More On Legal & Compliancefrom The Advisor's Professional Library
- The New and Improved Form ADV Whether an RIA is describing its investment strategy in advertisements or in the new Form ADV Part 2, it is important the firm articulates material risks faced by advisory clients and avoids language that might be construed as a guarantee.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
Over the last decade, the world's accounting standard-setters have been working on "converging" local and global accounting standards. Central to these efforts has been the work of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) to converge U.S. GAAP and IFRS. Some have argued that there is no need to transition U.S. public companies to IFRS because convergence eventually will result in the two sets of standards (U.S. GAAP and IFRS) being the same.
While convergence is designed to bring U.S. GAAP and IFRS closer together, many have misinterpreted convergence to mean the development of identical standards. The reality is that the development of identical standards was never the intended result of convergence. In fact, the FASB and IASB have acknowledged that such a task would be too difficult to accomplish. This is evident in the boards' recently issued business combinations standards that contain differences in certain requirements. And, based on the boards' current thinking on topics such as financial instruments, consolidations, and leasing, differences are likely to be present in future converged standards.
It's worth noting that the current convergence efforts were conceived at a time when IFRS needed significant improvement and were not used by many companies. Indeed, there was doubt about whether IFRS would ever be globally accepted. Today, that doubt has been erased. First, the quality of IFRS has increased significantly, which has been acknowledged by many observers, including the SEC. Also, since 2005, when European companies were required to use IFRS, thousands of companies have been using them. By 2011, every major capital market (except the United States) and just about every jurisdiction around the globe will be using IFRS as a basis of financial reporting.
Another area that is often omitted from the convergence discussion is interpretations of standards. There has been little or no effort by standard setters to "converge" interpretations, even on the converged standards. In fact, divergence is often created when interpretive guidance is issued by one body but not another.
While progress has been made in converging U.S. GAAP and IFRS, without regulatory action we are unlikely to ever achieve the goal of a single set of global accounting standards.