Countries have utilized several methods to implement international accounting standards. These methods range from adoption to condorsement and everything in between. The most common methods of implementation are convergence and endorsement. The SEC and FASB are considering condorsement, which is a combination of convergence and endorsement.
Dr. Nigel Sleigh-Johnson, Head of Financial Reporting Faculty at the Institute of Chartered Accounts in England and Wales, said that condorsement is “fraught with risks and drawbacks.”
Under condorsement, the FASB would complete its joint projects with the IASB. The FASB would then incorporate subsequently issued and amended IFRSs into U.S. GAAP as deemed appropriate. The FASB could also modify the IFRSs prior to incorporation.
The U.K. had a mandatory transition date for implementing international accounting standards for public companies, but allowed for a gradual transition for private companies. This gradual approach for private companies has been problematic. Sleigh-Johnson went on to note that gradual transitions “can result in a rather incoherent and complex accounting framework.”
Sleigh-Johnson also believes that the transition under condorsement could take significantly longer than is anticipated as IFRS continues to evolve. In fact, Sleigh-Johnson stated, “five to seven years is optimistic”.
Only time will tell how this will unfold. Many of the joint priority projects will not be finalized until later in 2012.
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