The push for a new international accounting system is picking up traction. As the Corner Office reported April 8, moves to accept International Financial Reporting Standards (IFRS) instead of the GAAP (Generally Accepted Accounting Principles) could well happen in the U.S., the last GAAP hold out.
Now the mainstream business media is noting the acceleration. The New York Times ran a front page story July 5 and The Washington Post carried something today.
Their gist: Christopher Cox, the lame duck chairman of the U.S. Securities & Exchange Commission, and the Bush Administration are preparing groundwork for a faster timetable to IFRS. Now that the SEC finally has a full, five-member commission, some decisions could come in a matter of weeks.
While some in Congress, especially Democrats, mutter that switching to IFRS could undo some of the corrective measures taken after Enron and WorldCom, the business community seems to agree that IFRS is inevitable.
Indeed, just about every country in Asia and Europe uses IFRS, which is more principles-based, as opposed to GAAP, which is more rules-based. In this sense, IFRS gives more of a general model to follow than a strict template.
There are some areas of conflict. IFRS, for instance, allows companies to report higher earnings because it defines such areas as “good will” more broadly. Yet experts say that such discrepancies are being worked out.
If Cox gets his way, the U.S. will start allowing more use of IFRS. That begs another question regarding converging global securities regulation, but that’s for another post.
