Convergence with IFRS in an expanding Europe: progress and obstacles identified by large accounting firms survey

Transcription

1 Journal of International Accounting, Auditing and Taxation 13 (2004) Convergence with IFRS in an expanding Europe: progress and obstacles identified by large accounting firms survey Robert K. Larson, Donna L. Street 1 Department of Accounting, School of Business Administration, University of Dayton, 300 College Park, Dayton, OH , USA Abstract The International Accounting Standards Board (IASB) acquired greater legitimacy and stature when the European Union (EU) decided to require all listed companies to prepare consolidated accounts based on International Financial Reporting Standards (IFRS) beginning in This study examines the progress and perceived impediments to convergence in 17 European countries directly affected by the EU s decision. These include: (1) the 10 new EU member countries, (2) EU candidate countries, (3) European Economic Area (EEA) countries, and (4) Switzerland. We utilize data collected by the six largest international accounting firms during their 2002 convergence survey. Additionally, we analyze subsequent events and studies. While all surveyed countries will either require or effectively allow listed companies to prepare consolidated financial statements in accordance with IFRS by 2005, few are expected to require IFRS for non-listed companies. This suggests the development of a two-standard system. The two most significant impediments to convergence identified by the survey appear to be the complicated nature of particular IFRS (including financial instruments) and the tax-orientation of many national accounting systems. Other barriers to convergence include underdeveloped national capital markets, insufficient guidance on first-time application of IFRS, and limited experience with certain types of transactions (e.g. pensions) Elsevier Inc. All rights reserved. Keywords: Convergence; International Financial Reporting Standards (IFRS); Europe Corresponding author. Tel.: addresses: Robert.Larson@notes.udayton.edu (R.K. Larson), Donna.Street@notes.udayton.edu (D.L. Street). 1 Tel.: ; fax: /$ see front matter 2004 Elsevier Inc. All rights reserved. doi: /j.intaccaudtax

2 90 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) Introduction In recent years, the International Accounting Standards Board (IASB) has acquired greater legitimacy and stature (Choi, Frost, & Meek, 2002; Herz, 2003; Meek & Thomas, 2004; Roberts, Weetman, & Gordon, 2002). Indeed, the 2002 convergence survey conducted by the six largest accounting firms reveals that 95% of the countries surveyed are committed to either the complete or partial convergence of their national accounting standards with International Financial Reporting Standards (IFRS) 2 (BDO et al., 2003). A major event for the IASB was the European Union s (EU) decision in 2002 to require all EU listed companies to prepare consolidated accounts using IFRS beginning in To date, considerable research has focused on convergence in the first 15 members of the EU (see, for example, Haller, 2002; Street & Larson, 2004). 3 Although it has received limited attention by academic researchers, the EU s decision regarding IFRS has substantial ramifications for the rest of Europe. All new EU member countries are obligated to follow accounting decisions made by the EU. This most directly affects the ten new EU members that joined May 2004 and the three EU candidate countries. In addition, Norway, Iceland, and Liechtenstein are members of the European Economic Area (EEA). EEA countries, by treaty, are obligated to comply with EU Accounting Directives and Regulations, including the adoption of IFRS in Finally, although not an EU member, Switzerland is geographically in the midst of the EU and has close economic relationships with many EU countries. The current study examines the state of convergence in these 17 countries by providing an overview of how IFRS are being adopted and investigating the perceived impediments to convergence. The study addresses a key question recently posed by Meek and Thomas, What about non-listed companies and companies nonconsolidated (i.e. individual company) accounts, particularly those from European code law countries? Will they continue to reflect national accounting systems, or will they shift away from them? (Meek & Thomas, 2004, p. 31) This research utilizes the extensive data set collected by the six largest international accounting firms in their GAAP Convergence 2002 survey. Additionally, subsequent events and studies are reviewed. All 17 countries examined in this study will either require or effectively allow listed companies to prepare consolidated financial statements in accordance with IFRS by However, several barriers to convergence were identified by the large firms survey. The most frequently noted impediments were limited national capital markets, insufficient guidance on first-time application of IFRS, the lack of existence of transactions of a specific nature (such as pensions and other post-retirement benefits), the tax-driven nature of national accounting regimes (i.e., the alignment between financial accounting and tax reporting), and the complicated nature of particular standards. In regards to the latter, several of the 2 The term IFRS in the paper includes current and future standards issued by the IASB as well as International Accounting Standards (IASs) issued by the former International Accounting Standards Committee. 3 Before May 2004, the EU member countries were Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden, and the United Kingdom.

3 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) countries were particularly concerned about financial instruments. Other standards most commonly viewed as complicated were impairment of assets, income taxes, and employee benefits (pensions). Our analysis reveals that concerns about tax linkages and complicated standards appear to be creating a situation in certain European countries where IFRS are most often used for listed companies consolidated accounts, and another basis of accounting is used for non-listed companies and/or for individual accounts. 4 The research finds that few of the countries studied intend to require IFRS for non-listed companies, and only about half will require IFRS when listed companies prepare individual accounts. This finding suggests the emergence of a two-standard system of financial reporting in a majority of these 17 European countries and is consistent with Street and Larson s (2004) findings for the first 15 EU countries. The rest of the paper is organized as follows. The study continues with a summary of the major findings reported by the firms in GAAP Convergence This is followed by an overview of official EU convergence efforts and a literature review. A detailed countryby-country analysis of the data is then presented and followed by a discussion of the results and the conclusion. 2. GAAP Convergence 2002 GAAP Convergence 2002 is the third major survey sponsored by the six largest accounting firms aimed at encouraging convergence of national accounting standards with IFRS [GAAP 2000, GAAP 2001, and GAAP Convergence 2002 are available at GAAP 2001 found that, at year-end 2001, many national accounting systems included numerous and significant differences from IFRS and that greater effort must be directed at identifying differences in these countries and planning for their timely elimination (Andersen et al., 2001). The 2002 survey explores the extent to which nations have developed country plans aimed at converging their national standards with the international benchmark and identifies impediments these countries have encountered, or anticipate facing, in their efforts to converge with IFRS. To provide context for the survey analysis by individual country, an understanding of the overall findings of GAAP Convergence 2002 is important. The 2002 survey indicates global accounting convergence towards IFRS is underway. In some manner, 56 of the 59 participating countries had either adopted IFRS or intended to converge their national GAAP with IFRS. While the survey findings support the legitimacy of the IASB s global accounting role, it also identifies obstacles that continue to impede convergence in many countries. A slim majority of the 59 countries express concerns regarding the complicated nature of certain international standards, especially those associated with fair value accounting. Almost half note that the tax-driven nature of their national accounting regime hinders convergence. Three impediments to convergence are identified by about one-third of the 59 countries: 4 The term non-listed includes all EU domiciled companies that are not listed on an EU stock exchange. The terms individual accounts or individual financial statements are used in this paper. In some countries, these financial statements may be known as annual, single-entity, or parent-only.

