Delays and more delays – will 2012 be any different?

28 December 2011

Will we remember 2011 as a year of delays? Will the theme continue into 2012? We started 2011 with high hopes that the year would see the completion of the convergence agenda and that we would end it with a decision by the US as to whether they would adopt IFRS. Here is a look back at this year’s developments and a look forward at what we can expect in 2012.

Use of IFRS in the US

The SEC had promised us an announcement before the end of 2011 to confirm the position on companies using IFRS, but in December they told us they needed more time to complete their work plan.  Given the parallel delays in the IASB work plan, this was not surprising, but we hope it doesn’t lead to further delays in other countries’ implementation plans.  But the SEC did complete a key part of its work plan when it published two staff papers in November.

The first paper summarises differences between US GAAP and IFRS frameworks, commenting that US GAAP’s detailed industry and transaction-specific standards promote consistency within an industry, whereas IFRS’ broad principles promote consistency across industries. The second paper analyses IFRS as applied in practice and identifies diversity in applying IFRS across various territories. Both are factual and add new perspectives to the debate. The second paper in particular is well worth a read – the SEC highlights poor clarity of disclosure, particularly around accounting policy implementation, as perhaps the biggest issue identified in its review. This is something well within the grasp of all of us to fix.  

At the American Institute of Certified Public Accountants’ annual conference on SEC and PCAOB developments, Jim Kroeker, the SEC’s Chief Accountant, explained that it would be sensible not to race to a decision; the SEC needs to take time to find the best answer. Given the US domestic concerns about IFRS adoption voiced at the SEC roundtables in July , it makes sense for the SEC to be as thorough in its analysis as possible. I think therefore we need to be patient. But it is an election year in the US and it would be very unfortunate if the decision gets sidelined by politics.

Activity at the IASB

For the IASB, much of 2012 looks set to be taken up with Memorandum of Understanding projects. Key accounting standards are taking much longer to develop than we expected, and the complexities of international standard development are becoming very obvious.

Following the high-level of concern raised by the many respondents to the first revenue exposure draft issued in June 2010, we now have a revised revenue exposure draft. We expect two more revised exposure drafts in early 2012, on leasing and financial assets impairment, with macro hedging to follow. We wait to see how people respond to the revised exposure drafts. Currently, standards on revenue and leasing are expected later in 2012. No date has yet been set for an impairment standard.

The IASB has also announced a ‘limited’ review of IFRS 9. Given the topics to be comprise operational issues identified so far − possible changes to help resolve the impact of market volatility on assets held to back insurance contracts and whether further changes could be made to achieve a converged standard with the FASB − I think the IASB has found an entirely new meaning of the word ‘limited’!  However, if this does lead to a converged financial instruments classification and measurement model and a breakthrough in the insurance project, I for one would be happy to see ‘limited’ change.  Let’s see how much gets resolved this year – hopefully we will be able to start 2013 with the new agenda that should emerge from 2011’s agenda consultation, but there’s a lot to be done this year first.  I’ll leave you though with my good wishes for a successful new year!  Lets hope it won’t be entirely dominated by the Eurozone crisis!


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