What is the difference between convergence and adoption

We are equally concerned about another related, butcomplicating and counterproductive, shift -- convergence. Convergence is not apath to a single set of high-quality global standards. IFRS is a set ofaccounting standards that have already been adopted by a number of countriesaround the world. Convergence is the effort to take U.

In theory, this approach represents a perfect solution. Theoretically, you could converge U. Early evidence reveals that we are moving toward U. Today in the United States, we require businesses to adopt a number of new U.

Those who are adopting thesesomewhere-in-between standards are likely to have to switch horses once againto comply with yet another set of standards when they adopt IFRS.

The situationis really starting to frustrate businesses and investors, and it will certainlysap greater vitality in the global capital markets. Finally, at Grant Thornton, we support the SEC'sperspective that there is more work to do and thus, the process requires moretime. However, we also believe that by agreeing on a date certain, we couldfacilitate the process and make the ultimate agreed-upon standards moreeffective.

Given the continuing evolution toward a world economy,globally recognized accounting standards are becoming more and more essentialmoving forward. In my opinion, this is an important development and rapidadoption is as important as ever. The shift to a global economy calls for the developmentof standards that make financial statements comparable across borders.

Theorganizations involved in the process, such as the SEC, will need to take stepsto ensure that companies and accounting professionals are provided with thetools to make the proper adjustments accordingly. I think the goal of a single set of high-quality, fullyvetted, global standards for publicly held companies is appropriate and shouldbe pursued.

The misinformation and outright hype and exaggeration ofthe acceptance worldwide of IFRS is not helping to convert federal and stateregulators. What are the standards and what about the carve-outs? Which entities should use IFRS? How should IFRS be developed, promulgatedand monitored there are grave sovereignty issues related to a foreignstandard-setter?

I think the best thing about IFRS at this point is thatthe conversation has focused the profession and the regulators on the need forglobal quality standards. And while IFRS may not be the best answer, there is aresponse to the need that will come forth if appropriate deliberation and vettingamong all vested parties is accomplished. A single set of standards will be crucial to worldcommerce as our globe morphs into one overarching super-economy.

I believe it'sour leadership responsibility as accounting professionals to drive the effort. I'm disappointed the SEC is distracted and not setting a steady pace. The initiative has huge implications on not only the technicalside, but the market dynamics of our profession. The initiative will createsignificant demand for our services, and cause further specialization of ourprofession. I think a single set of global accounting standards wouldbe very good because it would bring uniformity to an already-confusing set ofstandards.

Most companies that rely on CPA services cannot discern thedifferences between U. GAAP and global standards. A CPA promoting his or herservices can more easily communicate the one set of standards to clients andprospects, especially if the client does business internationally. I think is also incumbent on everyone who works in theaccounting profession to take an active role in helping clients and the publicunderstand the single set of standards, instead of relying on larger entitiesto solely communicate the information.

Of course, the regulatory organizationswill have to help the accounting professional understand "what" to communicate,but I think everyone should participate in this discussion. I agree that there should be a single set of globalstandards. I am really not in a position to determine the best manner ofaccomplishing this goal.

I don't think this is a big issue for the "mom andpop" or "main street" accounting firm. These standards may wellbe appropriate for major players but I don't see the average small practitionerhaving strong feelings about this. As the activities and interests of investors, lenders andcompanies have become increasingly global, it is crucial for the continuedhealth of our global capital markets that a globally accepted, high-qualityfinancial reporting framework is developed at both a domestic and internationallevel.

This is the only way to achieve fair, liquid and efficient capitalmarkets worldwide by providing investors with information that is comparable,transparent and reliable. Given the unique concerns of the U. I think that this is an important goal, as it creates alevel playing field across continents and markets, which becomes more importantas investors and their advisors look at investing and diversification with amore global view. Knowing that financial information is standardized makes iteasier for investors to make more informed decisions.

I support the creation of a single set of globalaccounting standards -- and truly believe IFRS is way overdue. A single set ofstandards will not only simplify the way companies conduct themselves, butencourage percent adoption of ethical behavior.

In addition, any timesomewhat-disparate regulatory bodies can come together for a common cause --even though the rules may be somewhat complicated to follow in the short term-- the public will appreciate the effort because it builds long-term trust anda much stronger economy. A standardized set of global accounting standards isinevitable.