4 92 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) (1) disagreements with certain significant IFRS; (2) insufficient guidance on first-time application of IFRS; and (3) limited domestic capital markets. Translation difficulties and satisfaction with national standards among investors and financial statement users represent barriers to convergence in about 20% of the countries. In addition to dealing with the obstacles noted above, the large firms conclude that capital market participants need to join forces to ensure that (1) the coverage of IFRS in the education and training of accountants is increased, and (2) national language translations of IFRS, including interpretations, are produced on a timely basis. GAAP Convergence 2002 includes a copy of the survey questionnaire completed by partners representing the participating accounting firms in the 59 countries (see pages 19 through 23). For each country, the findings reported in GAAP Convergence 2002 reflect the consensus view of the participating partners in that country and not necessarily those of the national governments or accounting standard setters. Respondents focused on listed companies. In countries where requirements for listed and non-listed companies differ, the responding partners were asked to provide additional information regarding the situation for non-listed companies (i.e. would they be allowed or required to prepare consolidated accounts based on IFRS, etc.). 5 The primary data source for this paper is the explanatory comments provided by the partners. In addition, subsequent events and studies are reviewed. 3. EU convergence efforts Effective January 1, 2005, European Commission (EC) Regulation No. 1606/2002 requires all EU listed companies to prepare their consolidated accounts in accordance with IFRS. 6 However, listed companies will only be required to use those IFRS approved for use by the EU. In September 2003, the EU endorsed all then existing IFRS except those relating to financial instruments (including IAS 32, IAS 39, and Standing Interpretations Committee (SIC) interpretations 5, 16, and 17). As of September 2004, the EU still had not endorsed either the IASB s financial instrument standards or the 16 International Accounting Standards (IASs) just revised as part of the Improvements Project (EC, 2004). 7 The EU regulation allows the 25 member countries to determine whether IFRS endorsed by the EC will be required beyond the preparation of consolidated financial statements by listed companies. Each EU country is given the choice of whether IFRS will be required or allowed in preparation of: (1) listed companies individual accounts, and (2) non-listed companies consolidated and/or individual accounts. 5 The survey also did not seek to address any different or additional requirements that may apply to financial services or other specialized industries. 6 Companies can delay use of IFRS if: (1) they only have publicly traded debt securities; or (2) they already use another set of internationally accepted standards and are publicly traded both in the EU and on a regulated third country market. 7 The EC s Accounting Regulatory Committee met in September, 2004 to discuss whether to recommend that the EC in October endorse IAS 32 and IAS 39. It recommends endorsing IAS 39, except for two sections: the prohibition on hedge accounting for core deposits and the fair value option.

5 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) EU regulations also affect member states of the EEA. Effective since 1994, the EEA agreement allows Iceland, Liechtenstein, and Norway to participate in the EU Single Market without full EU membership. However, EEA countries are expected to comply with the accounting directives and regulations (DTT, 2003b), including adoption of IFRS for preparation of consolidated financial statements by listed companies (Andersen et al., 2001). 4. Literature review Research addressing the convergence or harmonization of international accounting standards is both growing and becoming more empirical in nature (for more extensive discussions of this literature, see Abd-Elsalam & Weetman, 2003; Garrido, Leon, & Zorio, 2002; Meek & Thomas, 2004; Rahman, Perera, & Ganesh, 2002; Street & Larson 2004; Tarca, 2004). Many studies assess the International Accounting Standard Committee s (IASC) (predecessor of the IASB) and the IASB s success in facilitating or achieving harmonization. These studies focus on either: (1) accounting practices of corporations, de facto; or (2) national accounting standards, de jure (Tay & Parker 1990). This study is concerned with the latter, de jure, and how or whether national accounting standards are actually moving toward convergence. Early studies investigating the harmonization of official national accounting standards with IASs produced varying results (Larson & Kenny, 1999). While more recent studies point out that convergence is still not complete (Bloomer, 1999; Street & Gray 1999), these studies indicate that the increased legitimacy of the IASC, and now the IASB, is creating a situation where national accounting standards are in the process of converging with IFRS (Abd-Elsalam & Weetman, 2003; Andersen et al., 2000, 2001). Numerous studies have focused on accounting harmonization within the EU and other European countries (Aisbitt & Nobes, 2001; Canibano & Mora, 2000; Haller, 2002; Hoarau, 1995; Roberts et al., 2002; Thorell & Whittington, 1994; Walton, 2003). In many of the earlier studies, the major harmonization issues examined and debated typically center on the proper and actual roles of the EU accounting directives and the IASC (e.g. Hoarau, 1995; Thorell & Whittington, 1994). One stream of research investigates the problems associated with translating accounting terminology and concepts, such as true and fair, into different European languages (Aisbitt & Nobes, 2001; Evans, 2003). Another stream of research used annual reports and indexes in an effort to measure European harmonization (Canibano & Mora, 2000; Taplin, 2004). Roberts et al. (2002) and Walton (2003) document the development of accounting harmonization in Europe through the EU directives and note the shift towards convergence with IFRS. After providing an in-depth analysis of EU harmonization and its movement toward the IASB, Haller (2002) raises many important issues. For example, Haller (2002, 182) points out that the current EU solution of mandating IFRS for the consolidated accounts of listed companies and allowing countries to require national GAAP for individual accounts is not really an increase in efficiency and a reduction in complexity! Recent developments in the EU and other European countries allow for an examination of the effect of mandated regional regulations requiring convergence on national accounting standards. Rahman et al. (2002) empirically support the idea that regulatory harmony can improve practice harmony. However, the EU regulation mandating IFRS adoption by listed

