Rulesetter warns global accounting drive may go into reverse

LONDON Tue Oct 23, 2012 7:12am EDT

LONDON Oct 23 (Reuters) - A decade-long drive backed by world leaders to align accounting rules could go into reverse if the United States balks at adopting global standards, a top rule-setter said.

The G20 group of top economies called in 2009 at the height of the financial crisis for a single set of global accounting rules to improve transparency for investors.

But differences between the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) pushed the initial 2011 target back to 2013. And in its latest communiques, the G20 has dropped all mention of a date and only states the need for common rules.

The two sides have been holding meetings for a decade to try to align their rules, but have become bogged down in disagreements, in particular over how to force banks to recognise losses earlier on bad loans.

This was a key G20 demand to stop banks leaving it too late and in extreme cases needing taxpayer bailouts.

"There is a risk that, in the absence of a U.S. decision on adoption, a decade of convergence may be followed by a new period of divergence," said the IASB staff report released on Tuesday in response to a July U.S. announcement.

The report responds point by point to issues raised by the U.S. authorities, which said in July that full adoption of the IASB's rules known as IFRSs had little support and they would stick to requiring generally accepted accounting principles or GAAP.

"While acknowledging the challenges, the analysis ... shows that there are no insurmountable obstacles for adoption of IFRSs by the United States," IASB Trustees Chairman Michel Prada said.

The United States is well placed to achieve a successful transition to IFRSs and complete the objective repeatedly confirmed by the G20 leaders, Prada added.

The IASB report said it was important to consider whether the existing level of alignment can be maintained as both boards plan future workloads.

IASB Chairman Hans Hoogervorst has expressed frustration at how convergence has slowed and wants to move beyond the seemingly permanent joint meetings with the Americans.

Countries such as Japan, Singapore and India are watching to see what the United States decides before fully adopting IFRSs themselves. Over 100 countries use IFRS and many believe it's now time for some of their issues to be debated.

The IASB report seeks to ease U.S. concerns about loss of regulatory sovereignty, saying enforcement would remain the sole responsibility of the U.S. Securities and Exchange Commission.

But it dismissed one option aired in the United States, that of adopting IFRSs rule by rule rather than all in one go.

Accounting industry officials don't expect the SEC to revisit IFRS adoption until at least next year when its top officials will have been replaced in the wake of next month's U.S. presidential election.

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