I believe that eventually, through convergence, it will happen. Itis just a matter of time. The broader concern is the potential variances basedon size and type of business involved. With this consideration, I believe thatthere will be a difference in the development and implementation of globalstandards. I think the adoption of unified global accounting andfinancial reporting standards are enormously important. The world isglobalizing -- both firms and their clients need to be able to do businessaround the world -- and with the Internet and globalization, the barrier todoing business internationally is going to keep getting lower and lower.

Morethan countries already use IFRS -- firms of all sizes will increasinglyhave clients that are doing business both inside and outside of the UnitedStates and having unified standards will help everyone. What is equally important is that the standards that weend up with are company-size-appropriate.

Public company standards must bedifferent from private company standards. We must be careful to balance theneed for private company stakeholders to get consistent, relevant, transparentand meaningful information while at the same time not introducing an unduecompliance burden for smaller businesses.

KPMG continues to support the adoption of a single set ofhigh-quality global accounting standards. To achieve the objective of a single set of globalaccounting standards will likely require an independent and well-fundedstandard-setting body that, while suitably accountable to the world's capitalmarkets, is insulated from political interference and has an investor focus toits standard-setting activities.

In terms of convergence with international standards herein the United States -- we recognize that by bringing U. In addition, we believe that financial markets regulatorsin jurisdictions with significant capital markets, such as the U. SEC, theCommission of the European Union and the Japanese FSA, among others, can playan important role in the convergence of national and international accountingstandards by overseeing standard-setting activities globally.

Our experience hastaught us that it is important for preparers and auditors to discuss theapplication of standards across borders and seek common solutions toapplication issues, as doing so can lead to increased comparability infinancial reporting from one capital market to another. There's no doubt that this is challenging -- both withina global network like KPMG's and more broadly across the profession -- but it'sclearly the path we need to pursue to facilitate more efficient allocation ofcapital resources around the globe.

IFRS has become the international accounting standard,with more than countries having already adopted or in the process of adoptingit. That total includes all of the world's most developed economies with theexception of the United States.

Accordingly, I welcomed the SEC's announcement inFebruary reiterating its support for a single set of high-quality globalaccounting standards, and its support of IFRS as that single set of standards.

I am on the record in support of U. Such benefits includefacilitating more efficient capital allocations by both companies andinvestors, promoting increased transparency of financial information given theprinciples-based nature of IFRS, reduced costs for companies especially thoseoperating in multiple jurisdictions , as well as protecting the long-term capitalmarket competitiveness of U.

The Center for Audit Quality is committed to working withthe SEC as it carries out its work plan, as well as collaborating with otherstakeholders to encourage engagement.

As such, we are continuing our efforts toeducate capital market stakeholders, including investors, to understand thebenefits of IFRS. Arriving at a single set of accounting standards isimperative; inconsistency breeds uncertainty, which in turn discouragesinvestment and business activity. GAAP against the rest of the world, at the moment. We would thenwork within the IFRS structure to get change. While IFRS is not perfect, it'sbetter than the current uncertain standoff.

As capital markets become increasingly global, U. In this environment, I believe U. The Securities and Exchange Commission has longexpressed its support for a single set of high-quality global accountingstandards as an important means of enhancing this comparability.

Therefore,International Financial Reporting Standards will potentially provide the bestcommon platform on which companies can report and investors can comparefinancial information. The ultimate goal of having a single global standard forpreparation and presentation of financial statements is certainly a netpositive, but I have some concerns about the transition:. This will create an uncertainenvironment both for preparers and consumers of financial statements.

The idea of a single set of global accounting standardsis nice, especially as business today isn't and shouldn't be limited bygeographic boundaries. And more principles-based than rules-based is probablygood. But standards imposed by regulatory authorities for comparability aren'tall that helpful to stakeholders as would be, say, reporting that meets thetrue needs of these stakeholders: assurance of accuracy and relevance specificto the purpose.

With something as complex as accounting, judgments are almostalways necessary and exceptions seem to be the rule captured minimally, atpresent, in footnotes. An approach that clarifies the judgments applied andassures transparency of the judgment process is, in my humble opinion, the moreimportant objective. The ability to compare corporate finances on a consistentbasis using the IFRS standards makes sense, particularly for companies withglobal operations.

IFRS will drive consistent standards of measurement acrossnational borders. For U. Certainly the SEC and the investing community will have difficulty switchingfrom GAAP, even as the need for more disclosure and tighter scrutiny increases. For these reasons, I believe that the best approachshould be through a convergence of the two systems.

