NEW YORK -- Will the United States move forward in adopting International Financial Reporting Standards (IFRS) in June 2011 now that the Securities and Exchange Commission (SEC) recently reaffirmed its commitment to eventually adopt a single set of accounting standards?

Financial Accounting Standards Board (FASB) Chairman Robert H. Herz wouldn’t say whether he thinks that date is still feasible—only that the FASB and the International Accounting Standards Board (IASB) are “redoubling efforts” and doing the best they can.

“We probably increased our efforts five- or sixfold,” he told a group of business leaders, professors, CPAs and press at an IFRS forum in Manhattan on April 7. “We are really engaged in something that is probably unprecedented in the annals of accounting standard-setting, and we’re doing that to try to meet this effort.”

Herz was joined at the forum by his international counterpart in the IFRS push, IASB Chair Sir David Tweedie, who considers meeting the deadline set by the IFRS roadmap, proposed by the SEC in August 2008, to be of the utmost importance. It is also considered essential, Tweedie said, by the Group of Twenty (G-20) finance ministers and central bank governors, which was established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy. The G-20 met in September and specifically asked the standard setters to stick to the 2011 deadline.

“All the countries who are changing to IFRS in 2011 or 2012 don’t want to change twice, so therefore the pressure is to try and fix this thing,” Tweedie said. “As a result, you will see a barrage of exposure drafts in the next three months, as we try and clear off all these particular projects. …. People are fed up.”

Internationally, Tweedie said, “the view is, if the U.S. doesn’t want to do it, let them go. Just let them go. Take them off the board, take them off the trustees, take [SEC Chair Mary Schapiro] off the monitoring board. The rest of us will just get on board. The opinion is, nine years is enough.

“The appetite for endless U.S. convergence is diminishing internationally as a consensus on IFRS emerges, meaning the U.S. could lose its voice,” he said.

But, said Herz, “at the same time, we’re very cognizant that quality of both process and quality of output are essential. Due process really contributes to the overall quality and acceptability of the results.”

So, he said, “at this point, what we’re trying to do is get out these many exposure drafts and engage in a very intensive outreach program with constituents …. And then we’ll have to see, based on the comments, but we will then resume our very intensive efforts.”

Most recently, a joint exposure draft was issued by the IASB and the FASB on the reporting entity concept. In June, both boards will tackle hedge accounting as part of the two boards’ Accounting for Financial Instruments Joint Project.

Other topics to be addressed through the convergence project are performance reporting, leases and pensions, Tweedie said.

Regarding fair value, or mark-to-market, accounting standards, “we’ve taken the U.S. standard … basically, the U.S. standard has proved very effective,” Tweedie said. And, he said, the IASB has already tackled and resolved the issue of business combinations.

In addition to a looming deadline, other possible potholes line the path to adoption of IFRS in 2011, Tweedie warned.

“It might not work if people cheat,” he said. “If we don’t have good auditing, it won’t work; if the standards aren’t enforced by regulators … it won’t work either. The regulators have got to get their act together. We’re trying to put pressure on them. And that’s why we feel the SEC has a major role to play in this. If the SEC commits, it gets a seat at the table, a seat at the head of the table. It is the world’s most powerful regulator.”

Tweedie added that adoption of international standards also won’t work if people keep trying to amend the provisions.

“This is the advice I give people when they complain about the final standards …. Between FASB and ourselves, we’ve made a call. We’re totally independent, we’re not paid by organizations, [and] this is what we think the answer is,” Tweedie said. “In the meantime, don’t start fiddling with it. If you do, we’ll never have global standards.

“If it blows apart at this stage, it will take about 20 years to put it back together again,” he said.

Tweedie said that there will be post-adoption analysis to ensure that the goal of a “single set of high-quality global accounting standards” is truly being met by the finished IFRS product.

“We’ve agreed that two to three years after the standard becomes effective, we’re going to have a review,” he said.

The morning forum was held at the Japan Society in Midtown Manhattan, and Tweedie noted that in contrast to the U.S.—which won’t make a final decision on IFRS until 2011—in Japan, “the decision is made,” along with 117 other countries that are said to be moving more quickly to adoption than the U.S., Tweedie said.

“And more are coming,” he said. “Next year is the big year for Asia: [South] Korea changes in March, India in June [and] Japan has agreed to converge to these standards by the end of June.”

Why Change at All?

Tweedie continued his pitch for IFRS by listing several benefits he said will come from the final adoption of a single set of global accounting standards:

Tweedie said that it would also be incongruous for the U.S. to continue using Generally Accepted Accounting Principles (GAAP) when everyone else is getting on the IFRS bandwagon.

“If major U.S. companies use IFRS, Japan uses it, Europe uses it, why are you using national standards?” he asked.

There was a time when it made sense to stick with national accounting rules, but not today, Tweedie said. Initially, “accounting standards should [have been] national because that’s where you get the money from,” Tweedie said. “You just set your own rules. But by 1975, things were starting to globalize and things started to change, and gradually people felt it was a good idea to have the same sort of standards. People actually copied each others’ standards, but there was nothing formal going on.”

In today’s financial accounting, “in Tokyo or Toronto, we should get the same answer,” Tweedie said. “And if we don’t, why don’t we?”

That, he said, is why so many countries are now using IFRS.

“People understand them,” Tweedie said. “You can’t have a single market with 27 different ways of accounting.”

For businesses, this means big savings: “If people understand what you’re doing the risk is less, so the cost of capital is less.”

Convergence to IFRS has been a gradual process in the U.S., and some have made the argument that reconciliation should just continue to be used—but Tweedie said the reconciliation of U.S. GAAP to IFRS has brought with it a lot of resentment. Convergence, he said, “is not an endpoint.”

“Differences will persist,” he said, “despite intense efforts to converge, and there’s the continued possibility of regulatory arbitrage. Convergence without adoption entails cost of change without getting the full benefit of adoption.”

He said that Herz’s appointment to the chairmanship of the FASB was partly to shepherd convergence into adoption.

“What many people don’t remember is that Bob was one of our founding members in the IASB and his selection as chairman of the FASB was not an accident,” Tweedie said. “I think that was a very strong symbol that the U.S. acknowledged … and wanted to have input into international standards and move closer toward them.”

The FASB, the SEC and the IASB moved through those difficult times to develop a roadmap “that the SEC could accept,” Tweedie said.

A memorandum of understanding between the IASB and FASB was drafted in 2006, then renewed by the agencies in November 2009.

“We got a roadmap from [SEC] Chairman [Christopher] Cox’s administration," Tweedie said, "which of course was swept away by the financial crisis and also by the new administration, but that was renewed by Mary Schapiro just a few weeks ago and we’re moving on, setting a deadline of June 2011 to try and finish this thing.”