Securities and Exchange Commission chairman Christopher Cox has announced that the US and Europe will be working to a single accounting standard by 2009.

But will there be glitches in the transition?

Last week's Security and Exchange Commission announcement that it would provide companies more choice on whether to go with the International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP), raises a number of questions.

The SEC says it plans to issue a proposed rule this summer giving foreign private issuers a choice between IFRS and US GAAP. In addition, it plans a concept release relating to issues surrounding the possibility of treating U.S. and foreign issuers similarly in this respect by also providing U.S. issuers the alternative to use IFRS. It will take comments on both proposals.

The difference between IFRS and GAAP? IFRS is written more in the form of principles. GAAP, on the other hand, is composed of a huge body of detailed rules.

If you believe this sort of stuff should only interest beancounters, think again. DaimlerChrysler last week announced that applying IFRS had added close to $734 million extra profit. That makes it a nice little earner. Given that the car company is going through a few issues of its own and has its struggling Chrysler unit on the auction block, this sort of switch in Accounting methods is significant.

As Herb Greenberg says in The Wall Street Journal, the choice potentially allows companies to play more games.

"That might sound good in theory, but Lynn Turner, of research firm Glass Lewis and former chief accountant of the SEC, says it will work only if the two standards are comparable. Right now, he says, there still are "holes" for such industries as insurance, which is complicated enough for even sophisticated investors to figure out without letting different companies play by different rules. 'I have always believed that if investors are to make fully informed decisions as to which companies they should allocate their capital, the accounting standards used to inform those decisions must result in comparable, consistent accounting across the universe of companies that have similar transactions,' Mr. Turner says. 'To do otherwise, creates comparisons of apples to oranges, which does not work.'

"Former SEC Chairman Arthur Levitt, a longtime proponent of a single, international standard, is more to the point: 'The menu system, I believe, leads to earnings management, and that should be avoided.' That seems obvious enough. Game over?"