The biggest advantage will be consistent reportingworldwide. The biggest disadvantage will be the additional cost of change inaccounting to one standard reporting system and the impact on income for theperiod of change. There is a natural challenge in bringing so manyeconomies with varying levels of sophistication together.

However,globalization is no longer just a catchphrase, it is the norm. With companiesroutinely having operations in multiple countries, it is even challenging todefine what is a "foreign" or "domestic" organization. Forthe users of information, despite the great challenge to those preparers, it iskey that financial data be as consistent as possible. I think it is a bit earlyto determine whether the current initiatives are on track, but I do stronglybelieve they must continue to be pursued.

It is the right approach, as we live in a global and veryconnected, interdependent world. The approach should add the words"high-quality" to the single set of accounting standards. The privatecompany standards IFRS for SMEs are being adopted in other countries withchanges that almost nullify the advantages of converging.

The worst thing thatcould happen is adopting the single set and adding "dialects" allover the world, making it even more confusing than it already is. The current convergence project of the FASB-IASB has mevery concerned because of the extremely short timeframe and magnitude of thechanges being dealt with.

This needs to be reconsidered in a way that can allowproper input from stakeholders and an implementation timeline that giveseveryone time to get the necessary training and systems changes that will beneeded to deal with the significant changes being proposed.

I think that the Memorandom of Understanding is working. At the same time, as their work progresses,significant and, in some cases, possibly irreconcilable differences, are beingunearthed. Lease accounting might be an example. Thus, the schedule forconvergence is sliding.

Again, I would like to support the concept of movingtowards principles-based as opposed to rules-based accounting. However, I amsomewhat cynical about human nature and its ability to rationalize. If anaccountant is not principled, then principles-based accounting will notfunction.

Also, I feel that the litigious nature of the U. Ultimately, I want convergence to continue. It willfacilitate international trade and investment. I believe that it's more pressing that we devote ourlimited time and resources toward supporting the recovery of our economy. A single set of global accounting standards is aneventuality, whether through convergence or IFRS. As the world becomes evenmore connected, one set of standards is a requirement in order for investors tohave consistent information.

Given the complexity of transactions and theinterconnection of economies and investments, one set of global standards isessential. It is no longer a question of if, but when. Unfortunately, the whenbecomes the bigger question.

Since there are numerous organizations,individuals, governments, etc. IFRS will be disruptive in the short term, and will causemore work for auditors and accountants as they try to understand thedifferences. Many software products already support IFRS, and will help withthe transition. IFRS looks at many items differently, not necessarily correctlyor incorrectly.

Having a single global standard should make globalization fromthe U. IFRS is not as big of a threat to theU. I'm generally supportive of the creation of globalaccounting standards, although there are critical transitional and educationalneeds that flow from potential changes. Examples of issues include:. I believe that practitioners, from all size firms, shouldbe more open and proactive relating to IFRS. The smaller firms most of theAICPA membership often don't see that it could possibly relate to them andtheir clients.

I am hopeful that continual progress will be made. I think there needs to be a single set of globalaccounting standards. They only question remaining is when.

My guess is we'llsee adoption of IFRS worldwide in the next three to five years. Moreimportantly, I believe this could be the next "Sarbanes-Oxley," interms of creating additional revenue for the accounting profession andresurgence similar to what we experienced during the pre-recession boom. It's imperative that we have one set of global accountingstandards to facilitate investment and capital flow on a worldwide basis. Personally, I support the adoption of unified international financial reportingstandards.

Creating a single set of standards and the implementationof IFRS aren't a pursuit created by any one body as much as the necessity ofthe business world pushing to a global environment.

I remember practicing inBuffalo just seven years ago and hearing of small-business clients selling toforeign entities. Without one set of standards, how do you possibly comparethe financial viability of a company in China to Canada to the U.

The SEC needs to set a date for the U. The creation of a single set of globally accepted,high-quality accounting standards is in the best interest of the capitalmarkets in the United States and the rest of the world. However, this"single set" of standards needs to be responsive to the needs ofentities and the users of their financial statements.

For this reason, webelieve that the IFRS framework, which includes a full set of standards forentities with public accountability and Small and Medium-Sized Entities,provides the best option for capital markets in the U.

The decision to make a wholesale change in accountingstandards from U. GAAP may not be the most efficient path, it is important to theprocess in the United States because a decision to adopt the IFRS frameworkwould likely not be possible without it. In addition, the convergence processwill also lead to the creation of several improved accounting standards thatwould not have been developed as quickly, if at all, without the convergenceprocess.

