EY Partner: Slow Progress Toward Global Convergence on Accounting Standards

Serena Wolfe, partner at professional services firm EY, joined REIT.com for a video interview during REITWise 2015: NAREIT’s Law, Accounting and Finance Conference held in Phoenix.

Wolfe commented on the possibility of reaching global convergence on accounting standards.

“We as a firm are fully supportive of a single set of high-quality financial standards that are applied globally,” she said. “I think we are moving towards that.”

Wolfe noted that if the Securities and Exchange Commission (SEC) decides to champion convergence, it is likely that it would seek more targeted convergence on specific standards, rather than a broader approach.

“I think it will come, but it will be slow and a bit more specific,” Wolfe said.

Meanwhile, Wolfe said both Mortgage and Equity REITs are likely to be impacted by upcoming amendments from the Financial Accounting Standards Board (FASB) concerning guidance on the impairment of financial instruments. The proposed amendments would introduce a new impairment model based on expected losses, rather than incurred losses.

“Impairment is going to be very significant for Mortgage REITs because of the type of products they invest in,” Wolfe said. At the same time, Equity REITs are likely to have to make major changes to their systems and controls to adapt to the new rules, she said.