Some observations on a recent speech to the IFRS Foundation Conference in London by IASB Vice-Chair Ian Mackintosh.

Most of Mackintosh’s text consists of updates on current projects, but in the closing stretch, he steps back to make some broader remarks:

• “… I find it interesting to note that in recent speeches, various members of the FASB have begun to present a vision of international standard-setting that is remarkably similar to the old IASC approach. This is an approach whereby major economies maintain their own accounting standards, using IFRS as the international benchmark and seeking to reduce their differences. The problem is that in this view, differences between accounting standards would persist. As Jim Kroeker, Vice chairman of the FASB recently said: ‘(…) we recognize that one size may not fit all. By that, I mean that we understand that differences in standards will persist because of the legal,regulatory and cultural differences among different jurisdictions.’
• …If divergences are more or less accepted as inevitable, it can be no surprise they become the norm rather than the exception. If all IASB constituents were to insist on the primacy of national preferences, obviously the goal of a single set of global standards would come to naught. That was the old IASC approach. We tried it for 25 years and it failed.
• Moreover, I do not buy the argument that cultural differences mean that a ‘one size fits all approach’ cannot work. Our Board and staff work incredibly hard to develop principle-based standards that can be adopted by countries around the world, regardless of their stage of economic development and their legal culture. As a result, countries with cultures as diverse as Brazil, Canada, Colombia, Germany, Japan, Korea, Mexico, Nigeria, Turkey and of course the United Kingdom have all adopted IFRS without major issues. Indeed, there is more cultural diversity between the UK and France than between the UK and the US, yet both France and the UK report using IFRS.”

Mackintosh argues that “now is not the time to turn back the clock, and thereby put at risk the hard-fought gains of the last decade,” and ends by quoting Paul Volcker: “If we really believe in open international markets and the benefits of global finance, then it can’t make sense to have different accounting rules and practices for companies and investors operating across national borders. That is why we need global standards. Ultimately this will get done.”

I know one can only go into so much depth in a single speech, but I doubt the IFRS does much to help its case by simply asserting the inevitability of its project and holding out a few supporters, however eminent they might be. One could easily amend Volcker’s quote to say that if we really believe in open international markets and the benefits of global finance, then it can’t make sense to have (say) different currencies and different written and spoken languages for companies and investors operating across national borders. Of course, he wouldn’t make such a statement, because it would be pointless; everyone understands that with such matters as currency and language, there’s more at stake than just helping out the capital markets. You could take this as an implied assertion about the secondary importance of accounting – that whatever argument a jurisdiction might think it has for retaining its own standards couldn’t possibly count for as much as the interests of international business. The fact that over 100 jurisdictions have judged this to be true doesn’t seem to me to make the calculation any easier though for those that remain; one can name any number of areas where something that works for the majority can’t and shouldn’t be imposed on the rest.

His comment about the relative cultural diversity of France and the US versus the UK seems particularly heavy-handed in this regard. One can only guess on what he’s basing that assessment – presumably in large part on the use of English versus French (notwithstanding the famous remark about Britain and America being two nations separated by a common language). But you could just as easily argue that France and the UK have more in common in the ways that matter – for example, that their common histories as colonial powers and as intertwined participants in continental war and peace better allow them to take a broader global view in this regard. Maybe the US will give up US GAAP at around the same time it gives up even a tiny portion of its guns. Who knows? But it seems clear that if some jurisdictions go on believing in the necessity of a distinctive national accounting language, you can’t win the argument by telling them it isn’t so, no matter how loudly and how many times. And, to echo some comments I made on a previous Mackintosh speech, why would you keep pounding pointlessly away at the subject, if not for some unresolved inner neurosis about the sustainability of what you’ve already achieved…?

The opinions expressed are solely those of the author