6 Table 1 Sources of information regarding accounting practices in 17 European countries Panel A:New European Union (EU) member countries (as of May 1, 2004) Sources Cypus Czech Republic Estonia Hungary Latvia Lithuania Malta Poland Slovakia Slovenia GAAP Convergence X a X X X X X X X X 2002 GAAP 2001 X X X X X X X X X GAAP 2000 X X X X X EU (2004c) X X X X X X X X X X DTT (2000) X X X X X X X X Alexander and Archer X X X X X X (2001) European Accounting Review articles Bailey et al. (1995) Bailey et al. (1995) Garrod and Turk (1995) Other reports and journal articles Vafeas, Trigeorgis, and Georgiou (1998) Ernst and Young Cyprus (2004) Sucher, Seal, and Zelenka (1996), Holeckova (1996), Seal, Sucher, and Zelenka (1995) World Bank (2003a), PwC (2002a) Bailey, Alver, Mackevicius, and Paupa (1995) DTT (2003a) Rooz, Sztano, and Sztano (1996); Clarkson, Fraser, Iles, and Weetman (1996), Boross, Clarkson, Fraser, and Weetman (1995) Roberts et al. (2002), de Bruin (2000) World (2002b) Bank DTT (2004b) Kosmala-MacLullich (2003), Schroeder (1999), Jaruga and Szychta (1997), Jaruga, Walinska, & Baniewicz, Krzywda, Bailey, and Schroeder (1994) PwC (2002b), World Bank (2002c), Gornik-Tomaszewski and Jermakowicz (2001) Daniel, Suranova, and de Beelde (2001) E&Y/Weinhold Legal (2004), PwC Slovensko (2003) Panel B: European Union (EU) candidate countries, European Economic Area (EEA) member countries and Switzerland Bulgaria EU Romania EU candidate Turkey EU candidate Iceland EEA Liechtenstein EEA Norway EEA member Switzerland candidate member member GAAP Convergence X X X X X 2002 GAAP 2001 X X X X X X GAAP 2000 X X X X EU (2004b) X X X DTT (2000) X X Alexander and Archer (2001) X X X X European Accounting Review articles Other reports and journal articles World Bank (2002a) King, Beattie, Cristescu, and Weetman (2001), Dutia (1995) PwC (2004), World Bank (2003b), Ernst and Young Romania (2003) Cooke and Curuk (1996), Simga-Mugan (1995) DTT (2004b), DTT (2002), Bursal (1998) Alexander and Schwencke (2003), Aisbitt and Nobes (2001), Eilifsen (1996), Johnsen (1993) DTT (2003b), Ordelheide and KPMG (2001) a Cyprus returned a GAAP Convergence 2002 survey, but the response did not address all areas this paper investigates. Cyprus already uses IFRS. Achleitner (1995) DTT (2004a), PwC (2002c), Ordelheide and KPMG (2001) 94 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004)

7 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) companies followed a variant of ideas suggested by Hoarau (1995) and others by allowing each country to decide whether national standards should still be allowed or required for non-listed companies and the individual accounts of listed companies. The current study contributes to the literature by exploring the dynamics that evolve when regional regulations mandate convergence for consolidated accounts of listed companies while allowing individual countries to determine the degree to which national standards converge with IFRS. Convergence of national accounting standards with IFRS in what, until recently, could be called non-eu Europe has received limited attention in academic accounting journals based outside of Europe. Indeed, much of the existing English language academic literature addressing this issue has appeared in the European Accounting Review. Most other prior studies addressing convergence of IFRS and national standards were conducted by the large public accounting firms or the World Bank. While not meant to be exhaustive, Table 1 lists the major English language studies and reports regarding convergence for the 17 European countries examined in this study. Many focus on comparisons of one or more country s national GAAP and IFRS (e.g. Andersen et al., 2000, 2001; PwC, 2002a, 2002b, 2002c). The most complete study is Deloitte Touche Tomatsu s (DTT) (2000) detailed comparison of IFRS with GAAP in 14 Eastern European countries. In general, this body of research indicates that, while over time national accounting standards are gradually converging with IFRS, a number of significant differences remain to be addressed before convergence is achieved. While European countries are moving to converge their accounting standards with IFRS, research is needed to provide updated assessments of convergence and impediments to its progress (Meek & Thomas, 2004). Street and Larson (2004) investigated convergence in the first 15 EU member countries and found that it is focused primarily on the consolidated accounts of listed companies. A major barrier to convergence of national standards with IFRS appears to be that most continental European countries have historically linked their financial reporting and tax laws (Eberhartinger, 1999; Eilifsen, 1996; Haller, 2002; Hoogendoorn, 1996; Holeckova, 1996; Jaruga et al., 1996; Lamb, Nobes, & Roberts, 1998). Guenther and Hussein (1995, p. 132) concluded that one of the biggest impediments to uniform international accounting standards is the requirement in many countries that financial reporting standards conform to tax regulations. In the new EU environment, Meek and Thomas (2004, 31) ask, How will taxation influence their accounting? Our review of the large firms 2002 convergence survey findings and recent developments provides preliminary evidence of the extent to which the European countries examined in this study have been motivated to break or relax this traditional link. 5. Findings We examine convergence efforts in 17 European countries that are either new EU members or have close economic and political ties to the EU. While the study examines 17 countries, it primarily focuses on the 13 countries that provided detailed responses to the large accounting firms 2002 convergence survey. GAAP Convergence 2002 did not cover convergence efforts in Liechtenstein, Malta, and Turkey, and the survey response from

