International Accounting Standards Board (IASB) Chairman Hans Hoogervorst predicted in a speech in Moscow on Monday that the SEC will adopt IFRS for U.S. issuers.
Hoogervorst doesn’t have any privileged insight regarding the SEC’s internal decision-making, according to the speech posted on the IFRS Foundation’s website. But he said that he and FASB Chair Leslie Seidman think continuing the current process of pursuing convergence on individual projects is not an acceptable way forward.
“The U.S. ultimately will come on board,” Hoogervorst said at the Ernst & Young IFRS Seminar. “Quite simply, they need us and we need them.”
Last month, in a speech at the AICPA’s Conference on Current SEC and PCAOB Developments, SEC Chief Accountant James Kroeker said the SEC needed at least a few more months to produce a final report that would prepare the commission to decide on IFRS.
Hoogervorst acknowledged that IFRS poses many practical challenges for the SEC. “This is not an easy decision to make,” he said. “The U.S. already has developed a sophisticated set of financial reporting standards over many decades. Transitional concerns have to be carefully considered.”
Hoogervorst said those challenges are real, but his comments about the SEC and IFRS were optimistic.
“The U.S. is committed to supporting global accounting standards,” he said. “It is SEC policy, it is U.S. government policy and it is the policy of the G20, in which the U.S. is a key player.”
Currently, the IASB and FASB are working on projects that began in 2002 with the signing of the Norwalk Agreement and four years later moved forward when the boards agreed to a Memorandum of Understanding (MoU) to help merge elements of IFRS and U.S. GAAP.
The boards are making progress on three remaining MoU projects – financial instruments, revenue recognition and leasing – as well as an additional project on insurance, Hoogervorst said. A second exposure draft on revenue recognition has been published, with a comment date running through March.
Hoogervorst explained the timelines of the other three projects:
- On leasing, he expects an additional ED to be published shortly: “Despite what you hear, we have not set out to kill the leasing industry,” he said. “Leasing provides many important economic benefits to companies and that will not change. All we ask is that these transactions are accounted for in a way that is transparent to investors.”
- On financial instruments, where there is work to be done on classification and measurement, he said he hopes to complete the current stage of the project by the end of this year and move quickly to an exposure draft.
- On insurance, he merely said there is commitment to completing the project “in a timely fashion.” He said: “This is another tough one.”
Another task the IASB is working on is the completion of its conceptual framework. In a recent letter to Hoogervorst, the AICPA’s Financial Reporting Executive Committee (FinREC) said that needs to be a priority.
Hoogervorst said the most common request from the IASB’s constituents, though, is for a period of calm.
“I suspect that after the somewhat frenetic period of the last few years, a slowing down in the pace of change would be welcomed by most if not all of our constituents,” he said.
—Ken Tysiac ( email@example.com ) is a JofA senior editor.
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