(This is an expanded version of the interview that appeared in the September issue of CFO.) Make no mistake: the International Accounting Standards Board is poised to become the world’s accounting-standards setter. When its chairman, Sir David Tweedie, spoke with CFO in late July, rumors were swirling that the Securities and Exchange Commission was about to release a timetable for U.S. companies to adopt international financial reporting standards (IFRS). That would put an end to the accounting principles used in this country since the end of the Great Depression (and set, in their modern form, since 1975 by the Financial Accounting Standards Board). Instead, companies from every developed economy in the world would report their financial results according to standards set by a multinational IASB based in London. To assuage fears that such an organization could become a supranational lawmaker answerable to no one, IASB’s parent organization has begun to create its own overseer, a global monitoring group made up of regulators around the world, including the SEC. Meanwhile, Tweedie and his U.S. counterpart are rushing to replace some of America’s most critical accounting standards, accelerating what was once called “convergence” but which now looks a lot more like conversion.
Some 112 countries now use IFRS, with Korea, India, Japan, Canada, and Brazil set to start by 2011 or sooner. That’s quite a success for a seven-year-old organization.
It really has spread very rapidly. Far more quickly than we were expecting, to be honest. There is one major economy still standing out, and that is the United States. Of course, for six years now we have been working with FASB to bring our standards closer together. The United States — that is, the SEC and FASB — actually wrote our objective, before we were even formed, to create one single set of high-quality standards. Both organizations have really pressed to get there, so I think it will happen.
Meaning that the United States will switch?
Clearly it would be a massive cost savings for multinational companies, so that pressure is there in the United States. Also, if your competitors are being judged under IFRS, people start to wonder about the differences between your reporting and theirs. The markets would like everyone to be the same.
Do you have any idea if, as rumored, the SEC will choose 2013 as the date for U.S. adoption?
I literally don’t know. I wouldn’t be able to tell you if I did, but I don’t.
It almost seems as though companies in America don’t think this is really going to happen. Do you get any sense that U.S. companies are engaged in IFRS?
It’s quite interesting. We have been quite well observed by Europe and others, and we find the letters are coming in even as we are debating. That tends not to happen, FASB tells us, in the United States. Once FASB starts issuing draft standards, the letters start to come.