Slow Progress on Financial Standards Convergence

Progress has been "slow and painful" when it comes to the global convergence of financial reporting standards, according to Tom Wilkin, partner with PwC.

Wilkin sat down with REIT.com at REITWise 2012: NAREIT's Law, Accounting & Finance Conference in Hollywood, Fla., last month to talk about the global convergence process and how it affects REITs.

He said convergence is no closer to becoming a reality now than it was five years ago.

"A lot of the major projects that were the key convergence issues that were supposed to be completed seven years ago have all taken substantially longer to complete than originally expected," Wilkin said. "Some are nearing completion, but some still have a long road to go still in terms of getting them completed."

Uncertainty has been one of the biggest obstacles remaining to completing global convergence.

"It's a lot of discussion still about is it a 'when' or is it an 'if' we are going to converge ultimately in the U.S.," he said. "Are we going to switch over in entirety, or are we in essence going to converge and get closer and closer until the differences aren't that significant?"

Within the last few months there have been changes that affect the direction that the convergence process will take, according to Wilkin. Wilkin said the leasing standard is of the most significance for U.S. REITs from both a business perspective and financial reporting.

Additionally, he said the investment property entity standard would have a huge impact if it goes forward as it currently exists and REITs are scoped in.

"As we understand, some of the intent was to get the public REITs in so they can get the fair value accounting. You might see the public REITs reporting on a fair value basis, which would be a significant change from current reporting, and investors are going to be getting a lot of financial information that they haven't seen," he said.