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IFRS 9 Deferred As Convergence Talks Sour

by Amanda Banks,, London

09 August 2011

The International Accounting Standards Board (IASB) has announced its intention in an exposure draft to defer the mandatory adoption of the IFRS 9 standard until January 1, 2015, following disagreement on convergence with the US standards setter, the Financial Accounting Standards Board (FASB).

The two bodies have long been in discussions on the adoption of a 'Financial Instruments' standard, with the IASB drafting a new standard, and the FASB amending its existing GAAP framework. Both parties are aiming to have agreed a standard, which is identical or broadly similar.

Previously, an implementation date of January 1, 2013, had been set, but the IASB has now proposed the deferral of this date.

According to a report by Moody's analyst Wallace Enman, it is anticipated that even if IASB completes a standard by mid-2012, the earliest IFRS implementation date would be in 2015, “though this could be pushed back further,” he says. The FASB will not have a final standard ready until the latter half of 2012, if not later, Enman forecasts.

According to Enman, a number of issues continue to hold back convergence:

  • An IASB Deferred Acquisition Cost (DAC) proposal that is more conservative than DAC rules the FASB has recently completed;
  • Proposals to require a company to use a discount rate that reflects the characteristics of the liabilities assumed rather than the characteristics of the assets supporting the liabilities;
  • An IASB push to have companies mark liabilities to current value and reflect that adjustment in net income each period. FASB is considering letting companies report changes that result from interest-rate fluctuations in the less closely watched “other comprehensive income” rather than in net income; and
  • Proposals for presenting income statements in terms of “margins,” or changes in income components, rather than the underlying values that are changing.

In remarks during a recent webcast, IASB Vice Chairman, Ian Mackintosh reportedly talked down the possibility of future bilateral FASB-IASB programmes, stating that US negotiators would need to adopt more fully the IFRS framework, aimed at being a global standard. Among his comments he said that the 'global constitutency' of IFRS also had a 'right in the process' to ask for improvements in problematic areas.

TAGS: business | interest | law | accounting | insurance | International Accounting Standards Board (IASB) | international financial reporting standards (IFRS) | United States | financial reporting | Financial Accounting Standards Board (FASB) | standards

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