IFRS Adoption, Convergence or Endorsement?

It has been over ten months since the Securities and Exchange Commission (SEC) released its IFRS work plan.  Since then, we received a progress report in October.  The SEC is taking a well-advised, methodical approach to making its decision on IFRS in the U.S.

Generally speaking, the debate over IFRS in the U.S. has been whether or not the SEC should permit or require a switch to IFRS for U.S. public companies.  At the AICPA’s National Conference on Current SEC and PCAOB Developments in December, SEC Deputy Chief Accountant Paul Beswick offered another approach – which he called “condorsement.”

Mr. Beswick explained that under this approach, U.S. Generally Accepted Accounting Principles (U.S. GAAP) would continue to exist.  The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) would work to finish their joint converge projects.  After completing their joint projects, FASB would work to converge U.S. GAAP to IFRS over a period of time for standards that are not on the IASB’s work plan. 

At the same time, FASB would have a process to consider new standards issued by the IASB for incorporation into U.S. GAAP.  The new standards could be incorporated into U.S. GAAP with or without U.S. modifications.

The condorsement approach would allow FASB to retain control over U.S. GAAP.  It would also mitigate the effort associated with a full scale, mandated switch to IFRS.

The SEC in its October progress report stated that most jurisdictions follow either a convergence or endorsement approach to incorporating IFRS.  The report noted that only a small minority of the largest jurisdictions use IFRS as issued by the IASB with no mechanism for making changes to the standards. Condorsement is a new term injected into the IFRS debate.  It will be interesting to see how much traction it gains over the coming months.

What do you think you think about the “condorsement” idea? 

- Paul Parks | www.IFRS.com

Comments

[Gaston Cantens]

There will be smart people as long as there are idiots! Please, come back to earth and give us the truth behind the hesitation.

[accountant]

Please, give me the fact with clarity! Fancy words comes from vanity or misrepresentations. I am tired of them! After Government talks about Investments = Bad judgment from the use of our dollars = Redistribution of wealth and who knows what else. There are going to be smart persons as long as you can find idiots! Please, come back to earth and give us the reality behind the hesitation. The Grandiose term Condorsement! Does it makes everything explainable and right?

[IFRS]

agreed with danny... let see how US gonna adopt IFRS...

[Danny DeMichele Entrepreneur]

It's time to put an end for all and go with IFRS. The FASB is broken and lost, and needs to be disbanded.

[Hector Griffin]

It is time to bite the bullet and move to a principles-based system. We don't need more complexity and an ever-increasing array of rules. Let's go with IFRS at the end of 2011 and by becoming part of it, wield greater influence in the decision making of IASB.

[John Lee CPA]

As an accountant thats spent over 30 years with GAAP, I think the go slow approach may be prudent. I applaud Mr. Beswick for his idea.

[Cesar A. Frutos, CPA]

Please, give me the truth with clarity! Fancy words comes from vanity or misrepresentations. I am tired of them! When Government talks about Investments = Bad judgment in the use of our money = Redistribution of wealth and who knows what else. There will be smart people as long as there are idiots! Please, come back to earth and give us the truth behind the hesitation. The Grandiose word Condorsement! Does it makes everything explainable and right?

[Marvin Pollack]

I am just wondering why it is that the U.S. is acting subserviant to IFRS- i.e., why is the US moving towards IFRS, without IFRS moving towards GAAP? From my limited involement with IFRS statements, it seems as if though companies are always trying to get around having to revalue real estate holdings every 3 months, for example. We are still the largest economy in the world. Shouldn't we have more say as to what the standards are?

[Brent]

Give the FASB or the U.S. at large a fair share of the power over IFRS decision making, and then move to IFRS. In that order.

[John P. Vanderslice, CPA]

There are not that many differences, just go to IFRS at the end of 2011. Require all reporting entities to report IFRS statements along side of GAAP statements and explain the differences. Then after 12-31-2011 all statements are based on IFRS. Done.

[S]

Condorsement sounds like a wishy-washy answer to making a real decision. We can join the rest of the world with a form of IFRS or we can isolate ourselves from the international market.

[Howard Sibelman]

"Condorsement" is cute, but not needed. As US GAAP is converged with IFRS, the outcome may appropriately be viewed as US IFRS, just as we have EU IFRS to describe IFRS as modified by the European Union. I'm afraid that the dream of ONE set of identical standards will never be more than a dream. The best we can look forward to is a world where the differences between each country's "IFRS" are minimal and easily understood by users from the details presented in the disclosures.

[Art Lieberman]

We have made complete hash out of our accounting rules by opting for a rules-based system over a principles-based system, to the point where financial accounting is rivaling tax law for complexity and loopholes. It's time to put an end to GAAP once and for all and go with IFRS. The FASB is broken and lost, and needs to be disbanded.

[Rich J.]

Condorsement is just a term to define where we are today. It's a no decision approach and it's wrong.

The SEC needs to make a decision. Should U.S. public companies apply IFRS, which is currently permitted for some foreign filers in the U.S., or not?