Accounting convergence casino

Will the world’s largest economy adopt International Financial Reporting Standards (IFRS)? It’s a question that’s had no answer for over a decade now, with the US Securities and Exchange Commission (SEC) continuing to waffle on the call to adopt international standards for US issuers (and declining to comment on the topic).
 
Proponents of “accounting convergence” argue that a shared set of global accounting rules makes it easier for chief financial officers and others to read financial statements across borders. 

Critics say the US has a litigious culture that principle-based international standards don’t account for well enough compared to more precise US GAAP; and are further concerned about the time and costs involved in US businesses having to learn a new set of accounting rules. So which side will the SEC come down on? Let’s play some odds:
 
Chances of the SEC making a formal decision at all: It’s entirely possible the US continues to sit on the fence for the foreseeable future when it comes to convergence. US officials regularly pledge support for harmonized accounting rules to their international counterparts, but insider sources say the government worries that the timing may be wrong. The economy is still shaky, and until it stabilizes, the fear is that mid-size businesses won’t have the resources to migrate their accounting systems to international standards, says Gary Illiano, an accounting partner at Grant Thornton. It’s hard to envisage a time when SEC officials will agree that the economy is healthy enough to support such a transition, nonetheless curious financial markets are expecting an answer from the SEC as time drags on. Odds: 1:3
 
Chances of the SEC making a decision in the next five years: If a decision is made, what are the chances it comes in the next five years? In 2011 PricewaterhouseCoopers surveyed over 1,400 business professionals for their thoughts on the SEC’s attitude towards convergence, discovering that the overwhelming majority (81 percent) believing adoption of IFRS would happen by 2016 or some point later. However the survey was conducted before the commission released a heavily anticipated report on IFRS adoption last July that left many disappointed. After two and a half years in the making, the report provided no final word on convergence, instead listing a number of requirements the SEC would need met before signing off on wholesale adoption of IFRS. And now that former Debevoise & Plimpton litigation partner Mary Jo White has taken over as SEC chairwoman, sources expect enforcement activity (and not accounting convergence) to be a bigger priority at the agency in the near-term.  Odds: 1:5
 
Chances of the IASB stalling the convergence project: Another possible outcome is that the London-based International Accounting Standards Board puts on pause the goal of complete harmony with US standards. Alongside the US Financial Accounting Standards Board, the two boards have been diligently working towards finding common ground between the two standards, but prickly differences (including for example leasing standards) still remain. And as the IASB continues to focus its attention on the US, sources say other countries are feeling left neglected by the IASB board. “It’s possible IASB pulls back from the US to rededicate its efforts towards those countries who have already signed on to their standards,” says one New-York based accountant. Moreover US issuers are not entirely sold on the idea that international standards are necessarily an improvement from the status quo, says Marc Fogarty, an accounting partner at EisnerAmper. That may make it more difficult for the SEC to push US business onto a global set of standards anytime soon, which in turn may weaken the IASB's confidence in the project. Nonetheless, years of effort has been dedicated to convergence, making any decision to postpone plans seem unlikely. Odds: 1: 9
 
If IFRS does become adopted by the US, sources say it’s a safe bet that the SEC will allow a multiyear transition period before US issuers will need to make the transition to international standards. Unfortunately, that’s the only safe bet that seems available.