29th August 2014
An International Accounting Standards Board (IASB) official has suggested that the possibility of achieving global accounting standards is more achievable than some may believe.
Speaking in Johannesburg, South Africa earlier this month, vice-chairman of the IASB Ian Mackintosh described the potential of global accounting standards as “desirable” and “inevitable”.
The latter statement might be a bit of a surprise, considering the resistance from larger countries such as the US. However, with over 100 countries having adopted International Financial Reporting Standards (IFRS), it could only be a matter of time until it becomes globally accepted.
United States Generally Accepted Accounting Principles (USGAAP) might still be present in the accounting world, but Mr Mackintosh stated that individual standards in specific countries lead to some extremely problematic issues.
“Against this backdrop, it is increasingly difficult to see different and often incompatible national accounting standards as anything other than a legacy of a bygone era,” the IASB official said. “They add cost, complexity and translation risk to companies and investors operating in today’s global marketplace.”
He went on to suggest that with the pace of economic globalisation continuing, the arguments recommending IFRS will become increasingly loud in the coming months and years.
“That is why I believe that we should not fret too much about the timing by which we get every jurisdiction onto global standards,” he added.
However, despite this level of positivity, IASB chairman Hans Hoogervorst recently expressed a slightly less convincing outlook for the future. In an article from The Business Times in Singapore, Mr Hoogervorst indicated that a fully integrated system with the US and USGAAP was unachievable.
Writing for Financial Executives, director of Accounting Policy Analysis and Communications for the association Edith Orenstein said the arguments of “inevitability” were not overly persuasive, with issues still surrounding existing regulations in home country GAAP; current tax regimes; existing contracts and agreements featuring GAAP reporting provisions; and differences between the standards and standard setters.
However, there could soon be an option for US public companies to use IFRS for financial reporting, with Securities and Exchange Commission chairman Mary Jo White suggesting during a speech in May that the incorporation of IFRS remains a priority for her in the US. So while the US as a whole might not adopt the standards readily, there is still some hope for progressive change throughout the country.