The House Financial Services Committee conducted a hearing last Thursday at which the issue of globalization of accounting standards was discussed.
Testifying at the hearing, Robert Elliott, KPMG partner and past chair of the American Institute of Certified Public Accountants, said, "Globally compatible financial presentations will make it easier for investors to compare companies and for companies to file in different markets.
"Investors around the world need information that allows them to make good decisions," Mr. Elliott continued. He also argued that the current financial reporting models were designed in the industrial age and that a new reporting model was needed for today's new global economy.
"While uniformity around the world would be a good thing, it would not be a good thing if U.S. investors were deprived of rigorous accounting standards," Mr. Elliott cautioned.
Former Federal Reserve Board chairman Paul Volcker also argued in favor of a global accounting standard, noting that development of single set of accounting rules that could be embraced worldwide should take at least five years. He added, "That may be a very optimistic outlook."
The new International Accounting Standards Committee (IASC) hopes to create such a standard. A prior committee failed to produce accounting standards that were acceptable internationally, but the committee has reshaped itself in preparation for a new approach to the task.
Mr. Volcker indicated that the committee will have a hard time reaching agreement on technical matters such as accounting for stock options and derivatives as well as accounting for intangible assets.
Agreeing that new standards are necessary, Philip Ameen, controller of General Electric stated that such new standards offer the chance to start over with "a clean sheet of paper" and improve accounting, not undercut it. Mr. Ameen was testifying on behalf of the Financial Executives Institute.