PricewaterhouseCoopers U.S. Chairman and Senior Partner Dennis Nally called for a shift in accounting standards away from U.S. GAAP to International Financial Reporting Standards (IFRS) in a speech Tuesday at the Union League Club in New York. In his speech, Nally urged members of Financial Executive International to embrace the rapid and often disruptive changes brought about by globalization as an opportunity to address systemic problems that impact America's long term competitiveness. He argued that global economic and cultural integration coupled with the rapid growth of emerging economies will demand more engagement and cooperation from the United States, citing the transition of accounting standards as a prime example.
"If we continue in the way we've always done things, the core foundation of IFRS will be eroded. The result will be that the U.S. will find itself out of step with the changes that the rest of the world is undertaking in financial reporting," said Nally. "American businesses, regulators and policy makers must behave differently over the next ten years, as we participate in ever-increasing discussions about the convergence of standards, rules, and principles."
Nally argued that the transition from GAAP to IFRS is not only inevitable, but a positive development that would help make America's capital markets more competitive. Transitioning to IFRS would allow U.S. companies to compete for capital in sectors in which non-U.S. companies currently report under IFRS, while reducing cost and complexity for American companies operating internationally. He also noted that embracing a single set of global accounting standards would contribute to a higher degree of investor understanding and confidence.
"Where our own standards do not prevail, we should not necessarily assume that what does prevail will be at the expense of American business," Nally added.
Nally's speech also addressed a range of future challenges facing American business, including climate change, the scramble for talent and the need for improved infrastructure. In spite of these challenges, Nally remains optimistic.
"I have long believed that America should not fear change, but embrace it," he said. "To be sure, the scenario of strong growth for emerging economies plus rapid economic and cultural integration will yield some important challenges. But, in my judgment, none are insurmountable."