The world is flat, and the world of corporate accountancy is no exception. At least it won’t be anymore in 2014, when the SEC plans to require U.S. companies to switch from U.S. Generally Accepted Accounting Principals (GAAP) to International Financial Reporting Stands (IFRS). WSJ:
The Securities and Exchange Commission voted unanimously to seek public comment for 60 days on a “road map” to move from U.S. to international accounting. The plan calls for early, voluntary use of international accounting standards by large U.S. multinational firms in 2010, followed by an SEC vote in 2011 on whether to require all U.S. companies to make the switch. The decision would rest on whether key changes occur by then, including international accounting standard-setters obtaining independent funding.
Under the timetable outlined by the SEC, the switch to international accounting could be staggered, starting with large U.S. companies in 2014, followed by mid-sized companies in 2015 and small companies in 2016.
Why require the change? The rest of the world is already switching from local or regional accounting standards to the more widely used international standards (The E.U. completed the transition in 2005). Also, in an increasingly globalized world in which companies on different continents are competing with and cooperating with each other on regular basis, it makes a lot of sense for everyone to use the same set of standards and benchmarks. Of course, the same logic applies to the metric system, and that never took off here.
So it’s not a terrible idea, and things aren’t yet set in stone; the SEC can still vote the measure down in 2011. This will probably be little comfort to U.S. accountants, however, who will have to spend hours learning the new system.
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