8 96 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) Cyprus lacked detail (i.e. IFRS had already been adopted). This section begins by reporting each country s plans to converge national GAAP with IFRS (see Table 2 for a summary of the countries included in the 2002 survey). Then, for the countries covered in GAAP Convergence 2002, this section explores the difficulties experienced or anticipated in working towards convergence (see Table 3). This includes highlighting the particular accounting topics and standards that the survey finds to be hindering convergence (see Table 4). While the analysis focuses on data from the survey, it also incorporates information from other pertinent reports to provide a more complete and up-to-date snapshot of convergence efforts in these countries. The discussion begins with the new EU members, followed by EU candidate countries, the EEA countries, and Switzerland Cyprus new EU member country Cyprus requires all companies to use IFRS in preparation of both individual and consolidated financial statements (Ernst & Young Cyprus, 2004). Thus, Cyprus survey response did not indicate any significant obstacles to convergence Czech Republic new EU member country The Czech Republic will require all listed companies to apply IFRS in consolidated and individual financial statements for 2005 accounts (EU, 2004c). Non-listed companies will be allowed, but not required, to use IFRS for consolidated accounts. Non-listed companies will still be required to use Czech GAAP for individual accounts. Where applicable, early adoption of IFRS is permitted. Accounting legislation effective January 1, 2002 resulted in the elimination of some differences between Czech GAAP and IFRS and, accordingly, made Czech GAAP more convergent with IFRS. Further progress is expected toward convergence. However, the World Bank (2003a) notes a number of differences between IFRS and Czech GAAP, including Changes in Accounting Policies (IAS 8), Intangible Assets (IAS 38), Business Combinations (IAS 22), Special Purpose Entities, and Financial Leasing (IAS 17). The World Bank (2003a, p. 1) also reports that in practice, compliance with certain complex EU Directives and IAS requirements, including those dealing with consolidation and deferred tax, has been delayed. A number of impediments to convergence were identified by the 2002 convergence survey. These include insufficient guidance on first-time application of IFRS, the tax-driven nature of the national accounting requirements (viewed as a major obstacle), a relatively underdeveloped capital market, and a general satisfaction with national accounting standards. On a more positive note, foreign investors are seen as supporting the adoption of IFRS. Another impediment to convergence noted on the Czech Republic survey is the lack of transactions of a specific nature, such as pension schemes and other post-retirement benefits. The survey also suggested that national standard-setting authorities believe the local environment is specific and needs tailored accounting and reporting standards that reflect the Czech environment. The survey indicates convergence could be further stimulated by the introduction of an independent body that would issue Czech accounting standards. Convergence could also be

9 Table 2 Expected use of IFRS in 2005 for 17 European countries by listed and non-listed, and by consolidated and individual financial statements European country IFRS required for consolidated statements of listed companies IFRS required for individual accounts of listed companies a IFRS Required for consolidated statements of non-listed companies IFRS required for individual accounts of non-listed companies New EU members Cyprus Yes Yes Yes Yes Czech Republic Yes Yes Allowed option No Estonia Yes Yes Required for financial institutions; allowed for others Required for financial institutions; allowed for others Hungary Yes, to extent does not conflict with national law No Allowed option, to extent does not conflict No with national law Latvia Allowed, to extent there is no conflict with national law Allowed, to the extent there is no conflict with national law Allowed, to extent there is no conflict with national law Allowed, to extent there is no conflict with national law Lithuania Yes Yes Yes for banks; not allowed for others Yes for banks; not allowed for others Malta Yes Yes Yes Yes Poland Yes Allowed option Yes for banks; not allowed for most Not allowed for most companies others Slovakia Yes Yes Yes No Slovenia Yes Being considered as required Proposed as required for banks and insurance firms; allowed for some others Proposed as required for banks and insurance firms; allowed for some others EU candidates Bulgaria Yes Yes Yes Yes Romania Yes b Yes b Yes b Yes b Turkey Allowed option Allowed option EEA members Iceland Yes, EEA members expected to (must) comply Being considered as allowed option Being considered as allowed option Being considered as allowed option with EU accounting directives and regulations Liechtenstein Yes, EEA members expected to (must) comply Allowed option Allowed option Allowed option with EU accounting directives and regulations Norway Yes, EEA members expected to (must) comply with EU accounting directives and regulations Will probably not be allowed Being considered as allowed option Will probably not be allowed Other Switzerland Multinational companies must use IFRS or US GAAP; Others may use Swiss GAAP No No No Data sources: GAAP Convergence 2002 Survey Data, 2004 EU Surveys, DTT, E&Y, and PwC. a Several countries state that companies may use IFRS as long as it does not conflict with national accounting laws. b Except for small entities and where Romanian Accounting Law conflicts with IFRS. R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004)

10 Table 3 Perceived impediments to achieving IFRS convergence identified in large firm survey a European country Complicated nature of particular standards Tax-driven nature of national accounting regime Disagreement with certain significant IFRS Insufficient guidance on first-time application of IFRS Limited capital markets Satisfaction with national accounting standards among investors/users Translation Difficulties New EU members Czech Republic X X X X X Estonia X X X X Hungary X Latvia X X X X X Lithuania X X X X X Poland X X X X X Slovakia X X X X Slovenia EU candidates Bulgaria X X X X X X Romania X X X X X EEA members Iceland X Norway X X X Other Switzerland X Total a As of December 31, Lack of Existence of transactions of a specific nature 98 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004)

11 Table 4 Accounting standards and areas perceived as barriers to convergence in survey a European country Standards seen as too complicated or complex Standards where country has little experience with such transactions Financial Instruments (IAS 39) Impairment of Assets (IAS 36) Deferred Income Taxes (IAS 12) Employee Benefits (pensions) (IAS 19) New EU members Czech Republic X Estonia X X Reporting by Retirement Plans (IAS 26), X Hyper-Inflation (IAS 29), Joint Ventures (IAS 31) Hungary Latvia X X X X Construction Contracts (IAS 11), Leases X (IAS 17), Investment Property (IAS 40) Lithuania X X X X Poland X X Business Combinations (IAS 22), SIC 19 and SIC 30 (Reporting Currency) X Slovakia X X Slovenia EU candidates Bulgaria X X X X Leases (IAS 17), Reporting by Retirement X Plans (IAS 26), Provisions (IAS 37) Romania X X Hyper-Inflation (IAS 29), SIC 19 and SIC 30 (Reporting Currency) EEA members Iceland Norway X Other Switzerland Total a As of December 31, Other Pensions and post-retirement benefits Other Financial Instruments R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004)

