One world, one set of accounting standards? Think again, it's not going to happen that quickly. There's a fair bit of resistance out there not to mention some unresolved issues.
According to a Grant Thornton survey, most US chief financial officers (56 per cent) don't agree with the Securities and Exchange Commission proposal to permit foreign firms listed on U.S. exchanges to file financial statements, 55.6 per cent opposed having all US firms using International Financial Reporting Standards (IFRS) in financial statements filed with the SEC instead of US Generally Accepted Accounting Principles (GAAP) and more than three quarters (77.8 per cent) said they had no experience preparing financial statements according to IFRS.
Financial Accounting Standards Board chairman Robert Herz says convergence is not going to happen overnight. In his statement to the Subcommittee on Securities, Insurance and Investment-Committee on Banking, Housing, and Urban Affairs, he said differences between US GAAP and IFRS remain, resulting in significant differences in the reported numbers under the two sets of standards. "Thus, while we have been making steady progress in our convergence program, it will take many more years to reach the goal of full convergence using our current approach," Mr Herz said.
Some of the differences include revenue recognition, extraordinary items (they're prohibited under IFRS but defined as being both infrequent and unusual under GAAP. The US system also allows negative goodwill to be presented as an extraordinary item), different definitions of associates, the treatment of termination benefits, and the treatment of leases and convertible debt.
And quite apart from the differences, there are issues about disclosure requirements, regulatory, enforcement, corporate governance regimes, auditing standards and practices, not to mention education of capital market participants.
As Sarah Johnson points out in CFO.com, there are also unanswered questions about whether private companies will have to start using a modified version of IFRS, whether there'll be changes to state laws and securities regulations tied to GAAP.
Clearly, this convergence is quite a few years down the track. Herz says something like five years but that sounds optimistic.
no comment untill now