Are we there yet? The road to IFRS

18 January 2016

This week’s guest blogger is Saad Siddique, Accounting Consulting Services UK. Connect to him on LinkedIn.

A recent talk at PwC from Christopher Nobes, Professor of Accounting at Royal Holloway (University of London), on his research on the adoption of IFRS worldwide brought a range of answers to my titular question.

Under the bonnet (or is that the hood?) of the 116 territories identified by the IASB as IFRS adopters, you may find that the accounting engine is a little bit different depending on where you visit.

Our trip starts at the home of the IASB, the UK, where IFRS as adopted by the EU is our vehicle of choice. The IAS 39 carve out and delays in adopting the new consolidation standards gave rise to the need to distinguish EU adopted from IFRS as issued by the IASB. Whilst the carve out only impacts a handful of financial institutions, does delaying the effective date of a standard take you down a detour on the road to being IFRS compliant?

Switzerland remains neutral to IFRS by requiring mandatory adoption for premium listed entities unless the entity is applying US GAAP. An easy journey here. Similarly, Japan has become much more welcoming of IFRS traffic and voluntary adoption is rapidly increasing.

At this time of year, a trip down under is tempting, with beach barbeques, koala bears and the equally unique A-IFRS, otherwise known as ‘Australian equivalents to IFRS’. These standards incorporate practically all of IASB issued IFRS whilst stripping out some of the policy choices available, adding disclosures and local terminology. Ultimately, this modification still runs smoothly, and is considered unreservedly compliant with IFRS.

The path starts to meander as we head through the Himalayas with Pakistan not using the latest parts, having not yet adopted IAS 39 Financial Instruments: Recognition and Measurement, IAS 40 Investment property or IFRS 7 Financial Instruments: Disclosures for its financial institutions and China has not yet taken their 2006 model back to the showroom for an upgrade. Convergence with the latest effective standards remains a destination for these territories.

Our worldwide adventure now heads across the Atlantic (or Pacific … I lost the map somewhere near Mount Everest) to North America where in Canada adoption is mandatory unless the entity is SEC registered or rate regulated, in which case US GAAP is permissible instead. This results in some of the largest companies on the Toronto exchange going off the IFRS piste.

The journey ends, for now, at a roadblock in the US, where the SEC remains unconvinced by IFRS. Whilst convergence projects such as IFRS 15 Revenue from contracts with customers are a steer in the right direction, others such as IFRS 16 Leases have not been able to fully align and thus the highway to global harmonisation continues far beyond the horizon.

What are your thoughts on where we are on the journey?

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