The tough row to hoe for IFRS/GAAP convergence has always been jurisdiction. It’s the magic act of getting competing multi-national philosophies of government to agree on a common interpretation of a single set of reporting principles for their multiple and varied economic engines.

Watching the EU form up for a gang tackle of the unfolding credit troubles brought me right back to IFRS and the jurisdiction hurdles it will face. The EU’s spot solution for its banks has been to step away from a common approach and reach for the “state” based answer (I take care of mine, you take care of yours).

“We’ve seen both at the national level and more importantly at the international level, that there’s no strategy,” said Richard Portes of the Center for Economic Policy Research in London, adding that “it reflects the underlying fact that individual governments don’t have a clear sense of where to go.” (NY Times, 10/06/08)

An economic union requires limited promotion for sign-on when GDP is strong and the common currrency gains nearly 50% on the US dollar since adoption (after a slow start with some handwringing about its prospects). But a lead pipe to the knees, such as EU banks wheezing or chugging to a halt and the onset of credit seizing up, demands putting individual “state” money at risk for the sake of the larger union.

It’s difficult to sell this at home politically, particularly if it’s seen as your nation-state’s money being used to hold up another’s troubles (see US House of Reps 9/29/08 vote for blueprint on political paralysis). The global person on the street has an uncanny consistency in their resistance to it. It all looks like somebody else’s mess that was dumped at their door.

When it’s all capital gains and spending, there’s no sell required. But when it becomes the pumpkins & mice of midnight with Cinderella, it’s hard to locate your recent “partners” in an economic union. This is the rub against any meaningful IFRS/GAAP convergence reaching altitude.