12 100 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) facilitated by changes in tax and other business legislation. In regard to the former, the World Bank (2003a) has expressed concern that the Ministry of Finance drives both accounting regulations and the regulation and collection of taxes. The survey noted that while new IFRS translations are usually prepared on an annual basis, at year-end 2002, the most recent version of IFRS available in the Czech language was the 2000 version. Confirming the survey, the World Bank (2003a) notes that 2001 and 2002 translations were not published. The World Bank further noted that the 2000 version was expensive and, therefore, not widely available. An IASB (2004) approved 2003 Czech language translation is now available Estonia new EU member country In 2005, Estonia will require all listed companies and all financial institutions to apply IFRS in their consolidated and individual financial statements (EU, 2004c). Non-listed companies may choose to prepare their consolidated and individual accounts using either IFRS or Estonian GAAP. Larger companies are expected to choose IFRS while smaller and medium-size companies (SMEs) are expected to choose Estonian GAAP. The new law states that standards of the Estonian Accounting Standards Board (Estonian GAAP) should be harmonized with IFRS and cross-referenced to applicable IFRS paragraphs. New Estonian GAAP should be in line with IFRS recognition and measurement requirements. Any differences in the local standards should be explained and justified (DTT, 2003a). By mid-2003, most Estonian GAAP had been rewritten to conform with the new law and IFRS. Although new standards of Estonian GAAP are to be based on IFRS, they will require less disclosure and will allow simplified treatments in certain accounting areas. Several IFRS deemed less relevant in the Estonian economic environment will not be covered by Estonian GAAP. Standards not expected to be adopted into Estonian GAAP in the near future include IAS 19 (Employee Benefits), IAS 26 (Accounting and Reporting by Retirement Plans), IAS 29 (Hyperinflation), and IAS 31 (Joint Ventures). Estonian GAAP recommends that companies follow IFRS where local GAAP is silent. Convergence with IFRS is relatively widely supported by different authorities. The Estonian Accounting Standards Board understands that, for a small country like Estonia, IFRS is the most effective way of improving the quality of the accounting framework. Unlike many countries, the Estonian survey response states that the national accounting environment is absolutely not tax-driven (there is no annual profit tax). Rather, as DTT (2003a) notes, corporate tax is based on dividends, not profit. While considerable progress has been made, the survey identified several impediments to convergence. These include: (1) the complicated nature of certain IFRS, particularly IAS 39 (Financial Instruments); (2) a relatively underdeveloped capital market, including difficulties in measurement of the fair value for items such as long-term investments and biological assets; (3) the lack of existence of transactions of a specific nature, such as pension funds; and (4) translation difficulties. IFRS were not translated into the national Estonian language at the time of the 2002 survey. However, a translation was in process, and it was hoped that a completed text would be published by the end of 2003 or the beginning of 2004.

13 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) Hungary new EU member country In 2005, Hungary will require listed companies to prepare consolidated financial statements in accordance with IFRS, to the extent there is no conflict with national law. IFRS will also be permitted, but not required, for preparing consolidated accounts of non-listed companies. However, IFRS will not be permitted for the individual accounts of listed and non-listed companies unless the individual accounts also comply with the Hungarian Accounting Act (EU, 2004c). Government Resolution No. 2099/2002 (dated March 29, 2002) sets out a detailed time schedule of steps to harmonize Hungarian accounting legislation with the EU norms. Hungarian national accounting standards will be based on IFRS, and the deadline for completion is The standard-setting process was initiated by several meetings set up by the Ministry of Finance (which is responsible for the current accounting legislation) to discuss basic decisions regarding the standards. Attendees represented the Chamber of Auditors, the Association of Qualified Accountants, several Ministries, preparers and users of financial statements, and Big 4 accounting firm representatives. The standardsetting process is intended to eliminate some allowed alternatives included in IFRS. It is also expected that some additional rules will be incorporated to reflect Hungarian specialties. The tax-driven nature of national accounting requirements is seen as an impediment to convergence. Previously, de Bruin (2000) noted that Hungary still had a strong linkage to accounting for tax purposes. Also, the survey identified some concerns that IFRS are too comprehensive and complex for owner-managed SMEs. At the time of the survey, the most recent Hungarian version of IFRS was an unofficial translation prepared in The 2002 edition was expected to be officially translated by the end of 2003, and plans are to translate new IFRS as they are issued. With EU membership, it is believed that problems with translation availability should disappear Latvia new EU member country Legislation currently in force allows companies to use IFRS in the preparation of individual and consolidated financial statements, but only to the extent it does not conflict with the national Latvian accounting laws (EU, 2004c). Additionally, Riga Stock Exchange listing rules currently require that all Official List companies prepare and submit financial statements prepared in accordance with IFRS. However, for statutory reporting purposes, these companies are required to prepare another set of accounts prepared in accordance with the accounting law. Latvia plans to establish a board to develop Latvian standards in compliance with IFRS. At the time of the survey, the new accounting law was still in the process of approval. The proposed law would require the Cabinet of Ministers of Latvia to mandate the process of convergence in accordance with EU requirements and IFRS, and it would apply to a long list of companies and entities, including commercial companies, branches of international companies, not-for-profit organizations, permanent representatives of foreign companies, state and municipality organizations, public organizations, and individuals carrying out business activities. However, the Cabinet of Ministers would have the authority to determine

