Michel Prada, chairman of the IFRS Foundation Trustees, has warned against individual countries trying to influence IFRS standards to match their specific needs, saying they must accept that adopting IFRS means committment to a single set of global standards and will not be able to maintain local GAAP.
Speaking at the Financial Accounting Standards Foundation in Tokyo, Prada said while he acknowledged that adhering to a single set of global standards was 'difficult and sometimes unpopular', he stated 'there really is no alternative.'
Prada described the desire to 'tweak' the IFRS standards to better reflect local preferences or accounting traditions within a particular jurisdiction as 'a form of nostalgia accounting'. He said that while individual IFRS jurisdictions might well like to choose from what he termed 'the a la carte menu', by doing so they would endanger the benefits of having one set of standards.
'If we all work together, taking into consideration our local knowledge and expertise, to develop a single set of standards of the highest quality, and if we all commit ourselves to abide by the outcome of the standard-setting process that takes into consideration global input gained along the way, then we are all better off,' Prada said.
In his speech, Prada cautioned that if some jurisdictions, and particularly the larger ones, showed signs of wanting to return to the 'a la carte' model, then others were likely to follow and 'everyone loses'.
'If the IASB and the FASB could not come up with the same standards for the netting of derivative contracts, and has struggled to find a common loan loss impairment model, despite years of sitting around the same board table, then what chance is there for multiple boards to independently reach the same outcome?' Prada said.;p>
He also spoke out against a decentralised process by which national regulators would work together with a view to either converge towards international standards, or not, according to 'so-called national specificities and interests'. They would then choose whether or not to adapt their national standards accordingly. Prada described such an approach as 'a most regrettable step backwards'.
When assessing progress worldwide towards adopting IFRS, Prada admitted that 'it is fair to say that progress in the US has been slower than many of us would wish'.
In contrast, while China has a lot of catching up to do, Prada reported it has 'already made remarkable progress and has reached substantial convergence with IFRS'. Prada also said that the 'dynamics of IFRS' continue to be very strong in Japan, although it has yet to mandate a full transition to IFRS. Current estimates suggest that 60 Japanese companies will be reporting using IFRS, representing around 20% of the total capitalisation of the Japanese Stock Exchange.
He urged jurisdictions to play a full part in international dialogue on the issues via the Accounting Standards Advisory Forum (ASAF).
