It’s a target, stupid!
Any regular reader of this column would know that the IASB and the US FASB would harldy dare fail to miss their self-assigned 30 June 2011 deadline for convergence of their respective accounting literature. And on 14 April, IASB chairman David Tweedie and FASB chief Leslie Seidman finally faced facts and ‘fessed up'. "[L]et me clarify any misunderstanding about the June 2011 date. It was always intended to be a target, not a deadline, and we always said that achieving the target was subject to the nature and extent of the feedback that we got on each of the exposure documents," Seidman said.
No, the target was a mere motivational tool. Tweedie added: "The June date is a target, it actually gave both boards great focus, and we are probably further ahead than we would have been had we not had that focus." One would hope that a salary of $768,198, and, for unnamed board members, the prospect of first-class flights, a tax indemnification agreement and ‘hotel-type lodging', would be motivation enough.
Those of us with experience of IASB targeting abilities were not surprised. In February 2011, IASB technical director Alan Teixeira addressed a meeting of the board's global preparers forum. Revealing his ‘publication schedule' for three new IFRSs, 10, 11, and 12, he said: "We are looking looking at around about the 21 March for that, thereabouts, 21 to 25 March." They remain unpublished at the start of May.
He continued: "And a few days after that, on 28 March... we will be producing post-employment benefits and some amendments to IAS1 that deal with other comprehensive income. At the moment, I think our schedule is [for] 28 [March], I'm sure that's right." The post-employment benefits amendments will, he added, align it "quite substantially with US GAAP." Whether they will or will not is a matter for debate; what is clear is that the board has yet to publish the two standards.
There are yet more ‘targets'. As if to underline the IASB operating principle that a target is not something that you hit, a target is something that you miss, his next sneak preview of the publications schedule continued: "Then, in the second week of April, at the moment [it] is our target, we will produce IFRS13, which is the fair value measurement standard." Yes, you guessed correctly.
After that, Teixeira explained, there will be at least a pause of a month or two before the big projects come on. This means the big four, which comprises leases, revenue recognition, insurance, and financial instruments. "We meet next week for, I think, four or five hours on Monday, the same again on Tuesday, and then we have the interpretations committee. The week after that we have four days of meetings, the week after that three days of meetings, the week after that two days of meetings."
It is an analysis that appears to confuse the mere act of holding a meeting with the entirely separate activity of publishing an accounting standard. Increasingly, IASB meetings have taken on the feel of prayer meetings; first, they assemble, then they pray that the meeting will result in progress.
So, what was the master plan behind the March meetings? Well, explained Teixeira: "It's very, very busy. That's designed basically... to break the back of our re-deliberations on our major projects: that is mainly, revenue, leases and insurance."
Yet another missed target. Paragraph 11 of a meeting paper 156_09a produced by the German national standard setter for its 6 May meeting reveals: "In the context of its deliberations, the IASB, as at the end of March 2011, had still reached no tentative decisions [in relation to determining whether a contract contains a lease]; however, [in two related areas] the board has proposed two possible ways of bringing clarity to two areas of criticism raised in the comment letter process."
The paper continues that amendments to the criteria for an arrangement to amount to a lease were in fact made in April. The staff author of the paper notes that the amendments "are of a largely clarifying nature and do not have a materially significant impact." No broken backs there then. And as at early May, the IASB still has no idea how to differentiate between a lease and a service.
As for the completion of the convergence agenda, the reality is that we have no reliable estimate of when work on the remaining projects will be completed.