The Causes of the 2008 Financial Crisis
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increasingly global nature of capital markets, the agency will work to promote higher quality financial reporting worldwide and will consider, among other things, whether a single set of high-quality global accounting standards is achievable.18 The New York State Society of Certified Public Accountants (NYSSCPA) became probably the first group of professional accountants to voice their concerns regarding IFRS adoption in their 2009 comments to the IASB Road Map. For instance, they specified: •
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The SEC’s plan for adoption lacked sufficient detail as to “the methodology and criteria expected to be applied to the milestones in assessing the adequacy of IFRS in meeting the needs of preparers, users, and auditors.” The proposal did not recognize any tilting in the cost-benefit calculus that must surely have occurred as a result of the current economic environment: companies, investors and other participants in the U.S. capital markets have to face the continued dearth of capital at an economically feasible price. It would be reasonable to conclude that the monetary and human capital costs of the transition to IFRS could be burdensome to entities with limited resources and prohibitive for smaller entities, even over a period of many years.
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For a variety of technical, legal, and practical reasons, IFRS will not enhance comparability of financial statements across companies. As this is one of the purported benefits of IFRS adoption, if not the primary benefit being touted, a positive net benefit from adoption is somewhat illusory. Moreover, another benefit of IFRS adoption put forth in the proposing release is the added flexibility afforded to issuers to account for transactions and events by applying their judgment; the Society is concerned that opportunities for management judgment will result in less comparability. Recent events indicate that the IASB is inappropriately influenced by various national regulators and others “who promote the interests of their specific constituencies, as opposed to the needs of the worldwide community.”19 In this context, the NYSSCPA cites as an example the modifications to IFRS (IAS 39 and IFRS 7) that have allowed companies to “‘cherry pick’ [financial] assets with significant losses and reverse those losses out of net income.” Fully acknowledging the extensive history of lobbying and political influence on US GAAP, it is still relevant to the IFRS adoption
