A single set of global accounting standards seems like a dream, but there’s a sliver of hope

During my time in public accounting in Canada and throughout my experience in the U.K., differences between various countries’ generally accepted accounting principles were often front and center. There were continual discussions of a shared GAAP around the world—a utopian world for accountants, auditors and investors alike.

Initially, given the seemingly insurmountable challenges of converging disparate approaches, I was among the skeptics who thought reconciling differences between GAAPs would take a lifetime. I knew international standards were in the works and had spent enough time reconciling Canadian to U.S. GAAP for SEC filings to see the complexities of converging standards. Over the years, my outlook for converged GAAP has grown more optimistic. The challenges (politics, prioritization, variances in application and enforceability, cost and so on) continue, but the need for an international approach is greater than ever. Canada adopted International Financial Reporting Standards (IFRS) for most public companies for financial years beginning Jan. 1, 2011, and companies whose securities are publicly traded in the U.S. have the option of using U.S. GAAP. Canada does not get the benefit of a single accounting system until U.S. GAAP and international GAAP converge.

Fast-forward to 2013, and it is a time for celebration. The FASB has voted to move forward with the long-awaited final revenue recognition standard. (For details, read Diana Gilbert’s How the New Revenue Recognition Rules Should Help Global Businesses.) Joint FASB-IASB standards are expected in the areas of financial instruments and leasing.

IFRS has been adopted by 14 of the G20 countries for all or most companies in their public capital markets. The U.S. permits, but does not require, IFRS for foreign issuers. Investors and other stakeholders still need to know if U.S. GAAP or IFRS has been adopted, depending on the capital market. This makes things very complex: investors need to reconcile adjustments and disclosures for investments and subsidiaries, but also account for local variations in interpretations, applications, enforceability and audits. When implementation of aligned revenue standards is complete, that will be real progress, as investors will have confidence that they are comparing apples with apples on the top line.

Will this progress continue? How long will it take? The revenue standard was 11 years in the making, and priorities constantly shift. However, there is a new model for collaboration going forward. In April 2013, the creation of the Accounting Standards Advisory Forum (ASAF) was announced. This group of national accounting standards boards (including FASB) and regional bodies with an interest in financial reporting will provide both technical advice and feedback to the IASB. The ASAF had its fourth meeting Dec. 5 and 6. The agenda items included the 2013 Lease Exposure Draft (IASB) and the 2013 FASB Accounting Standards Update. ASAF received over 600 comment letters, and there are some significant differences in opinion. Leases will need to be re-deliberated, and there is skepticism about the chances for agreement on a converged approach.

Still, I am hopeful that the new ASAF will be successful in improving alignment. FASB Chairman Russell G. Golden has outlined a vision for more common and comparable financial standards, which he describes as a “new, decentralized, multi-lateral model of international standard setting that is consistent with the goal of promoting greater convergence in global financial accounting standards.” It is going to take time to find the right model, and hopefully the next 10 years will be more successful than the past 10.

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