Finance We are rapidly heading towards a world where there are two main financial reporting systems US GAAP accounting, used by the largest part of the global capital market, and International Financial Reporting Standards (IFRS), the system now being used as the benchmark in many other countries all of Europe, China, Australia, Malaysia, Asia (India by 2011) and Egypt to name a few. There has been controversy in certain quarters about whether the time and effort being put into convergence between these two reporting systems is worth it, and whether it will inevitably have an adverse effect on the quality of the international standards. It may not come as a surprise that, given ACCAs status as the worlds largest professional international accountancy body with over 370,000 students and members in 170 countries, we support the idea of global accounting standards. Convergence between IFRS and US GAAP is important in our view because: The harmonization of financial reporting around the world will help to raise confidence of investors generally in the information they are using to make their decisions and assess their risks. The opposite is perhaps the clearer case. If accounting for the same events and information produces radically different reported numbers, depending on the system of standards that are being used, then it is self-evident that accounting will be increasingly discredited in the eyes of those using the numbers. For individual companies it should be the case that the greater confidence in reliable and transparent information translates into a lower cost of capital reduced interest costs and higher share prices. For those companies with joint listings in both America and another country, there should be substantial savings, particularly in terms of preparation costs. Obviating the burdensome US GAAP reconciliation statement required at present would be a worthwhile prize. Harmonization of requirements also assists the international mobility of professionally qualified accountants themselves. Mobility of skilled labour can only be a good thing. So where is the process currently? Encouragingly, good progress has been made so far. Some of the major sources of differences have been eliminated or are declining. For example, the issuing of IFRS3 meant that the treatment of business combinations and how to deal with changes in groups has been harmonized and, going forward, will be largely the same under the two systems. This is an important development given the level of global merger and acquisition activity, the different treatments having been the source of the largest differences between the two accounting systems. In terms of share-based payments (including US executive stock option schemes), IASB issued IFRS2 which was comparable to the US standard SFAS123. Following that, the Americans in effect changed the status of SFAS123 from voluntary to mandatory. Of course significant areas of difference remain. Impairment of property, plant and equipment the models for triggering when to do a test and then the model for measuring the impairment when it comes to it are different even though both models seem to work reasonably well. On revenue recognition, there are just a couple of IFRS standards that deal with this, by contrast to the 200-plus standards, interpretations and other statements dealing with the subject in US GAAP. So how far do we need convergence to proceed? We do not believe the capital markets need identical standards in every case. What is most important is the confidence that reporting has been done to a high standard and that there is equivalence in the different systems. This is the objective of the European Commission in its convergence discussions with the US mutual recognition of US GAAP and IFRS and the removal of the need for a reconciliation statement by foreign companies registered with the SEC. About the Author: 相关的主题文章: