BY PAUL B. W. MILLER AND PAUL R. BAHNSON
Four reasons why
missed the mark
In mid-August 2010, the American Institute of CPAs released a video interview with Sir David Tweedie, chair of the International
Accounting Standards Board (available on
the Journal of Accountancy Web Site, www.
journalofaccountancy.com). The content of
the interview was also summarized by the
British Web site AccountancyAge ( www.ac-countancyage.com).
The full title of that summary is especially
provocative: “Tweedie warns U.S. to adopt
standards or lose influence.” According to the
reporter, Tweedie rebukes America by saying
that we will be left out of the standard-setting
process if we don’t get on board his train right
now. He also used this forum to question why
U.S. citizens fill four of 15 IASB seats, and he
seems to chafe that Securities and Exchange
Commission Chair Mary Schapiro sits on the
IASB’s Monitoring Board. Although Tweedie’s
manner was characteristically calm and diplomatic, we think his comments completely
missed the mark because he, like others who
want the U. S. to adopt IFRS, overlooked four
major points contrary to his position.
The U.S. has influenced global reporting since
the International Accounting Standards Committee was formed in 1973. American firms
and individuals played key roles in establishing that body, and U.S. GAAP provided the
template for most of its standards. American
participation was needed because our prestige and expertise helped bring credibility to
the effort. That prestige is still useful because
we have the largest, deepest, most-informed,
best-regulated, and most liquid capital markets in the world by a great margin.
Also, non-U.S. companies can come to
our capital markets with financial statements prepared in accordance with IFRS. As
a result, the U.S. should actively participate
through IASB membership and the Monitoring Board’s oversight. Thus, we are not
persuaded by Tweedie’s plaint about undue
da, Tweedie chides us by suggesting that it’s
time we signed on with the other 120 countries (or so) that have adopted IFRS. While
that number seems impressive, the facts are
Curiously, even the IASB’s Web site disclaims full knowledge of all countries that
have adopted, and sends inquirers off to contact specific countries’ regulatory authorities on their own. Fortunately, we found a
Web site managed by Deloitte that tries to list
adopters but ends up asking for assistance
with information about others (www.iasplus.
Using that data, we determined that more
than half the participants in this purportedly
vast global movement are countries that most
people will be able to find only by consulting Google Earth. More to the point is that
it would take some sort of economic magnifying glass to detect their impact on global
Here are 69 IFRS-using countries out of
Tweedie’s 120; we’ll let you decide whether you’re afraid the U.S. will be left out if it
doesn’t join them: Abu Dhabi, Anguilla, Antigua and Barbados, Armenia, Aruba, Azerbaijan, Bahamas, Bahrain, Belarus, Bermuda,
Botswana, Cayman Islands, Costa Rica, Croatia, Cyprus, Dominica, Dubai, El Salvador,
Fiji, Georgia (the country), Ghana, Gibraltar, Grenada, Guyana, Haiti, Iceland, Iraq,
Jamaica, Kazakhstan, Kenya, Kuwait, Kyrgyz-stan, Laos, Lesotho, Liechtenstein, Luxembourg, Macedonia, Malawi, Maldives, Malta,
Mauritius, Mongolia, Montenegro, Morocco,
Mozambique, Myanmar, Namibia, Nepal,
Netherlands Antilles, Oman, Panama, Papua
New Guinea, Qatar, St. Kitts and Nevis, Serbia, Sierra Leone, Slovak Republic, Slovenia,
Sri Lanka, Suriname, Swaziland, Tajikistan,
Tanzania, Trinidad and Tobago, Uganda, Virgin Islands (British), West Bank and Gaza,
Zambia, and Zimbabwe. While joining the
IFRS club was certainly a step up for them, it
would not be the case for the U.S.
Unfortunately, Tweedie’s edited com-
ments, which are consistent with the IASB’s
usual claims of widespread acceptance, don’t
acknowledge that virtually all adopters, espe-
cially major nations, carve out objectionable
standards. As we have cited before, the com-
bined economic output of the full-adopters is
approximately equal to the GDP of California
and Georgia (the state).
Paul B. W. Miller is a professor at the
University of Colorado at Colorado Springs
and Paul R. Bahnson is a professor at Boise
State University. The authors’ views are
not necessarily those of their institutions.
Reach them at firstname.lastname@example.org.
THIS IS A GLOBAL MOVEMENT?
WHAT WOULD BE ADOPTED?
Tweedie’s seems to commit a faux pas by implying that adopting IFRS in place of GAAP
would be as simple as changing channels
with a remote. This erroneous presumption
is not unique, as we have seen it expressed
by Tom Jones (see “Mencken was right and
so were we,” July 19-Aug. 15, 2010, page 16),
the four largest firms, and the AICPA, as well
as many others who minimize the difficulty
in changing. Many also claim that the SEC
is saying adoption is inevitable and coming
soon. As we read the commissioners, they
are thoughtful but, more important, highly
skeptical of that move, and we know why.
For emphasis, we’ll put our first incontrovertible point in boldface capital letters:
ADOP TING IFRS WOUD REQUIRE
THE U.S. TO ADOP T THE IASB’S
There is no evidence, much less clear evidence, that the IASB can cope with political
pressure to compromise quality and usefulness any better than the Financial Accounting Standards Board, and plenty of reason to
suspect it cannot do nearly as well.
Three points are germane. First, the IASB
depends on contributions from corporations
and auditing firms. Second, it is linked politically to the European Union and the banking and finance industry on the European
continent, such that its standards are surely
crafted with an eye on those constituents’
objections. Third, its large membership and
diverse global constituency causes every decision to be carefully constructed to accommodate many interests, thus filling the standards with one compromise after another. As
a result, there is no valid reason to think U.S.
capital markets would benefit from standards