"…[W]e know there are going to be challenging issues to resolve under any [IFRS] incorporation decision. The issues of LIFO and contingencies immediately come to mind. But even with all of this, I would offer up one final thought for your consideration: Would it better to be 90% converged and understand the differences, or should the objective be abandoned? [bold italics supplied]
Paul Bestwick, SEC deputy chief accountant, asked this question at the end of his remarks on IFRS at the AICPA conference last December. As I'll explain further, it's an inappropriate question; and I thought as much when I read it around the time it was asked. But, I had decided to live and let live, considering that I had already issued a pretty brutal send up of Beswick's boss, James Kroeker, for his own IFRS comments at that conference.
All that changed a few days ago upon reading a report in the Financial Times that the European Commission is still balking at endorsing reasonable and U.S. GAAP-like standards for consolidating special purpose entities:
"The [European Financial Reporting Advisory Group] said some companies felt that  was not enough time to meet the deadline [for adoption], citing additional opposition from financial services groups, including insurers." …
However, European reservations go deeper than timing. France is questioning the substance of the new consolidation rules, which say a company can have a de facto control of an entity while holding less than half of voting rights." [italics supplied]
Basically, the EC is thumbing its nose at GAAP/IFRS convergence. The EC is the elephant in the room, and it will never leave, so anything the IASB wants to do to address its governance processes and independence is mere window dressing. It seems to me that there will always be (a) France standing in the way of investor-purposed financial reporting. (To their specific gripe, I say meh. An entity can be structured so that nothing of substance may be subject to a vote of the common shareholders.)
Not only are we not getting enough convergence out of the joint projects, but there will always be forces standing on guard to break apart what has been converged and is not paltable to the EC -- or India, or China. That's why the FT article made me realize that this ludicrous notion of a "90% solution" has to get it with both barrels.
Let's start with Beswick's implication that IFRS and GAAP will be 90% converged after completion of the current joint projects. What does "90% converged" even mean? On its face, it may have been a slick rhetorical device (recall that Beswick also takes credit for coining "condorsement") to get the audience's heads nodding up and down, but it's far too slick. In fact, it's highly misleading.
First, there's the pretense that convergence will beget comparability, the putative object of the exercise. How could a single set of standards without a single, consistent and rigorous enforcement mechanism deliver on the promise of comparability? But, even more important, IFRS is so loosey-goosey that comparability is not a practical possibility even with the requisite enforcement mechanism.
Second, even if revenue recognition, leasing and financial instruments are converged, even the study (as bad as it is) coming from Beswick's bailiwick shows that differences between U.S. GAAP and IFRS exist for practically every topic – even the ones that have been declared "converged" by the powers that be. Are these differences between GAAP and IFRS significant? Of course they are; for if they weren't significant, they would have been converged already!
Third, there is the problem of costs and benefits. Even Beswick acknowledges (albeit somewhat as an afterthought) that "strong voices" are "concerned" that the cost of IFRS incorporation could be "significant with no commensurate benefit, either to an individual company and or the U.S. markets"; and that IFRS is not high quality. To these naysayers, Beswick coos, "I think these will be important issues the staff will need to consider." The staff has never once stated that it would conduct a study to evaluate the benefits of IFRS incorporation.
* * * * *
Obviously, my answer to Beswick's question is YES, PLEASE ABANDON CONVERGENCE WITH IFRS.
And, I'd like to ask him one: Thus far, what benefits have U.S. investors realized from the ten-year effort to converge IFRS and U.S. GAAP?