14 102 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) the mandatory Latvian accounting standards (which should comply with IFRS) and the scope of the entities to which the Latvian accounting standards apply. While Latvian standards are to comply with EU regulations and IFRS, it is intended that Latvian accounting standards will be more simple, understandable, and easier to use. Thus, few international standards will be incorporated without changes. While there should not be any real conflicts with IFRS, Latvian standards may ignore subjects not generally applicable to Latvia. When national accounting law does not make specific requirements, best practices of IFRS are to be followed, but this guidance is likely to apply only to large, local companies and foreign subsidiaries subject to the judgment of the auditor. At the time of the survey, four national accounting standards had been issued by the Financial Accounting Standardisation Technical Committee under the Latvian Ministry of Economics. These include: (1) Presentation of Financial Statements; (2) Inventories; (3) Cash Flow Statements; and (4) Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies. These standards are not legally binding, although they represent generally accepted practice and may be voluntarily applied. Several impediments to convergence in Latvia were identified by the survey. One impediment is the lack of financial resources, including money to involve professionals in the local standard development process. The survey also revealed concerns regarding insufficient guidance on first-time application of IFRS, although respondents noted there was no reason to believe such guidance could not be issued if necessary. The Latvian survey respondents believe a separate system of accounting for tax assessment is a necessity. Under the existing system, application of IFRS influences calculation of the tax base. Tax adjustments needed when taxable profit is different than accounting profit under IFRS had not been developed at the time of the survey. Indeed, there is reluctance of national authorities in Latvia to accept standards based on rules prepared by an international organization, such as the IASB. Until EU admission, Latvia could not directly incorporate IFRS in the Latvian legal system, which is based on Continental law principles. However, the survey suggested recent admission to the EU may facilitate inclusion of IFRS in Latvia s legal system. While the Latvian accounting profession is definitely interested in developing more sophisticated national standards, IFRS are generally viewed as too complex, especially with regard to extensive disclosures. Indeed, a major concern highlighted by the survey is the complicated nature of some IFRS. Adoption of the following standards would be complicated for SMEs (which constitutes more than 99% of enterprises in Latvia): IAS 11 (Construction Contracts), IAS 12 (Income Taxes), IAS 17 (Leases), IAS 19 (Employee Benefits), IAS 36 (Impairment of Assets), IAS 39 (Financial Instruments), and IAS 40 (Investment Property). Three additional barriers to convergence were identified by the survey. Certain types of transactions, such as pensions and post-retirement benefits, do not exist or are not common in Latvia. Thus, a lack of applicability may impact the perceived need for standards in these areas. Another impediment is the relatively undeveloped state of the Latvian capital market, which is seen as rather illiquid. Finally, translation difficulties were seen as a barrier. At the time of the survey, the most recent translation of IFRS available was the version effective January 1, 2000 and published in Private organizations developed the 1997 and 2001 translations, which were not officially sanctioned. In the past, limited financial

15 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) resources were available for translation efforts. At the time of the survey, a translation of the 2002 version of IFRS was underway Lithuania new EU member country In Lithuania, as of January 1, 2004, IFRS are required to be used by all companies listed on the National Stock Exchange. By 2005, all listed companies and all banks (whether or not listed) will be required to use IFRS to prepare both consolidated and individual financial statements (EU, 2004c). Except for banks, all non-listed companies will be required to use Lithuanian GAAP for both consolidated and individual financial statements. A new national accounting standard-setting body has been established by law (World Bank, 2002b). The Lithuanian Law of Financial Accounting specifically states that Lithuanian Business Accounting Standards (Lithuanian GAAP) should comply with IFRS. Lithuanian GAAP is being developed and is expected to be similar to IFRS. According to the survey, several obstacles pose a barrier to convergence in Lithuania, including insufficient guidance on first-time application of IFRS, the tax-driven nature of the national accounting regime, and a relatively underdeveloped capital market. Certain international standards are also seen as being relatively complicated, including IAS 12 (Income Taxes), IAS 36 (Impairment of Assets), and IAS 39 (Financial Instruments). The World Bank (2003b) notes that the Bank of Lithuania prohibits banks from using IAS 39 and has rules regarding consolidation that conflict with IFRS. The survey also indicated that in Lithuania both accountants and financial directors in most companies and the public in general have very limited knowledge of IFRS. In addition, up-to-date consolidation and equity methods of accounting were not required by Lithuanian GAAP; therefore, companies do not have relevant experience. Another perceived barrier to convergence identified by the survey is the lack of existence of certain types of transactions in Lithuania, particularly pensions for employees and other post-retirement benefits. Derivative instruments, including embedded derivatives, are also not widely used in Lithuania. An official translation of IFRS in the Lithuanian language has been published. However, according to the survey, it is not easily available (expensive and sold only in certain places), and the quality of the translation is poor Poland new EU member country As of July 2004, Poland s Parliament had a proposal pending on how to officially converge with IFRS (EU, 2004c). In light of Poland s then anticipated accession to the EU, survey respondents expected that public companies would be required to produce IFRS consolidated financial statements as of Expectations are that listed corporations will be allowed, but not required, to use IFRS for their individual financial statements (EU, 2004c). While non-listed banks are expected to be required to prepare their consolidated accounts using IFRS, few other non-listed companies will be permitted to use IFRS for their consolidated or individual accounts.

16 104 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) Recent changes to the Polish accounting law (applicable from 2002) moved Poland significantly towards IFRS (e.g. long-term contracts, leasing, financial instruments). Poland also adopted IAS 33 (Earnings Per Share). While not compulsory, Poland s accounting law states that for issues where Polish GAAP is silent, IFRS may be used. Beginning in 2004, all public companies are required to produce a reconciliation of net profit and net assets between Polish GAAP and IFRS. The 2002 accounting law additionally created the Polish Accounting Standards Committee (KSB). The Committee s responsibilities include: (1) preparation of national accounting standards; (2) analysis of IFRS, other national standards, and EU directives; and (3) liaison with international bodies concerned with convergence of accounting standards. In practice, expectations are that IFRS will be a key benchmark used by the Polish Accounting Standards Committee when preparing Polish National Accounting Standards. However, at the time of the survey, many IFRS had not yet been addressed, including IAS 1, IAS 8, IAS 14, IAS 17, IAS 19, IAS 22, IAS 26, IAS 29, IAS 36, IAS 38, and IAS 41. The World Bank (2002c) has also expressed concerns about differences between IFRS and Polish Accounting Regulations, including reporting under hyperinflationary conditions, revaluation of fixed assets, consolidation requirements, segment reporting, research and development, leasing, accounting for employee benefits, and many disclosure requirements. According to the survey, a positive move towards convergence was the change in the accounting law that removed the remaining elements of tax-driven accounting. However, according to the survey, there is some reluctance of national authorities in Poland to accept standards based on rules prepared by an international organization, such as IASB. The reluctance stems from a mixture of factors, including a nationalist fear of loss of sovereignty (i.e. decisions made outside of Poland) and the loss of status or position (full adoption of IFRS would make domestic legislators/standard setters redundant). Other perceived impediments to convergence revealed by the survey include insufficient guidance on first-time application of IFRS and a lack of practical knowledge on IFRS application. There is also a general satisfaction with national accounting standards and a lack of interest from investors and other users to change national standards. Indeed, there is no significant demand from domestic investors for IFRS as opposed to Polish GAAP reporting. The relatively underdeveloped capital market in Poland is perceived as limiting the number of potential users of IFRS. According to the survey, some IFRS are viewed as being particularly complicated. For example, wide adoption of fair valuation causes problems with practical application, especially in regard to IAS 22 (Business Combinations), IAS 36 (Impairment of Assets) and IAS 39 (Financial Instruments). Also, the lack of existence of transactions of a specific nature is considered an impediment. For example, there are no defined benefit plans in Poland and financial instruments tend to be unsophisticated. The most recent translation of IFRS into Polish appears to be based on the 2001 standards. While expectations are that translations will be conducted on an annual basis, the Polish experience of the translation process suggests the time lag is likely to be significant. An example of the difficulties that can be associated with translating accounting concepts from one language to another is provided by Kosmala-MacLullich s (2003) analysis of how

17 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) the notion of true and fair has been translated into Polish and the Polish accounting framework Slovakia new EU member country In 2005, Slovakia will require all companies (both listed and non-listed) to use IFRS to prepare consolidated financial statements (EU, 2004c). Listed companies will also be required to prepare individual accounts using IFRS. However, non-listed companies will be required to prepare individual financial statements using national standards. Slovakia wanted to implement all required EU legislation before joining the EU. Therefore, Accounting Act No. 431/2002 became effective on January 1, 2003 (PwC Slovensko, 2003). The law is based on EU directives and incorporates many provisions similar to IFRS, including the True and Fair override principle. The survey indicates Slovakia s goal is to adopt IFRS into national GAAP on a standard-by-standard basis and, whenever possible, to eliminate any differences between IFRS and Slovakian GAAP. The Ministry of Finance can also prescribe accounting rules, as was done in the case of consolidation methods (E&Y/Weinhold Legal, 2004). Obstacles to convergence identified by the survey include the tax-driven nature of Slovakian accounting requirements, the relatively underdeveloped capital markets in the country, the lack of existence of certain types of transactions, and the complicated nature of certain IFRS. Regarding the latter, areas of particular concern include deferred tax assets and financial instruments. Another problem identified by the survey is the cost and financing of the convergence project. A 2000 translation of IFRS in the national language is available. The only updates since then are translations of IAS 40 and IAS 41. However, accounting firms are providing some up-to-date information on IFRS (for examples, see and Slovenia new EU member country In May 2004, Slovenia continued to contemplate how to adopt IFRS. Expectations are that IFRS will be required for use in the preparation of the consolidated and individual financial statements of listed companies (EU, 2004c). For non-listed companies, Slovenia will probably require banks and insurance companies to use IFRS to prepare consolidated and individual accounts. All other non-listed companies will be permitted to use IFRS in their consolidated and individual accounts (EU, 2004c). According to the survey, revisions to Slovenian accounting standards continue to align them more closely with IFRS. Presently, Slovenian Accounting Standards are nearly completely in compliance with IFRS. The Company s Act requires that Slovenian Accounting Standards comply with EU practice. EU requirements for listed companies are also to be adopted in Slovenia. Given the current state of Slovenian Accounting Standards, no extensive plans are considered necessary because Slovenia sees itself as being in almost full compliance with IFRS.

18 106 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) A 2001 translation of IFRS is available in the national language. There is usually a two to three month time lag between the issuance and availability of a new standard or interpretation after it has been approved by the IASB Bulgaria EU candidate country The Bulgarian Accountancy Act states that, effective January 1, 2005, all entities should prepare and submit both consolidated and individual accounts in accordance with IFRS. Since January 1, 2003, transitional provisions of the Act require that banks, insurance companies, and investment and pension assurance companies prepare both individual and consolidated financial statements in compliance with IFRS. Since 2003, all Bulgarian companies have been allowed to use IFRS. The 2001 Accounting law requires full convergence of Bulgarian national accounting standards with IFRS (see World Bank, 2002a). Until the enactment of IFRS, Bulgarian companies will apply national accounting standards adopted by the Council of Ministers. In 2002, national standards were amended and became quite similar to IFRS. The objective is to have the requirements of local GAAP follow IFRS so that the transition is smooth. Until complete implementation of IFRS in 2005, the National Accountancy Council, as a consultative body to the Ministry of Finance, will assist in the preparation of the normative acts for the accounting activities in the country. According to the survey, there are no longer significant disagreements between Bulgarian GAAP and IFRS. Remaining differences relate to IAS 12 (Income Taxes), IAS 17 (Leases), IAS 23 (Borrowing Costs), and IAS 34 (Interim Reports). In addition, not all of the SICs have been taken into account by national standards. There are additionally specific national standards which do not have an equivalent IFRS. These include national standards covering financial statements of insurance companies, specialized investment companies, not-forprofit organizations, and accounting for environmental expenses. The Bulgarian accounting profession will await guidance on international practice for the above-mentioned issues. In Bulgaria, several items are perceived as impediments to convergence. These include insufficient guidance on first-time application of IFRS, the tax-driven nature of the national accounting requirements, the underdeveloped nature of capital market, translation difficulties, and the complicated nature of particular IFRS. The survey respondents listed several standards as being complicated. These include IAS 12 (Income Taxes), IAS 17 (Leases), IAS 19 (Employee Benefits), IAS 26 (Accounting and Reporting by Retirement Plans), IAS 36 (Impairment of Assets), IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), and IAS 39 (Financial Instruments). According to the survey, the nature of pensions and other post-retirement benefits locally are different from international practice. Due to the underdeveloped business environment and market, there are also difficulties with the application of IAS 36 and especially IAS 39. The timely translation of IFRS into Bulgarian is a concern. At the time of the survey, a 2001 translation was available, but unofficial, and a 2002 translation was in process. The World Bank (2002a) reports that translation efforts rely on the goodwill of committee members from academe and international accounting firms that have been working with the Ministry of Finance. The survey indicated there is often a 6 12 month time lag between the issuance of new IFRS and the availability of a Bulgarian translation.

