A Single Sandbox for Standard-Setters (Part 2)

This blog post is the second of a series that explains the rationale for the United States and other countries to collaborate in creating a single, global registry of financial reporting standards rather than a single set of standards emanating from a single standard-setter. In my last post, I explained how the "single-sandbox" approach would significantly enhance the comparability of financial statements prepared in accordance with registered financial reporting standards without imposing a one-size-fits-all solution on reporting entities. In this post, I'll explain four ways in which the single-sandbox approach would drive non-value-adding costs out of the financial reporting supply chain.

The most significant cost-reduction benefit to result from the single-sandbox approach would be a reduction in the cost of capital for business entities. Specifically, an increase in the comparability of financial statements across companies that use different standards in preparing their financial statements (as I described in my last post) would reduce capital providers' analysis costs and/or reduce the risk premiums that result from capital providers not fully understanding the basis on which "foreign" financial statements have been prepared. Both of those effects would be reflected in lower expected rates of return, and therefore, lower costs of capital. Ask any economist—lowering the cost of capital is a very good thing for everyone.

A second major benefit of the single-sandbox approach would be the lowering of operating costs for reporting entities having multiple business units throughout the world that must adhere to multiple sets of financial reporting standards. Translation and reconciliation of financial statements prepared under different standards would be easier and less-costly thanks to the distinguishing characteristics of the global registry of standards, which I have described in previous posts.

Third, lower costs would result from the elimination of redundancy in the world's standard-setting infrastructures. Areas of agreed-upon commonality among registered sets of standards (i.e., conceptual framework, core standards, and codification) would be maintained by the single standards registrar rather than each standard-setter bearing the cost of maintaining essentially the same things.

Finally, the single-sandbox approach would lower the costs of training and developing financial-reporting talent, i.e., individuals capable of doing financial accounting and reporting for any company in the world from anywhere in the world.

While many of these cost-reduction benefits have been cited in arguments supporting the global adoption of a single set of standards, the improbability of getting the entire world to agree on what standards they will use and on who will set the standards means that we need a more realistic approach if we are to have any hope of capturing any of the benefits. In particular, the single-sandbox approach would be far more beneficial and far more feasible than if the United States were to attempt to switch to using current International Financial Reporting Standards (IFRS) instead of U.S. GAAP. To be clear, the single-sandbox approach is not an outright rejection of IFRS; rather, the approach acknowledges and builds upon the successes of the International Accounting Standards Board (IASB), many of which have resulted from collaboration between the IASB and national standard-setters such as the U.S. Financial Accounting Standards Board.

In my next post, I'll explain how the single-sandbox approach would maximize the quality of the financial reporting standards used throughout the world.

This blog

Bruce Pounder, MBA, CMA, CFM, DipIFR (ACCA) is an internationally recognized expert on corporate financial reporting and the global convergence of financial reporting standards. He has two decades of firsthand financial reporting experience as the CFO of a privately held corporation and has served as a financial reporting consultant to many public corporations. Currently Bruce is President of Leveraged Logic, a leading provider of educational products and services to accounting professionals. He is the author of the 2010 U.S. Master GAAP Guide (CCH), the Convergence Guidebook for Corporate Financial Reporting (Wiley), and the monthly "Financial Reporting" column of Strategic Finance magazine. Bruce also presents the live webcast series "This Week in Accounting."

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

44699

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

77313

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

49690

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

90886
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
21595

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

56951

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

82122

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

25778

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

65511

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

35265
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
104342
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
26938

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

53873
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
28857
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
33218

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

102280

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

34529

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

113368

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

62435

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

40573
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
67616

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

93719

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

54791