Chairman of the International Accounting Standards Board, Hans Hoogervorst, has batted away the comments from Christopher Cox, former SEC chair, who told accountants at a major conference in the US that he thought the future for International Financial Reporrting Standards (IFRS) in the US ‘has ceased to be’.

In addition to telling senior accounting professionals and securities regulators that he had come to ‘bury’ IFRS, not ‘praise’ it, Cox criticised the attitude of the IASB members during their interactions with the US Financial Accounting Standards Board (FASB), saying: ‘On the few occasions when IASB members did appear at US roundtables and meetings, they seemed aloof.’

Addressing senior accountants at the SEC and Financial Reporting Institute Conference in Pasadena, California, Cox said: ‘They simply weren’t accustomed to the more relaxed and supple interactions that FASB has been able to have with stakeholders over the years. But American investors, companies, preparers, and user groups noticed something else. In its efforts to be more accommodating to their international counterparts, the FASB itself was becoming more like the IASB.’

Hoogervorst has now hit back, saying: ‘Former chairman Cox has shifted his focus from a single set of high quality global standards to maintaining a national standard setter that is “supple” when responding to domestic priorities and concerns.

‘We continue to believe that investors are best served by high quality globally comparable information, and that includes US investors. As former chairman Cox noted, US investors have trillions of dollars invested in entities reporting under IFRS. We never forget the importance of these stakeholders and are expanding our efforts to reach out and consult with them on all of our projects.’

However Cox’s message was backed up by FASB vice chairman Jim Kroeker, whose speech to delegates at the same conference indicated a marked shift from the quest for a single set of global accounting standards.

Kroeker said that FASB remained committed to cooperation in the pursuit of more consistent international accounting standards; and that its goal was ‘comparable’ standards while addressing the needs of specific capital markets.

‘Our goal is to facilitate an ongoing dialogue… even as we recognise that one size may not always fit all. By that, I mean that we understand that differences in standards will persist because of the legal, regulatory, and cultural differences among different jurisdictions,’ Kroeker said.

He added that the outcome of these discussions will advance FASB’s goal of continuing to improve GAAP by making it more consistent, relevant and useful to those who use and depend upon it.

‘Even as we reaffirm our commitment to global cooperation and understanding, the FASB’s first priority is to improve GAAP for the benefit of all GAAP stakeholders, wherever they may live or work.

‘That means that in some cases, the need to serve the best interests of investors in individual capital markets may outweigh the goal of creating identical accounting standards,’ Kroeker said.

Changed mind on IFRS

Cox, a previous champion of a single set of accounting rules, has since flipped his stance, issuing severe criticisms over the lack of progress on the convergence agenda, just a week after the FASB and IASB jointly released their revenue recognition standard.

‘Today there is a real risk that the continuing increase in global trading and investing has gotten far ahead of the accounting standards that are necessary to make it all work… when I was SEC chairman, I worked to ensure that the United States was doing everything necessary to make financial information from companies in different countries both comparable and reliable.

‘But that was several years ago. And a great deal has changed since then. Today, I come to bury IFRS, not to praise them,’ he told the conference.

Cox, who currently serves as partner at US law firm Bingham McCutchen and president of Bingham Consulting, said that too much time had lapsed without meaningful progress.

‘I think we have to fairly conclude that the moment has passed. Full-scale adoption of IFRS in the United States might once have been possible, but it is no longer. This is not a prognosis. It’s just a statement of fact,’ he said.

During August 2008, Cox’s last year of tenure as SEC chair, the regulator produced a roadmap for conversion to IFRS. However successive SEC chairs have let convergence matter slip down the agenda, prioritising issues that dealt with the aftermath of the financial crisis.

‘Rather obviously, the high tide of American enthusiasm for IFRS has receded. The SEC still says that IFRS is a priority, and there is good reason for that. After all, most of the rest of the world uses it, not to mention more than 400 foreign private issuers right here in US markets. But moving the United States toward IFRS is clearly not a priority. This doesn’t mean that the SEC isn’t executing on its priorities. Rather, it means that public companies and investors aren’t saying clearly that they want it. That’s why today there is not even a plan for expanding the voluntary use of IFRS, in the way that, for example, Japan has done,’ he said.

We have to fairly conclude that the moment has passed. Full-scale adoption of IFRS in the United States might once have been possible, but it is no longer. This is not a prognosis. It’s just a statement of fact

Christopher Cox, former SEC chair and partner, Bingham McCutchen

Raising further comments from Hoogervorst, Cox said: ‘My friend Hans Hoogervorst, in his role as IASB chairman, has sometimes sounded confident about the prospects of the SEC allowing at least large multinational issuers the option to adopt IFRS.

‘Not long ago he was quoted as saying, “The US ultimately will come on board. Quite simply, they need us and we need them”.

‘I know he believes this; he has told me so himself. But after the SEC released its Work Plan for the Consideration of International Financial Reporting Standards for US Issuers— that was in 2012— the IASB could no longer maintain the myth that United States participation was coming along, slowly but surely.’

Hoogervorst has however insisted that things are on track despite previous disagreements with Cox.

‘I believe that we are on the right track with leases, and have disagreed before with former chairman Cox about this. Both the IASB and the FASB have reaffirmed the heart of our proposals – that lessees need to put this missing obligation on their balance sheet. This is what the SEC staff itself suggested in a 2005 report under Sarbanes-Oxley. At the same time, they cautioned that these reforms would be highly controversial and meet strong resistance. I’m sorry to say that they were right.’

Cox later told Accountancy: 'I remain a supporter of the IFRS mission, and am disappointed things have come to this pass -- but I think it's a fair appraisal. I hold out hope for a change for the better, including initially the voluntary use of IFRS by U.S. issuers in limited circumstances where industry comparability for the benefit of investors would be enhanced.'

SEC spokesman John Nester declined to comment on Cox’s statements but said that the SEC will prioritise making a statement on the matter.

To read Christopher Cox's speech, go here 2014-06-05 Keynote Address to SEC and Financial Reporting Institute_Chris Cox.pdf