Plans for the United States to move to global accounting standards have been delayed for another 12 months with the Security and Exchange Commission announced it was extending the time line for US businesses to comply with International Financial Reporting Standards (IFRS). The SEC has extended the deadline to no earlier than 2015. Under the original road map put together by former SEC chief Christropher Cox, it was 2014.
Check the wording of the announcement. SEC chief Mary Schapiro still gives the impression of supporting IFRS but the wording is loose enough to suggest things could change. "For nearly 30 years, the Commission has promoted a single set of high-quality globally accepted accounting standards, which would advance the dual goals of improving financial reporting within the U.S. and reducing country-by-country disparities in financial reporting," Schapiro said. "But supporting this goal is only the beginning of the discussion, not the end."
We can expect some resistance to the change with some US companies claiming the switch will increase their costs. "We believe the mandated implementation costs to U.S. issuers and U.S. registrants will be far in excess of any calculated benefits, real or imagined," Davey Tree Expert Co. CFO David Adante and controller Nicholas Sucic said in an e-mail to CFO.com.
Then there are other questions about whether global accounting standards would actually work in a market where various players are using accounting tricks to cook the books. It's a point raised by Bloomberg's David Reilly.
Reilly says: "Would it be foolish to adhere to a supposedly uniform, global accounting system when countries don't consistently enforce rules and have opposing views of the purpose of financial markets themselves? If Greece is openly admitting to fudging numbers on a national level, you can bet it and others wouldn't hesitate to twist corporate accounting rules. And let's not pretend the Chinese communist party is ever going to put the interests of investors over those of the politburo. That being the case, it's not clear any common accounting language would really offer investors the kind of comparability they'd hope for. Until the SEC can provide investors and Congress, which is sure to weigh in at some point, with an answer to how it will deal with that fundamental flaw, the agency would be crazy to rush to switch."
It's a good point. But it's not so much a case of cleaning up the world's finances. It's more about bringing in a system that ensure everyone, including the Greeks and Chinese, will follow the same rules.
no comment untill now