In their joint meeting in November 2010, the IASB and FASB decided to refocus their agenda on priority projects in order to secure their self-imposed June 2011 deadline for completing convergence projects.
The stakes are high. The US Securities and Exchange Commission (SEC) is considering whether to incorporate IFRS into the financial reporting system for U.S. issuers. The final decision should be taken in 2011.
“In 2011, upon conclusion of the fact gathering and analysis set forth in the work plan — and assuming completion of the convergence projects — the Commission will then be in a position to determine whether to incorporate IFRS into the financial reporting system for U.S. public companies.” (Speech by Mary L. Schapiro, SEC Chairman, Washington, D.C., Feb. 24, 2010)
What are the priority projects?
The last version of the IASB work plan (20 December 2010, available on http://www.ifrs.org/) can be summarized as follows:
All these projects are “joint” projects, which means that they are co-developed with the FASB as part of the roadmap for convergence.
For all of them, exposure drafts have already been published.
Some of these projects introduce deep changes in accounting practices thus raising many concerns among preparers. As an example, for both leases project and revenue recognition project (which are major topics), the same kind of concerns have been expressed by the respondents in their comment letters:
- Complexity of the proposed approach
- Lack of practical guidance (which could lead to an inconsistent application of the principles)
- Cost of implementing
Moreover, many respondents warn the Boards not to favor deadline – because of the 30 June 2011 commitment – over the quality of standards.
What agenda for the post June 2011 period?
Once the June 2011 date has been met, the Board should then be able to resume its deliberations on the other projects (described as “important but less urgent”).
These other projects are the following:
- Financial statement presentation (replacement of IAS 1 and IAS 7)
- Financial instruments with characteristics of equity
- Emissions trading schemes
- Income tax
- The reporting entity chapter of the conceptual framework
However, the IASB will have to consult broadly when it comes to defining its future agenda.
Indeed, as part of the IFRS Constitution review completed in 2010, the decision was made to undertake a three-yearly public consultation on the IASB’s future technical agenda, in addition to consulting the Trustees and the IFRS Advisory Council annually.
The first consultation will take place by 30 June 2011.
Before that, the IFRS Advisory Council has already expressed its advice on the post-2011 work plan. The broad outline can be summarized as follows:
- Convergence is no longer a priority, the IASB should focus on serving the needs of those already using IFRS
- A period of calm in issuing new standards is needed
- Significant resources should be allocated to answer to implementation issues and to ensure that the standards are applied properly and consistently
- The current conceptual framework is no longer appropriate and should be updated
As a conclusion, the IASB is now more than ever facing a tremendous challenge. The year 2011 will be crucial to strengthen (or undermine) its credibility as a global standard-setter.