Research released earlier this month by the world's six largest accounting firms shows that over 90 percent of the 59 countries surveyed intend to converge with International Financial Reporting Standards (IFRS). However, hurdles to reach this goal remain.
The GAAP Convergence 2002 project involved BDO, Deloitte Touche Tohmatsu, Ernst & Young, Grant Thornton, KPMG and PricewaterhouseCoopers. The findings found that 72 percent of the countries intending to move towards IFRS have a formal policy in place to achieve this, in most cases aimed initially at listed companies.
More than half the countries (51 percent) indicated that the complex nature of some of the international standards — in particular, those relating to financial instruments, and others incorporating fair value accounting — is a barrier to convergence in their country. In addition, 47 percent of the countries surveyed also cited the tax-driven nature of their national accounting regime as a hurdle. Consequently, many countries are at present limiting implementation of IFRS to listed companies, rather than extending it to all companies.
Survey respondents also stressed the importance of getting better and more timely access to national language translations of the new standards and interpretations. While translations of international standards were available in 70 percent of the countries covered, in many cases the translations were not sanctioned by the IASB. In addition, in nearly one third of the countries where IFRS are available in the national language, the translations were not considered to be available quickly enough.
Another area of challenge identified was the availability of IFRS training, for which demand is expected to build up significantly as the world moves towards new standards.
“Despite greater moves towards convergence, our survey indicates that obstacles still remain to achieving full and consistent adoption of the standards in the near future,” said Danita Ostling, Partner, Global Professional Practices, Ernst & Young.
Based on the survey findings, “GAAP Convergence 2002” recommends a number of principal action items for all parties involved in achieving further convergence.
“The accounting profession has actively promoted the development of global standards, but must increase its efforts to achieve the goal,” Ostling said. “Greater commitment is now required to make IFRS available throughout the world, in the required national languages, through training, and by assisting those countries that have started the convergence process to complete it.
“We urge all capital markets participants — governments, regulators, national standards setters, as well as companies, their investors and the academic world — to continue to work together with the IASB and the accounting profession to eliminate differences between national and international standards and to each take actions in their field of responsibility to further convergence. Only with a joint effort will we achieve a common accounting framework that is interpreted and applied consistently,” Ostling concluded.