The Convergence Blog™

E&Y Chairman on IFRSs

In its November 9, 2007 issue, The Wall Street Journal ran "Mind the GAAP", an op-ed piece written by James S. Turley, Chairman and CEO of Ernst & Young. If you're a Journal subscriber (which you must be in order to access the article), I highly recommend Jim's piece as it bears directly on this week's SEC vote regarding the elimination of the requirement for "foreign private issuers" (i.e., non-U.S. private-sector entities whose securities trade publicly in the U.S.) to reconcile their financial statements to U.S. GAAP if they prepare the statements in accordance with IFRSs as issued by the IASB. It is also relevant to the conclusion this week of the comment period on the SEC's Concept Release regarding the possibility of allowing U.S. issuers the option to prepare financial statements under either IFRSs or U.S. GAAP.

Key Quote: "At Ernst & Young, we will weigh in with strong support for the SEC to set a certain date for a shift to IFRS."

"Accounting Changing with the Times"

The October 3, 2007 edition of The Houston Chronicle contained an interview with Charles Swanson, managing partner of Ernst & Young's Houston office. The story, part of the newspaper's "Moneymakers" series, is titled "Accounting Changing with the Times". In the standard series format, Chronicle reporter Tom Fowler asks Swanson five questions, one of which is "The industry seems to have adapted to the demands of Sarbanes-Oxley. What's the next big change lurking over the horizon?" Swanson begins his response with "One of the big changes that could impact Houston specifically is the use of IFRS, International Financial Reporting Standards. There's been a long convergence between our rules, U.S. GAAP (Generally Accepted Accounting Principles) and international rules . . ."

As most of you know, the subtitles of my blog and forthcoming book refer to the convergence of U.S. GAAP and IFRSs as "the next big challenge in corporate financial reporting." What makes the Chronicle story striking to me is not so much that Mr. Fowler asked an excellent question as one of his allotted five, or that Mr. Swanson and I apparently think alike ("great minds"?), but rather that the Chronicle story is the first I have seen in a general-readership newspaper to deal specifically with IFRSs and Convergence.

When Convergence literally starts to show up on your doorstep in the morning, you no longer have the luxury of ignoring it. And when your mother-in-law reads about it before you do and calls to talk about it (as was the case with me and the Chronicle story), then you REALLY don't have the luxury of ignoring it.

"What Does a New World Accounting Order Mean for Audit Committees?"

Financial Executives International (FEI) recently posted a reprint of a Q&A session with former FASB Chairman Dennis Beresford regarding the SEC's Concept Release on permitting U.S. companies to use IFRS when filing their financial statements with the SEC. The Q&A article, titled "What Does a New World Accounting Order Mean for Audit Committees?", originally appeared in the August 2007 issue of KPMG's Audit Committee Insights newsletter. The article describes some of the significant implications that Convergence will have for audit committees and many other aspects of corporate governance.

"As the World Turns, So Do the Exchanges"

My comments on global financial reporting standards were featured in the article "As the World Turns, So Do the Exchanges" by Beth Karlin in the September 2007 issue of Treasury & Risk magazine. The article highlights a simple but important fact: global financial reporting standards are needed for increasingly globalized capital markets. Financial executives should understand that the needs of participants in the world's capital markets are what drives the phenomenon of Convergence.

"Get Ready: Four Trends to Watch"

On August 14, 2007, Jobs in the Money Career News & Advice posted the article "Get Ready: Four Trends to Watch" by Jon Jacobs. The article featured my observations on trends that will require U.S. preparers and auditors to enhance their skill-sets -- including the trend towards the convergence of U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards(IFRSs).

Another "Conversation with Bruce Pounder" at AccountingWEB.com

On August 8, 2007, AccountingWEB.com published "A conversation with Bruce Pounder: The impact of convergence on U.S. GAAP". That interview gave me the opportunity to explain the many reasons why ALL companies that use U.S. GAAP will be impacted by the phenomenon of Convergence.

U.S. GAAP vs. IFRS: Accounting for Customer Loyalty Programs

My comments on the differences between U.S. GAAP and IFRS with regard to accounting for customer loyalty programs appeared in the "Accounting Industry Update" section of the July 17, 2007 issue of Compliance Week (subscription required). I have posted a more-detailed analysis of the situation here.

"Simplifying Global Accounting"

I highly recommend the interview with Sir David Tweedie, Chairman of the International Accounting Standards Board (IASB), published in the July 2007 issue of the Journal of Accountancy. The article is titled "Simplifying Global Accounting", and in it, Sir David shares insights on convergence of U.S. GAAP and International Financial Reporting Standards, principles-based accounting, XBRL, accounting education and other issues facing the global accounting profession.

"International Hire"

My comments on the increasing globalization of the accounting labor market were featured in the article "International Hire" by Christine Bockelman in the July 2007 issue of INSIGHT Magazine. As I have always emphasized, Convergence will have very significant, very personal career consequences for accounting and finance professionals in the United States.

"Boards Agree On New Tax Rule, Kinda Sorta"

My comments on the FASB-IASB joint convergence project on accounting for income taxes were featured in the article "Boards Agree On New Tax Rule, Kinda Sorta" by Tammy Whitehouse in the June 26, 2007 issue of Compliance Week (subscription required). I have posted background information on the project here.