International Financial Reporting Standards Draft Released
Initiated by a meeting between the U.S. Securities and Exchange Commission (SEC) chairman William Donaldson & EU Internal Market Commissioner Charlie McGreevy in April, the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) met together in London in June. The topic of discussion was the convergence of U.S. and International accounting standards.
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In this conference, the two groups mapped their convergence plans as the Securities and Exchange Commission (SEC) made bullet points of the implications of their discussion. Their perspective was based on U.S generally accepted accounting practices (GAAP) standards. There would be several but the main reason for such a convergence would be for the reduction of the cost of capital in an international world.
"When I speak of IFRS/US GAAP convergence, I do not expect the two sets of standards will necessarily produce identical financial statements. But I do consider it necessary that convergence results in close alignment of the accounting for the same, or essentially the same, transactions, generally comparable results in trends and a continued co-operative will to reduce differences over time, as well as the transparent understanding of any significant differences," said SEC chief accountant Donald Nicolaisen speaking with the Financial Director.
Most world accounting standards mirror U.S. standards that are specific and rules-based versus principle-based. U.S. rules are not brief by any means. The discussions went toward international standards based on U.S. standards instead. In the face of Sarbanes-Oxley, this was the best path.
International accounting standards is still a far goal to Europeans and Americans but other countries like China and Japan are voicing interest as well. There will be a need to incorporate national and regional differences. The content of these International Financial Reporting Standards (IFRSs) is surely in the hands of politicians and regulating organizations.
The British Accounting Standards Board (ASB) has raised questions with the first draft of the IASB/FASB standards. They packaged their issues and proposals in a consultation document. They seemed to have particular issue with mergers and acquisitions.
“All parties interested in financial reporting should be aware that this represents a major change in UK requirements,” said ASB Chairman Ian Mackintosh in the consultation document. “We urge our constituents to make their views known to the IASB and to the ASB, so thay can be fully considered both in the international context and as regards their possible implecation in the UK.”
“The ASB is a respected body and has areputation for good thinking. It is an able lobby group,” said Ken Wild speaking with the Financial Director. Wild is the global head of IFRS at Deloitte and Touche and added, “If the ASB thinks there is something wrong it will say so and this could see the IASB and FASB make changes to the standard.”