Sir David Tweedie, chairman of the International Accounting Standards Board (IASB), sees small differences in worldwide accounting standards within five years. CFO.com reports that Robert Herz, the Financial Accounting Standards Board (FASB) chairman, predicts that within three to five years, U.S. and international accounting standards will be virtually interchangeable.
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Tweedie told the committee that some 100 countries now allow or require use of global accounting standards by resident companies. Herz predicted that Canada would convert to international accounting standards from their current standards within five years. He said that Japan is currently seeking accounting standards convergence, according to CFO.com.
Scott Taub, Deputy Chief Accountant of the Securities and Exchange Commission (SEC) made comments concerning convergence of U.S. and international accounting and auditing standards in May 2004.
Taub began by saying, “Whatever transaction we’re dealing with, it seems obvious to me that the best accounting for it is the same, whether the reader of the financial statements is in the US, the UK, Japan, or wherever. Similarly, the auditing procedures that are the most effective in the U.S. are likely to be just as effective in Canada, China, or France. Disclosures relevant to investors in Italy, Greece, or the Middle East, are likely to be just as useful to investors in the U.S. And having one set of high-quality standards in any or all of these areas would benefit investors and reduce the administrative costs of accessing the capital markets around the world,” according to the SEC.
The SEC reports that, “That being said, getting from where we are to where we all like to be with respect to convergence is not easy. In order to realize the benefits of truly global financial reporting, we need convergence in all the area I just mentioned, accounting, auditing, and disclosures. And we all need to work to enhance cooperation and consistency in regulatory review and enforcement, and to improve training and interpretive mechanisms as well. The amount of coordination necessary to do all of this is daunting, and much still needs to be done. But a lot is already happening...” His comments are still relevant today.
It became mandatory for companies listed the European Union Stock Exchange to adopt international accounting standards or International Financial Reporting Standards (IFRS) on January 1, 2005. IFRS is innovative because it moves away from historical cost principles toward fair value that equates to market value typically.
Barry Gilbertson and Duncan Preston wrote, “Globalization, increased levels of cross-border economic activity and the emergence of global clients are driving international standards in accounting, banking and valuation. International Valuation Standards (“IVS”) will improve transparency and so secure sound financial services in the public interest,” according to RICS.org.
Both accounting board leaders made their statements in testimony before the Senate Banking Committee concerning defined-benefit pension plans, according to CFO.com. The changes being proposed for defined-benefit pension plans and postretirement benefits are part of a two-phase project by the FASB.
Phase One is getting companies to measure the values of their retiree-benefit plans as underfunded or overfunded as of the closing dates of their corporate balance sheets. The FASB will be holding roundtable discussions concerning this phase outlined in their latest exposure draft issued in March. Phase Two will address “smoothing” pension values to present more consistent results over the long term and other pension accounting practices.