Inching towards international accounting standards in the US

In Canada, the Accounting Standards Board (AcSB) has already taken the first steps of convergence with international standards by outlining the plan under which publicly accountable enterprises will transition completely to IFRS. The change will occur over the next 5 years, and the Board expects the changeover process to be complete by fiscal years beginning in 2011, although it could still be pushed back if circumstances require it.

In the US, the SEC has recently proposed that foreign companies will not have to reconcile their IFRS financial statements to US GAAP:

If the current SEC proposal is approved, foreign companies registered with the SEC that use IFRS, which is published by the International Accounting Standards Board, wouldn’t have to provide a separate reconciliation report starting in 2009.

This is a great development and real progress towards convergence. Foreign companies will likely jump wholeheartedly on this proposal, as it will allow them to save significant costs. This means less work for the professionals, but so be it. The work is redundant and does not add value in the slightest. It is inefficient to have to present financials in two different sets of GAAP.

The SEC seeks comment on the proposal, in particular regarding the possible need for additional disclosure or information on areas where the two sets of GAAP don’t agree, and whether this might require too much knowledge on the part of users of the IFRS statements.

In particular:

Should issuers and auditors consider guidance related to materiality and quantification of financial misstatements?

This struck me, because if there are significant differences on these two very fundamental audit issues, perhaps convergence is farther off than I’d originally hoped.