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June 05, 2010



I think another, more obvious red flag was the inability to converge FAS 109 and IAS 12. IAS 12 was drafted using FAS 109 as a starting point, tax was identified as a "short-term" convergence project in the original Norwalk Agreement, and yet 9 years later the two boards have drifted further apart since the issuance of FIN 48 and the IASB's contradictory amendmends to IAS 12.

What would have the potential to kill convergence altogether would be for a number of large multinational companies (along the lines of GE or JP Morgan) to publicly say that they would have no problems with issuing two sets of numbers (GAAP and IFRS) or reconciling their books to IFRS the way foreign private issuers previously had to reconcile to GAAP. It would serve several purposes. First, it would embolden the SEC to declare that they have done enough and that 2 GAAPs are better than the 25 or so that we had 10 years ago. Second, widescale reconciliations of GAAP to IFRS would help expose more of the idiosyncrasies and inconsistencies within both sets of standards, possibly driving more change for the better. Finally, it might be enough of a sop to the Big 4 and AICPA (who would at least be able to promote limited IFRS services to larger clients vs. the almost zero projects happening now) so that they pull back on support for the larger convergence effort.

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