These improved standards will be a benefit to both entities andfinancial statement users in the future. I think the last two years have taught all of us theimportance of transparency when it comes to business. The language of businessis accounting and as such, one standard would go a long way to creating moretransparency among multinationals, investors and individuals.

Whether we likeit or not, the world economy is consolidating. The increasing role of Europe,China and India will force that convergence. Having one standard for accountingwill help accelerate that and will protect all of our interests. For the benefit of investors, who invest worldwide, it iscritical that U. The currentapproach, overseen by the SEC, seems to be the most efficient and effectiveprocess, although not without its problems.

Not being a CPA, my technical knowledge on this subjectis limited. From a layman's philosophical view, I think the idea of consistentglobal accounting standards is a worthy and perhaps necessary goal in aneconomy that is unquestionably global in its nature. The ability for capital toflow freely throughout the world is an important requisite to sustain globalgrowth. It is vital for investors to have confidence in financial informationto stimulate that capital flow.

Whether this goal can be reached from apractical standpoint without causing severe disruption to financial markets isa concern that I suspect can be addressed but may impact the timing of theeffort. Given the current tenuous state of many markets around the world, thismay not be the most opportune time to implement this initiative.

A global set of standards is great for multinationalcompanies and public companies. There should be a different set of standardsfor private U.

I believe the global nature of the worlds' economies in makes a compelling case for the benefits of IFRS. Capital markets areintrinsically linked through not only public traded companies, but sovereignactivities. As the world embraces like-standards, the capital markets will becomeincreasingly transparent and beneficial to the investor community. Many of our members contend withinternational business issues. As their organization, we have to respond totheir needs and guide them.

The institute supports one set of global accounting andhas for years. We certainly believe it will happen and are taking theappropriate steps to ensure that our country's CPAs are appropriately prepared. Through our educational and communications efforts and research, such aswww.

I prefer evolution over revolution. I see the advantagesof one set of globally accepted accounting standards, but I would like to makesure that it doesn't put the U.

If in our bestinterests and where possible, we should continue with the efforts to convergestandards -- where not, let's hold our ground. As our capital markets are increasingly global, it'simportant we ultimately have a single set of high-quality global accounting forpublic companies and companies with cross-border reporting. The importance of global accounting standards cannot beoverestimated.

As the nature of how we do business has evolved, so must ourmethods of financial reporting. Commerce no longer knows borders. Internationalclientele transcends the largest accounting firms, and many smaller firms havea presence on the international business landscape. More than countrieseither already use or allow the use of IFRS, and this number will grow in theyears ahead.

For public companies - yes. I did a search on the subject and found nearly all persons will go along with with your blog. Attractive, post. I just stumbled upon your weblog and wanted to say that I have liked browsing your blog posts. After all, I will surely subscribe to your feed, and I hope you will write again soon! Supporters of adoption, however, believe that convergence alone will never eliminate all of the differences between the two sets of standards.

Convergence means that the U. More convergence will make adoption easier and less costly and may even make adoption of IFRS unnecessary.

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Approximately nations and reporting jurisdictions permit or require IFRS for domestic listed companies, although approximately 90 countries have fully conformed with IFRS as promulgated by the IASB and include a statement acknowledging such conformity in audit reports.

For many years, the SEC has been expressing its support for a core set of accounting standards that could serve as a framework for financial reporting in cross-border offerings. In the release, the SEC stated its continued belief that a single set of high-quality globally accepted accounting standards would benefit U. The release also called for the development of a work plan the "Work Plan" to enhance both the understanding of the SEC's purpose and public transparency in this area.

The report did not recommend a specific course of action. There is currently no estimated date for when such a decision might be made.

By adopting IFRS, a business can present its financial statements on the same basis as its foreign competitors, making comparisons easier. Furthermore, companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language company-wide. Companies may also benefit by using IFRS if they wish to raise capital abroad. Despite a belief by some of the inevitability of the global acceptance of IFRS, others believe that U.

Further, certain U. They may believe that the significant costs associated with adopting IFRS outweigh the benefits. Convergence means that the U. More convergence will make adoption easier and less costly and may even make adoption of IFRS unnecessary. Supporters of adoption, however, believe that convergence alone will never eliminate all of the differences between the two sets of standards.

The key players are the Securities and Exchange Commission, which is responsible for the supervision and regulation of the securities industry and has oversight responsibility for the FASB; the Financial Accounting Standards Board, an independent body that establishes and interprets U. Back to Top Have any major U.