FEI Global Financial Reporting Convergence Conference

What IFRS Means to the GAAP Filer – September 28, 2007

FEI Summary

"It became evident that their initiatives related to international accounting and reporting standards would be among the most significant issues facing executives worldwide,” said FEI President and CEO Michael Cangemi in his opening remarks at FEI’s first convergence conference, held at the Marriott Marquis, in New York City. Further, he said that in his role as a member of the Financial Accounting Standards Advisory Committee (FASAC) and the International Accounting Standards Board’s (IASB) Standards Advisory Committee (SAC) he's observed, “The goal of creating one set of high-quality financial reporting standards that transcends borders is nearly universally applauded,” but that “getting there is the hard part.”

Expanding on this theme in later remarks to the press, Cangemi noted, “Establishing one single set of high quality accounting standards that are recognized around the world, if and when it happens, holds great potential for investors.” Referring to Financial Accounting Standards Board (FASB) Chairman Robert Herz and International Accounting Standards Board (IASB) Vice Chairman Tom Jones, he said, “what these gentlemen are doing is literally changing the world, or at least changing the financial reporting world” and that “change rarely comes easily or quickly. So I tip my hat in recognition of the harmonization efforts going on.”

Additionally, Cangemi noted that “FEI recognizes that as the pace of globalization in business continues to accelerate, initiatives related to international accounting and reporting standards are among the most significant issues facing business world wide.” He reiterated that the purpose of the conference was to raise awareness of global convergence in the U.S. and said: “I want FEI to be at the forefront of helping educate financial executives about International Financial Reporting Standards (IFRS) and how it will impact their companies.” Most importantly, he added: “I want U.S. companies to be a part of the process and be a contributor to the deliberations.”  

The conference opened with a keynote presentation by Richard Ketchum, president & CEO, NYSE Regulation Inc., who said, “I see a different world today,” and he spoke about new structural reforms at NYSE, including its regulatory oversight committee. He said in the new competitive environment we need to “keep our eyes open to change.”

He raised points on the role of U.S. Securities and Exchange Commission among the changes and its regulatory role. Among questions on IFRS, he asked: Do IFRS provide levels of comparison? Is IASB capable of changing and will investors benefit overall? Bottom line, he notes the changes in the capital markets and is cognizant of regulatory concerns. However, he said, “[the] world’s markets won’t wait.”

The session on “Standards Setters Objectives & Perspectives” was moderated by David Morris, president, Morris Consulting and member, Consultative Advisory Group, International Auditing and Assurance Standards Board (IAASB). Speaking on the panel, FASB Chairman Robert Herz stated that “Getting to a single set of accounting standards is a lifelong goal” of his. He also said he believes it’s time for the U.S. to establish a timetable and milestones to move to one set of global standards in the U.S. “We need a plan,” he said and also, “we need to “set a date.”

Herz said during the panel the "one set of standards" would be IFRS. He elaborated to FEI’s Director of Technical Policy Analysis Edith Orenstein that he believed IFRS would eventually be that one set of standards, but it's not there yet -- not until, as he outlined on the panel, the convergence and improvement projects agreed to under the FASB/IASB's Memorandum of Understanding (MOU) and the FASB/IASB's joint conceptual framework were completed. Also, he told a press briefing following the panel that currently, he believes "neither IFRS nor U.S. GAAP are entirely 'high quality,'" as they do not go “far enough,” and that the aim of the MOU is not only for convergence, but also for improvement.

Tom Jones said he believes the reconciliation for foreign filers to U.S.GAAP require “will go away.” He said if it doesn’t, and the U.S. continues using U.S. GAAP, U.S. companies would have to have two books and foreign filers would have one book. Referring to the obstacles to adopting one set of standards and the differences in practices around the world, he conceded, “No one could argue there’s no room for improvement [of IFRS]; however “if we wait for all the holes to be filled, it’ll be 1,000 years.”

On of the biggest issues around the world, he said, is “interpretation” and that there’s a “real difference in practice.” He also said in the U.S. “We can’t handle principles without other changes in our system,”

Also on the panel were Mark Olson, chairman, Public Company Accounting Oversight Board (PCAOB) and Craig Crawford, member, International Auditing and Assurance Standards Board (IAASB) and partner-in-charge of International Standards, KPMG LLP.

Kathleen Casey, commissioner, U.S. Securities and Exchange Commission was a keynote speaker; and other sessions included:

“Roadmap to Convergence,” moderated by Gregory Jonas, managing director, Accounting Specialists Group, Moody’s Investors Services; Julie Erhardt, deputy chief accountant, U.S. Securities and Exchange Commission; Pierre Delasaux, head of unit, DG Internal Market, European Commission; and Richard Thorpe, member, Financial Reporting Committee of the Committee of European Securities Regulators (EESR-fin) and Head of Accounting and Auditing Policy, The Financial Services Authority.

“Applying IFRS – the Good, the Bad and the Ugly,” moderated by FEI’s Senior Vice President Grace Hinchman. The panelists were James Campbell, vice president and corporate controller, Intel Corp.; Edmund Hodgeon, partner, Global Capital Markets Group, PricewaterhouseCoopers LLP; Danita Ostling, Americas IFRS Leader, Ernst & Young LLP; and Mark Smith, director, External Reorting, Tomkins plc.

“The Potential Impact of IFRS Adoption,” moderated by former SEC Chief Accountant Donald Nicolaisen. Also on the panel: Alister Cowan, chief compliance officer, BC Hydro; DJ Gannon, Leader, IAS Center of Excellence – Americas, Deloitte & Touche LLP; Sam Ranzilla, partner, partner-in-charge of Professional Practice, KPMG LLP; and Timothy Shaughnessy, vice president & controller, International Business Machines Corp.

Michael Maibach, president & CEO of the European-American Business Council (EABC) provided closing remarks.

For further details on certain sessions, see FEI’s Financial Reporting blog of September 28, written by Edith Orenstein for September 28.

Prepared by Edith Orenstein (eorenstein@financialexecutives.org) and Ellen M. Heffes (eheffes@financialexecutives.org)