Extended timetable for key projects – is it a surprise?
Shock news! The IASB and the FASB have announced that the major convergence projects (revenue, leasing and financial instruments) will no longer be completed by June 2011. I’m not sure that is a big surprise to anyone. The Boards have been working incredibly hard over the last few months to address the comments received on the exposure drafts. But it has been increasingly obvious that they still had some way to go and indeed some regulators have been urging them to take an extra six months.
I think making a formal announcement of the extended timetable was a very good idea. There is an English phrase ‘It is better to under-promise and over-deliver’, and I am hoping that the Boards will now be able to do this. They are aiming to complete the priority projects in the second half of 2011 – and this looks feasible for revenue and leasing at least.
The period of grace until later in 2011 should give the Boards time to consult further with preparers and users, fully assess the consequences of recent tentative decisions and undertake a proper fatal flaw review, resulting in high-quality standards. Sir David Tweedie and Leslie Seidman, chairmen of the IASB and the FASB respectively, said in their interview on 14 April that they are committed to carrying out robust due process; as Global Chief Accountant of a global network of accountancy firms, I can only support that ambition and the extension to the timetable.
But reaching agreement on financial instruments is another matter. The Boards still face a significant challenge to reconcile their different views on accounting for financial instruments. They have already noted in the report issued on 21 April that the FASB may need more time to finalise its hedging proposals, but they should not underestimate the scale of the task ahead. The IASB issued the classification and measurement phase of IFRS 9 last year, but it is not yet effective in all IFRS territories. The FASB are expected to issue their exposure draft in June and July, with three categories of financial instrument rather than two. This is likely to increase pressure from some preparer groups who would like to reopen the debate and take on board some of the FASB’s proposals. The impairment proposals are also a compromise and received a very mixed response from those who commented on them, although they may be the only way to achieve convergence in this area. A fully converged financial instruments standard is still a considerable way off.
Insurance, although not part of the MoU programme, is a further priority where the IASB is hoping to complete a new standard by the end of 2011; the FASB intends to issue an exposure draft at the same time. Both boards still have to reach decisions on some major issues for this to become a reality. I hope the Boards do meet their revised target, as a further period of uncertainty would be unhelpful for the many countries transitioning to IFRS at the moment and may impact the US adoption of IFRS. The upcoming future agenda consultation is also likely to be more fruitful if not overhung by the need to finish the current one.
I would be interested as always in any comments you may have.