation of Financial Reporting Standards.

EconoCountant ©2010


~ by EconoCountant on July 5, 2010.

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