19 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) Romania EU candidate country After 2006, all companies, except small entities, will be required to use IFRS in Romania. In 2001, the Ministry of Public Finance issued Order 94, which approved accounting regulations regarding harmonization with the Fourth EU Directive and IFRS. Order 94 requires a stepped implementation of IFRS between 2001 and Each year smaller and smaller Romanian companies are required to use IFRS. For example, in 2003 (vs. 2004) [vs. 2006], firms must use IFRS if they meet at least two of the following criteria: (1) revenues of at least 7 (6) [5] million euros, (2) asset book value of at least 3.5 (3) [2.5] million euros, and (3) at least 150 (100) [50] employees (Ernst & Young Romania, 2003, World Bank, 2003b). The official IAS Romanian translation was incorporated into local legislation regarding financial reporting. However, the survey notes that some subsequent regulations and guidance are contrary to harmonization, such as one encouraging non-application of IAS 29 (Hyperinflation). The World Bank (2003b, pp. 1 2) is quite concerned that the Accounting Law and secondary legislation include specific accounting requirements that may conflict with IAS and undermine government efforts to implement reliable accounting standards. The survey reports several obstacles to convergence in Romania, including insufficient guidance on first-time application of IFRS and the tax-driven nature of national accounting requirements. An interesting point related to the latter is the fact that the Ministry of Finance is currently responsible both for setting accounting standards and for planning and collecting taxes (World Bank, 2003b). Another perceived barrier to convergence in Romania is the complicated nature of certain IFRS. The survey notes that IAS 29 (Hyperinflation), IAS 36 (Impairment of Assets), IAS 39 (Financial Instruments), SIC 19 and SIC 30 (Reporting Currency), and standards referring to consolidation are particularly problematic. This may be a significant issue because, in practice, the imposition of complex IAS dealing with financial instruments, consolidation, and hyperinflation has been delayed (World Bank, 2003b, p.1). According to the survey, there are also major disagreements with certain significant IFRS, including, but not limited to: (1) mandatory non-application of IAS 29 for financial statements filed with the Ministry of Finance; (2) the basis for fixed assets valuation; (3) prescribed format for notes; and (4) non-application of SIC 19 (IAS 21) and SIC 30. According to PwC (2004), several differences remain between IFRS and Romanian GAAP, including financial instruments. The survey notes a reluctance of national authorities to accept standards based on rules prepared by an international organization, such as IASB. Romanian authorities have a tendency to try to amend the application of certain IFRS via detailed Ministry of Public Finance Instructions. These instructions can, while officially requiring application of all IFRS, prescribe certain fixed format disclosures that might introduce contradictions to IFRS. According to the survey, there is also a perception in Romania that financial statements are for the fiscal authorities. The capital market is still evolving, resulting in less pressure from investors to achieve full IFRS compliance. So, another perceived impediment is due to the relatively underdeveloped capital markets in Romania.

20 108 R.K. Larson, D.L. Street / Jnl. of Internatonal Accounting, Auditing and Taxation 13 (2004) The 2001 IFRS were translated into Romanian, and at the time of the survey, the 2002 edition was being translated. The World Bank (2003b) notes that while the Department for International Development in the United Kingdom is funding the translation, copies of the translation are considered expensive by local standards Turkey EU candidate country While not included in the 2002 convergence survey, Turkey is making many changes to converge national rules with IFRS. Currently, Turkey permits domestic listed companies to use IFRS (DTT, 2004b). Two regulatory bodies define accounting standards in Turkey: the Banking Regulation and Supervision Agency (BRSA) for the banking sector, and the Capital Market Board (CMB) for publicly traded companies (DTT, 2002). Effective July 2002, BRSA requires a completely new set of standards to converge their standards with IFRS. These new standards closely conform to IAS 7, 8, 10, 16, 17, 20, 21, 22, 24, 27, 28, 29, 31, 32, 36, 37, 38, and 39. Historically, CMB accounting standards were quite different from IFRS. In 2002, the CMB translated IFRS into Turkish and proposed changes to CMB rules to make most quite similar to IFRS. The effective date for these proposals was December 31, 2003 (DTT, 2002) Iceland EEA member In Iceland, at the end of 2002, there were no formal plans to converge Icelandic GAAP and IFRS in full or in part. However, a committee was reviewing the Annual Accounts Act (No. 144/1994) on behalf of the Ministry of Finance. The review of the act focused on whether Iceland is in compliance with the EU s Fourth Council Directive and the Seventh Council Directive, based on comments from the European Free Trade Association Surveillance Authority (ESA). An EU (2004b) survey found Iceland was still in the Work Group Stage. The EU survey suggests IFRS will only be required for the consolidated accounts of listed companies in Iceland. Listed companies will also probably be permitted, but not required, to prepare individual accounts using IFRS. In addition, while not required, nonlisted Icelandic companies will probably be permitted to prepare individual and consolidated financial statements using IFRS. The Annual Accounts Act and Regulation No. 696/1996 Presentation and contents of financial statements are the primary sources of financial reporting requirements in Iceland. These acts and regulations do not refer to IFRS. However, because IFRS presentation and accounting principles are more clear and accurate and give a better view of a company s financial standing than national Icelandic GAAP, the survey states that companies using IFRS fulfill all the requirements of Icelandic GAAP. Further, by the end of 2002, the Icelandic Financial Accounting Standard Board (a body set up by law) had issued five rules for preparing accounts based on IAS 1 (Presentation of Financial Statements), IAS 2 (Inventories), IAS 7 (Cash Flow), IAS 8 (Net Profit or Loss for the Period), and IAS 12 (Income Taxes). The survey indicates that major groups seen as influencing convergence in Iceland include its accounting profession and Icelandic corporate executive directors. A major impediment