Maybe we can finally bury IFRS convergence

My hopes rose even higher that we can finally lay IFRS convergadoption to rest in a 6’ deep grave, lay a thick slab of concrete on top, and pave that entire section of the new cemetery after I read Francine McKenna’s column at Capital Ideas: Regulation, but only if cost-justified. Convergadoption is my word-of-the-day from Adrienne Gonzalez.

Ms. McKenna discusses the SEC staff report that not only didn’t suggest any way forward for convergence but seems to me like an extended argument against IFRS.

She then described a few things that I can’t see with my vision, like declining support from the big firms and possible concessions to reality from the IASB.

She reports that support from auditors and international business is slipping:

… in the last few years, enthusiasm [from auditors] waned as multinational clients with headquarters in the US reconsidered the potential cost savings of standardization and instead began complaining about the enormous cost of conversion.

Also this great news from a recent conference in Berlin:

IASB chairman Hans Hoogervorst conceded that he no longer expect the US to adopt IFRSs for all entities. He predicts the United States will make IFRSs an option for large, internationally-oriented companies that can benefit from an IFRS adoption.

Why do I have such trouble with IFRS convergadoption? Here’s just a few reasons:

• It would reduce the quality of accounting in the U.S. (yes, even with all the complaints about messy U.S. GAAP, things can always get worse).
• It would increase the level of subjectivity in accounting.
• That increase in subjectivity will increase the opportunities of financial manipulation by unscrupulous corporate players (after Enron, WorldCom, et.al, you can file this in the things-can-always-get-worse folder).
• There will never, ever be comparability from country to country because each country chooses which portion of IFRS to adopt or reject.
• Different countries have different cultures, regulatory structures, and social norms, which raises the question of how one-size-fits-all accounting rules could ever work across all cultures. Ms. McKenna’s article points to another study discussing this concept of different reporting needs.

Remember that each of the international Big 4 firms is not actually one monolithic partnership that spans the globe. Each of them is an affiliation of national-level partnerships from each country.

The concept of one set of consistent IFRS rules across the globe is just like the idea of a seamless, unified international firm. It’s a nice concept and great marketing pitch, but is not reality.  IFRS looks like a consistent, world-wide brand, but is actually different sets of rules from each country. There are dozens of slightly different sets of IFRS rules, not one.

I hope it is time to order concrete and asphalt for convergadoption’s interment.