It sounds like the U.S.’s Generally Accepted Accounting Principles will be “Formerly Accepted Accounted Principles” within a decade. As reported by the New York Times:
The Securities and Exchange Commission moved Wednesday to allow some large American companies to begin using international accounting standards as early as next year, and to require all American companies to do so by 2016.
The Securities and Exchange Commission moved Wednesday to allow some large American companies to begin using international accounting standards as early as next year, and to require all American companies to do so by 2016.
Accounting and financing folks around the country are either breathing a sigh of relief (over having to keep one fewer sets of books, if they’re in a multinational company), or bracing for a transition period.
Personally, I suspect that the folks overseeing the decision have discounted the threat of litigation gumming up the works. From the NYT article again:
While it is often said that the international rules are based on standards, and the American ones on rules, the differences are more in degree than nature. Still, in many cases the international rules will require more professional judgment from auditors. Some auditors have liked rules, because they enable them simply to tell a company that a proposed accounting treatment violates a rule. Also, rules ostensibly provide a defense if the accounts are later challenged in a lawsuit.
In a world with more professional judgment, the auditors would be expected to tell companies that a given accounting treatment violates a standard because it produces a misleading result. Whether they would be willing to do that, and whether all would be equally willing, could become an issue.
An article in the Casualty Actuarial Society’s Actuarial Review mentions one extra potential complication for those of us in the insurance industry – the IFRS hasn’t finished establishing standards for the insurance industry, new global equivalents of FASB 5 and 60.
That odd sound you hear is the gnashing of teeth among CAS candidates who have to learn soon-to-be-obsolete accounting standards as part of the Part 7 curriculum.
