In what could be interpreted as an appeal to US policymakers, IFRS Foundation Trustees chairman Michel Prada recently warned that the goal of harmonizing accounting standards across the globe will be jeopardized if not enough countries subscribe to the mission.
For over a decade, countries have been working to create a common accounting language so that financial statements could be more easily prepared and read across borders. However, competing national interests have prevented some of the world’s largest players, including the US and China, from adopting international reporting standards wholesale.
“The reality is that, given the opportunity, every IFRS jurisdiction would like to choose from the à la carte menu; to tweak the IFRS standards to better reflect local preferences or accounting traditions within their own jurisdiction—a form of nostalgia accounting,” Prada said in a speech in Tokyo on Tuesday.
“Yet, if some jurisdictions, particularly the larger ones, go back to the à la carte model then we should not be surprised that others will follow.”
US policymakers are still not sure if wholesale adoption of international financial reporting standards is in the country’s best interests, according to market sources, who fear a transition to new accounting rules will disrupt a still shaky economy.
Last July, the US Securities and Exchange Commission (SEC) issued a long-awaited report that provided no final word on adopting international reporting standards, instead listing a number of requirements the SEC would need met before signing off on wholesale adoption of IFRS.
“The SEC has been a long-term supporter of our work to develop a single set of high quality global accounting standards, but it is fair to say that progress in the US has been slower than many of us would wish,” said Prada, who added he expects the US to eventually transition to international standards.