Convergence of Accounting Standards: The Devil Is in the Details

By now it's old news that SEC Chief Accountant Jim Kroeker mentioned that the Commission plans to review its semi-dormant roadmap for converging US accounting standards to international accounting standards. Yesterday, SEC chairman Mary Schapiro reinforced that statement at an IOSCO technical committee conference: she put accounting at the top of her list of three critical regulatory priorities, saying:

"The crisis has highlighted importance of implementing and enforcing high quality and consistent accounting standards around the world. The SEC has of course played a leadership role in fostering this ideal and I remain committed to the goal of a global set of high-quality accounting standards. I also believe that there are issues that will be critical to address as we at the SEC consider the input we have received on last year’s proposed roadmap on the role of international standards in the U.S. It is with the principles and ideas I just outlined in mind that I am committed to focusing our efforts this fall to following up with a work plan that expands upon the concepts proposed in the roadmap."

So it sounds like the SEC is committed to making convergence happen. The devil remains in the details, however. The first attempt at a roadmap was overly simplistic, in my view; I think it showed a belief that the differences between the two sets of standards were trifling. As the experience of both standard setters has shown over the last six months, there has been nothing simple about setting fair value accounting standards due to political interference - and the evolution of the fair value standards of both the IASB and the FASB shows more divergence than convergence. If this version of the roadmap fails to take these events into account - and the lack of independent funding of the IASB - it's not going to be any more credible than the first roadmap.

Comments

[Andrea M Ps...:]

somebody needs to remind the SEC that they are the Securities Exchange Commission for the United States, subject to our legal system. "convergence" looks to either fold US GAAP into International Reporting standards, ie, European Reporting/GAAP, which also is still like Basle, individual from one European country to the next, or for the US to virtually entirely embrace the way the Europeans account for commerce by means that suits their interests and for us us to accept that.

You have to look at that and wonder why our agencies and the Administration have this obsession to cripple our reporting of our commerce, which they're also compressing and collapsing to shrink to that which is about what and in the way that Europe grows or whatever.

I thought Europe was charming while I was visiting it, but why would I want how they go about their ways and report as opaquely or as loosely as they do as if that holds accountable professional management here in the States? Their way there is what works for them while we've got here what -granted its problems - but what works here, unless you're presumptuously going to re-write about 225 years of history.

Oct 13 01:41 PM