As described in the 2010 Progress Report, countries using a national incorporation
process generally can be further divided into: (1) those countries that converge their local
standards with IFRS without a firm commitment to incorporate fully IFRS as issued by
the IASB ("Convergence Approach"); and (2) those countries that undertake some form
of local endorsement ("Endorsement Approach").
Under the Convergence Approach, jurisdictions do not adopt IFRS as issued by the IASB
or incorporate IFRSs into their accounting standards directly.
Instead, these jurisdictions
maintain their local standards but make efforts to converge those bodies of standards with
IFRS over time. One example of a country using the Convergence Approach is the
People's Republic of China ("PRC"), which is moving its standards closer to IFRS
without incorporating IFRS fully into its national financial reporting framework.
PRC has indicated that it intends to make an effort to eliminate the existing differences
between its Accounting Standards for Business Enterprises ("ASBEs") and IFRS.
Based on the Staff's research, a large number of countries (e.g., countries within the
European Union ("EU")) appear to follow a form of the Endorsement Approach. Under
this approach, jurisdictions incorporate individual IFRSs into their local body of
standards. Many of these jurisdictions use stated criteria for endorsement, which are
designed to protect stakeholders in these jurisdictions. The degree of deviation from
IFRS as issued by the IASB can vary under this approach. In some cases, countries
appear to adopt standards exactly as issued by the IASB with a high threshold for any
country-specific deviation. In other cases, countries translate IFRS as issued by the IASB
into their local language. Because words or expressions may not have direct equivalents
in some languages, translated versions of IFRS may be understood and applied
differently from IFRS as issued by the IASB in English. In still other cases, countries
make modifications or additions to individual IFRSs upon incorporation for various
reasons (e.g., to address the perceived need for country- or industry-specific guidance or
to incorporate interpretative guidance previously issued by a jurisdiction's regulator).
Although the joint projects between the U.S. Financial Accounting Standards Board ("FASB") and the
IASB are often denominated "convergence," those projects are different from the Convergence Approach
described here. The FASB-IASB process involves movement by both standard setters toward a new,
mutually-acceptable high-quality standard, while the Convergence Approach involves movement by a
country toward existing IFRS.
Refer to the 2010 Progress Report for further discussion on the specifics of the PRC's convergence
In 2006, the PRC's Ministry of Finance Order No. 33 declared a revised set of ASBEs would become
effective in 2007. According to the World Bank's Report on the Observance of Standards and Codes
(ROSC) Accounting and Auditing: People's Republic of China (October 2009), these ASBEs are
"substantially converged" with IFRS. On September 2, 2009, the PRC issued an exposure draft of its
Roadmap for Continuing and Full Convergence of the Chinese Accounting Standards for Business
Enterprises with the International Financial Reporting Standards. Based on this exposure draft, the PRC
has indicated that it intends to make an effort to eliminate the existing differences between ASBEs and
IFRS by the end of 2011.